The National Bank of the Republic of Macedonia Council held its seventh session today.
Skopje, 30 June 2011
Press release of the NBRM
The National Bank of the Republic of Macedonia Council held its seventh session today.
The Council discussed the Report on the Financial Stability in the Republic of Macedonia in 2010, stating that the financial stability in the Republic of Macedonia in 2010 was satisfactory, while the risks for its future maintenance reduced.
The total assets of the financial system increased by 13.3%, which is almost twice higher than the increase registered in the previous year, which is conditioned primarily by the increase in both the banks' assets and the pension funds. The gradual recovery of the domestic economy, as well as the favorable movements in the external sector, contributed to intensification in the banks' activities, maintaining the risk level within controlled frames. The banking system in the Republic of Macedonia characterizes with stable liquidity and high capital adequacy, as well as with strong deposit base, which is the main generator of the growth in the sources of funding of the banking activities. The uncertainty regarding the future recovery of the global economic activity caused certain restrain of the banks for taking risks, which resulted in larger investments in low-risk financial instruments. Namely, the biggest challenges for the domestic banking system arise from the international economic environment, and primarily refer to the future dynamics of the world oil and food prices, the uncertainty regarding the economic activity of our largest trade partners and the risks caused by the debt crisis in some of the Euro area countries.
The risks on the financial stability that were created by households and corporate sector in 2010 are within controlled frames, which was not the case in 2009 when they were assessed as mounting. The improvement in the global conditions and the intensified activities in the economy of our most important trading partners contributed to more evident movements with the segment of the export-oriented domestic corporate sector. In such conditions, the liquidity of the corporate sector registered improvement compared to 2009, while the indicators for the efficient use of assets retained almost the same level. Proof for the recovery of the activities of the corporate sector is the improvement of the capacity of the corporate sector for maintenance and improvement of the profitable operating, with the gain from the regular operating being increased by closely 10% compared to 2009. The indicators for the indebtedness of the corporate sector showed slight increase.
The positive gap between the disposable income and personal consumption in 2010 enlarged, which conditioned annual increase also in the households' savings rate. Also, the investments in deposits with the domestic banks and savings houses had the largest contribution to the increase in the financial assets of the households. The higher annual growth rate of the financial assets, compared to the growth rate of the debt, indicates improved capability of the households for debt repayment.
The key risk factor for the financial position of both the corporate sector and the households, is their high exposure to interest rate and currency risk, since the possible changes to the foreign exchange rate and the increase in the interest rates would influence on their capability for debt servicing, and hence, the banks' performances.
The other segments of the financial system influence moderately the total financial stability of the Republic of Macedonia, because their assets volume is still moderate. The significance of the leasing for the total financial system, which was minor also previously, diminished even more, while the fully-funded pension insurance faces with higher risks from the investments made. The risks arising from the insurance sector are downwards, which is primarily due to the intensified activities of the supervisory and regulatory body for introduction of international standards in this domain of financial system.
At today's session, the Council adopted four new decisions from the area of consumer protection in case of consumer loans. These decisions comply with the new Law on Consumer Protection, they provide better transparency when creditors extend consumer loans, and determine precisely the costs included in the calculation of the rate of the total costs of the credit.
The National Bank Council adopted amendments to three bylaws, as well: Decision on the exposure limits, Decision on the Methodology for determining capital adequacy and Decision on credit risk management, which introduced the credit rating as more objective criterion for determining the risk of the banks' claims. In this manner, harmonization with the international supervisory standards and the European Directive for founding and operating of credit institutions was attained.
The Council discussed and adopted the Decision on the manner, the format and the deadlines for submission of statistical data and information on the assets and liabilities of other financial institutions. With this Decision, the National Bank includes, for the first time other (non-deposit) financial institutions (the insurance companies, investment and pension funds, as well as the companies that manage both investment and pension funds), as regular reporters, thus enabling better scope of the financial sector in the reports, which is in accordance with the needs for research and analysis of the developments in the financial sector.
The Council also adopted two decisions from the area of cash management operations of the National Bank. Namely, the Decision on the manner and the terms for replacing banknotes and coins unfit for circulation, specifies the replacement terms, which is in conformity with the new Law on the National Bank. The Decision on the manner and the procedure allowing reproduction of banknotes and coins provides protection of the Macedonian Denar from unauthorized reproductions and it is towards further harmonization with the European legislation.
The latest macroeconomic movements were also discussed at the session. In the first quarter of 2011, the gross domestic product registered real annual growth of 5.1%, which corresponds to the projections of the National Bank. The main growth generators are the export and the investments. From the aspect of the sectors participating in the creation of GDP, the intensified activity in industry, trade and construction had the largest contribution to the economic growth. The favorable movements in the economy are proved also through the data about the labor market, which show annual increase in the number of employees (of 5.5%) and decrease in the number of unemployed persons (of 4.8%) in the first quarter of 2011. Such movements were the reason for the decline in the unemployment rate by 2.3 p.p. annually, which equals 31.2% in the first quarter. According to the latest data on the industrial output, in May minimal growth in the production volume was registered, compared to the previous month, i.e. increase of 6.9%, annually (11.8% in April). Despite the considerable positive contribution of the production of tobacco, metal, electric equipment and clothing, the reduced production of energy is the main factor for the annual growth slowdown in industry. However, in the first two months of the second quarter of 2011, the industrial output still registers high annual increase, which equals 9.3%, on average (13.8% in the first quarter). Such performances, as well as other available, high-frequent indicators and the statistical surveys, for now, point to maintenance of the positive GDP dynamics in the second quarter of the year, as well.
Governor's Office