The National Bank of the Republic of Macedonia Council held session today, with several issues within its operating area being discussed at.
Skopje, 30 April 2009
Press release of the NBRM
The National Bank of the Republic of Macedonia Council held session today, with several issues within its operating area being discussed at.
The Council discussed and adopted the Banking System and Banking Supervision Report of the Republic of Macedonia in 2008. It was concluded that in 2008 the banking system of the Republic of Macedonia preserved its stability and safety despite the serious turbulences on the international financial markets, larger shocks in the banking systems in the developed and regional countries, as well as deep recessive movements of the world economy. However, as a result of the increased uncertainty caused by the developments on the international financial scene and the possible effects on the domestic economy, as well as the altered perceptions of the banks regarding the potential risks in their operating, in 2008, the growth in their total activities significantly slowed down. On December 31, 2008, the total assets of the banking system of the Republic of Macedonia reached Denar 250.7 billion, which is an increase of 12.1% compared to the end of 2007 (for a comparison, the annual growth rate for 2007 equaled 28.5%).
The delayed growth in the banks' assets mainly reflected the more decelerated annual rise in the deposits, of 12.8%, which is lower roughly by half than the increase registered in 2007. Parallel to the deceleration in the deposits growth, in 2008, in conditions of more apparent influence of the psychological factors on the adoption of the private sector's decisions, intensified transformation of their currency structure occurred, as well. The foreign currency deposits registered an annual rise of 22.1%, compared to the Denar deposits, which went up by 5.3%. Thus the trend of increase in the share of the Denar deposits, which commenced in 2006, ceased.
In 2008, the total credits extended by the banks, continued to grow intensively with a rate of 34.4%. However, under the influence of the measures undertaken by the NBRM, as well as the tightening of the banks' credit policies, the credit activity surged with slightly slower dynamics compared to the preceding year, when annual growth rate of 39.1% was registered. The households' credits continued to increment more intensively with an annual rate of 37.4%, with the credit cards and the consumer credits registering the highest growth of 27.8% and 24.7%, respectively.
The average level of risk of the banks' credit portfolio augmented by 0.5 percentage points, annually, and on December 31, 2008, it reached 5.8%. The total share of the exposure classified in the categories with higher risk level (C, D and E) in the total credit portfolio equaled 6.4% on December 31, 2008, which is an increment of 0.7 percentage points compared to the end of 2007. On December 31, 2008, the share of the exposure classified in the categories with higher risk level (C, D and E) in the total portfolio of households equaled 6.1%, which is rise of 1 percentage point, compared to the end of 2007. According to the type of credit products the banks offer to households, the highest risk level of 10.1% was registered with the consumer credits.
In 2008, the banks in the Republic of Macedonia had sufficient level of liquid assets and maintained stable liquid position. They serviced their liabilities towards depositors smoothly and timely, and they had no need in either case to use liquidity support from the NBRM in form of Lombard credit or short-term liquidity credit in last resort. However, in 2008, the trend of deepening of the maturity mismatch between assets and liabilities continued.
The solvency of the banks remained relatively high. At the end of 2008, the capital adequacy ratio equaled 16.2% and it is higher by twice than the legally prescribed minimum of 8%. Additionally, all simulations the National Bank makes on a regular basis demonstrated high degree of resistance of the banking system to different individual or combined hypothetical shocks.
The banks in the Republic of Macedonia continued to operate profitably. However, the trend of continuous improvement in their profitability and efficiency which lasted for several years, terminated in 2008. In 2008, the total gain of the banking system of the Republic of Macedonia equaled Denar 3,410 million, which is a decrease of Denar 240 million, i.e. 6.6% compared to 2007. Six out of eighteen banks showed loss, the cumulative share of which in the total assets at the level of the banking system equaled 9.4%. At the end of 2008, the rate of return on assets (ROAA) equaled 1.4%, and registered a decrease of 0.4 percentage points, annually. The rate of return on equity equaled 12.5% and it was lower by 2.7 percentage points than the rate recorded at the end of 2007.
In 2008, the NBRM performed regularly its activities within the supervisory and regulatory function. The process of banks licensing in order to comply with the provisions of the new Banking Law was finalized. Also, at the beginning of 2008, new concept of the risk assessment oriented supervision and their managing by the banks was adopted.
On the today's session, the NBRM Council discussed the Quarterly Report, April 2008. The Report determines that in the last quarter of 2008, the Macedonian economy began to feel the consequences from the deepening of the global economic crisis more intensively, mainly in the foreign trade and investments. Thus after the constant registering of relatively high rates of real growth in the first three quarters of the year, in the last quarter of 2008, the rate of economic growth slowed down to 2.1%, given more significant annual drop in the gross investments. In line with the severe decrease in the world price of oil and food prices, the annual rate of inflation continued to decelerate, and in the first three months of 2009 it equaled 1%, on average. The lower external demand for domestic products resulted in decline in the export in the last quarter of 2008, and in conditions of high dependence of the domestic production on imports and decrease in the investments demand, the export of goods also plunged. The same tendency continued in the first two months of 2009, given more apparent decrease in the export against the import of goods. Thus the trade deficit continued to maintain on a high level, which in conditions of higher uncertainty due to the consequences of the world crisis on the domestic economy and the reduced capital inflows from abroad increased the demand for foreign assets, creating pressures for depreciation of the domestic currency. Such pressures were overcome through high net sale on the foreign exchange market by the NBRM in the last quarter of 2008, a trend that continued also in the first two months of 2009 and together with the expectations for further deterioration in the conditions in the external sector, were the reason NBRM, besides interventions on the foreign exchange market, to react also by increasing the core interest rate from 7% to 9% at the end of March 2009. The negative changes in the global and domestic environment reflected also on the activity of the banking sector through delay in the deposit potential growth and consequently, the adjustment of the credit activity dynamics. Thus in February 2009, in comparison with the same month of the preceding year, the total deposits (with demand deposits) went up by 8.7%, while the total credits of the banks with the private sector augmented by 29%.
Intensified transfer effects of the global recession on the Macedonian economy, regarding the previously expected and constant downward revisions of the projections pertaining to the global growth, imposed the need of revising the macroeconomic projections for 2009. Thus the rate of the economic growth for 2009, for which the previous projections ranged from 3% to 4.4%, is revised to -0.4%, with significant slowing down of the domestic demand in the second quarter being expected. The reduced pressures by the demand and the supply and the higher comparison base are expected to result in low inflation rate of 0.6% in 2009, which is significantly lower level compared to the previous projection. It is significant to mention that despite the performed revisions, the risks relating to the economic growth and inflation projections are still high and they are mostly negative.
In direction of further rationalization in the statistical reporting by the banks, the Council reviewed and passed the amendments to the Decision on recording international credit operations and the Decision on the manner and the terms for submitting reports on concluded credit operations, which envisage exclusion of the credit transactions with non-residents on the basis of credit cards and overdrafts on the current accounts from the requirement for individual credit recording and reporting.
Governor's Office