Today the National Bank of the Republic of Macedonia Council held its eight session
Today the National Bank of the Republic of Macedonia Council held its eight session at which it discussed and adopted the Financial Stability Report for the Republic of Macedonia in 2015, concluding that the Macedonian financial system was stable in 2015, despite external and internal events which tested its resilience.
In 2015, the total assets of the financial system reached Denar 494 billion and grew by 7.1% compared to the previous year. The main features of the financial system are still its simple structure, weak cross-sectoral links and the absence of complex financial instruments and services. In recent years, there were activities for combining insurance and banking products, but the scope of these activities is still small. Such setup and development of the domestic financial system are the main factors for minimizing the possibilities of disturbing its stability, through the spillover of the risks from one to another institutional segment.
Because of the highest share in the financial system, banks are the most important factor for maintaining its stability as a whole, the stability of other institutional segments, but also the two key non-financial sectors, companies and households. Solvency and liquidity of this sector are the main factors for its stability and resilience to external and internal shocks. The main risk for banks comes from their lending activity, which had slower growth in 2015. In this context, the significant slowdown of the growth of non-performing loans caused a decrease in their share in total loans to banks to 10.8%, while the risks coming from the level of non-performing loans were further reduced due to the high coverage of these loans with impairment allocated for them. Individual banks showed little vulnerability to the assumed shocks and hypothetical need for recapitalization or liquidity support. Pension funds and insurance sector continued to grow at a faster pace, but because of the small scope of these institutional segments, the risk of spillover of the risks from the banking sector through invested deposits in banks is still limited. In 2015, savings houses, investment funds, leasing companies and financial companies had an almost insignificant share in the total assets of the financial system, and thus on its stability. The money and short-term securities market and capital market have been functioning without significant impact on financial flows in the country for a longer period of time.
At today's session, the Council also reviewed the Report on the Risks in the Banking System in the First Quarter of 2016, concluding that after the relatively high growth of banking activities with the corporate sector in December 2015, completely opposite movements of decline in credit support to non-financial companies followed already in the next month, followed by a significant reduction in corporate, transaction and short-term deposits, due to which the trend of several years of constant denarization of deposits in banks was undermined simultaneously. However, the loan portfolio quality of the banking system remained high, while the share of non-performing to total loans, as of 31 March 2016, was 10.9%, which is only a minimal increase, which was mainly driven by corporate loans. Accordingly, in the first quarter of 2016, solvency indicators and capitalization of banks registered some increase, which mostly stems from the reduction in credit activities and rising investments in treasury bills, amid almost unchanged amount of own funds. Compared with the end of 2015, the banks' resilience to the assumed shocks associated with the credit risk increased, and the other risks had little relevance, given the low probability of materialisation of currency risk and the still insignificant exposure to the risk of changing interest rates in the banking portfolio.
At today's session, the Council also discussed the Quarterly Report for the second quarter of 2016, whereby it was concluded that despite indications of possible deviations from the baseline scenario of the April forecast in some key variables for monetary policy, the assessments for soundness of the economic fundamentals remained positive. Data on economic activity point to further growth, but slower compared to previous performances. Recent data on banks' deposit base and demand for foreign currency on the currency exchange market indicate a gradual stabilization of expectations and confidence of economic agents, which are undermined by domestic political instability. Foreign reserves continue to be maintained at the appropriate level, despite the negative shock in the second quarter, when the resolution of the domestic political crisis was prolonged, which spilled over into the domestic economy. The risks for the economy are still assessed as unfavorable and are mainly associated with the domestic political crisis, and there are also external risks that were indicated in the April forecast. New risk in this context is the United Kingdom referendum voting for exit from the European Union, which could have adverse consequences for the British and European economy. Taking all this into consideration, the National Bank will continue to closely monitor the developments in the period ahead, and if necessary it will make further adjustments to the monetary policy conduct for the purpose of successful achievement of the statutory established goals.
The National Bank of the Republic of Macedonia Council, based on the planned schedule and pace of activities, also adopted the Decision on issuing and the Decision on putting into circulation the collector coin "Vladimir Mother of God" from the "Mother of God Icons" series, in a denomination of 1000 denars, in 500 pieces, the Decision on issuing and the Decision on putting into circulation the collector coin "Mother Teresa", in a denomination of 100 denars, in 5000 pieces, as well as the decisions on issuing and the decisions on putting into circulation the collector coins "Year of the Rooster - Rooster with an Angel" and "Year of the Rooster - Rooster Wind Spinner", in a denomination of 100 denars, in 5000 pieces.
The Council also discussed other matters within its jurisdiction.