Skopje, 30 October 2013

Press release of the NBRM

The National Bank of the Republic of Macedonia Council held its tenth session today. 
 

At the session, the National Bank Council reviewed the Report on the banking system of the Republic of Macedonia in the second quarter of 2013. It was concluded that in the reporting period, the lending growth accelerated moderately due to the loans to household sector and Denar loans. Amid recovery of domestic economic activity, in the backdrop of uncertainty about the global economic recovery, it was determined that the conservative strategies of some banking groups had an effect on the dynamics of lending activity in the aftermath. It is expected that the certain emergence of the European economy out of recession and the decline of the share of nonperforming loans in the domestic banking sector will fuel the acceleration of lending activity.

The solvency of the banking system is high and stable, which is acknowledged by the stress test simulations of extreme hypothetical shocks in the banking system. Great resilience of the banking system is necessary for sustainable lending. This resistance is further strengthened by the recently adopted amendments to the regulation on foreclosed assets, where the released impairment will not be recognized as an income to be paid as dividend, but will be used to strengthen the banks' capital.

Credit risk remains the most frequent risk in the banking system of the Republic of Macedonia, although the second quarter of 2013 was marked by a slowdown of the quarterly growth of nonperforming loans. This trend continued in the following months of the year. Consequently, as of August, the nonperforming loans to total loans ratio went back to the level of March 2013 (11.9%, versus 12.3% at the end of June 2013). The slower growth of nonperforming loans resulted from the corporate sector, reflecting the positive developments in the domestic economy in the previous three quarters, in particular the stronger growth of economic activity in the first quarter. Expectations that the economy will remain in the zone of solid annual growth make us assume that the further acceleration of the growth of nonperforming loans of the corporate sector is largely exhausted.

At the end of the second quarter, banks maintained high liquidity, as perceived through the scope of liquid assets, which covers a large part of household deposits and short-term liabilities of banks. Stress tests still indicate high resilience to simulated liquidity shocks. At the end of the second quarter, the banking system showed a positive financial result of Denar 351.4 million. Major generators of the profit growth are the total regular income, primarily net interest income, and the lower operating costs.

At its session, the Council adopted the Decision amending the Decision on managing banks' liquidity risk. This decision reduces the proportion of time deposits assumed to be withdrawn from banks from 80% to 60%. The amendment takes into account the high stability of deposits in the banking system. This amendment provides room for long-term bank lending to the real sector. The Council adopted a Decision amending the Decision on the terms and conditions under which residents may conduct payments in foreign currencies in transactions with non-residents, which is in compliance with the Law on Road Traffic. The amendments in the Decision simplifies the procedure for payment of cash foreign currencies for the current needs of domestic carriers.

The Council reviewed and adopted the Report on the Internal Audit in the first half of 2013 and made other decisions within its competence.

Governor's Office