At today’s session, the National Bank of the Republic of Macedonia Council adopted the report on the Banking Supervision and the Banking System of the Republic of Macedonia in 2004, ascertaining the following:

Skopje, 24 May 2005

PRESS RELEASE OF THR NBRM

At today’s session, the National Bank of the Republic of Macedonia Council adopted the report on the Banking Supervision and the Banking System of the Republic of Macedonia in 2004, ascertaining the following:

As of December 31, 2004, the financial potential of the banking system in the Republic of Macedonia amounted to Denar 118 billion, which is an increase of Denar 13.1 billion or 12.5% relative to 2003. The main cause for the increase of the banks’ financial potential is the continuous increase in the deposits of the non-financial legal entities and households, which reached their peak since the monetary independence of the Republic of Macedonia, and as of December 31, 2004 they amounted to Denar 82.3 billion, which is an increase of Denar 12.1 billion or 17.2% relative to 2003. Simultaneously, this is an indicator of the continuous strengthening of the confidence in the banking system of the Republic of Macedonia and of the increasing preference of the households for saving. Gross credits to non-financial legal entities and households increased by Denar 12.2 billion or by 27% relative to 2003, and at the end of 2004 they amounted to Denar 57.4 billion. Other positive developments in the banking system, such as the reduction of the banks’ risk profile, increase in the liquidity and solvency of banks, increase in the profit potential and efficiency of banks, diversification of the supply of credits and reduction of the price of the credits, also contributed to the increase in the financial potential and the credit activity of banks.

On December 31, 2004, banks’ capital adequacy ratio, as one of the most important prudential indicators of their operations, equaled 23.0%, which is a decline of 2.8 percentage points relative to the end of 2003. Such a downward trend is an indicator of improving the level of financial intermediation of banks in the Republic of Macedonia and increasing their efficiency.

The activities of the supervision of the National Bank in the course of 2004 were directed toward further improvement of the regulatory framework and the conduct of banking supervision, issuing licenses and approvals to banks and savings houses, supervision, i.e. control of the operations of banks and savings houses and undertaking corrective actions against banks and savings houses. As of December 31, 2004, changes in the composite rating of banks have been identified, with the number of banks granted the highest composite rating increased to two banks, while the number of banks with composite rating “4” and the number of non-rated banks reduced by one bank in each category. The number of banks granted the lowest composite rating (“5”) has not changed, but it should be emphasized that one of the banks that were granted rating “5” in 2003 exited the banking system in 2004. At the end of 2004, the banking system of the Republic of Macedonia consisted of 21 banks and 15 savings houses. 

Credit risk at the level of the banking system, analyzed through the indicators of the quality and the movements of the credit portfolio retained the trend of improvement. Credit exposure categorized in risk categories “A” and “B” registered an annual increase of 16.8%, while the credit exposure categorized in risk categories “C”, “D” and “E” remained at almost the same level as on December 31, 2003. The average classification of the credit portfolio in risk category “B” points to an exposure of banks to a moderate credit risk. 

At the end of 2004, a significant improvement of the profitable position of banks is evident, with the banks showing positive financial result in the amount of Denar 1,247 million (increase of 178.3% relative to the previous year). Of the total number of 21 banks, 16 banks showed positive financial result, while the amount of the loss realized by the other 5 banks reduced relative to 2003.

The National Bank of the Republic of Macedonia Council also reviewed and adopted several Decisions and Information related to its operations. 

Governor’s Office