The International Monetary Fund forecasts that the decline in the domestic product will amount to 2.5% this year, while the growth of 5.5% is projected for next year. We believe that the lending activity will continue to grow, too
Banks have responded very well to all the challenges in a year that is unprecedented in recent history, as evidenced by the satisfaction of both citizens and businesses. Banks’ lending activity continued throughout the pandemic. According to the National Bank of Serbia, during the second quarter of 2020, year-on-year growth in lending activity went up to 13.9% in June, said Vladimir Vasić, Secretary General of the Association of Serbian Banks (ASB).
Vladimir Vasić, Secretary General of the ASB
This year is rife with challenges for all of us, including the banking system. How did the banks respond to the situation and what do you think could have been done better?
This year is unprecedented in recent history, and therefore is something completely unusual for the banking system. Citizens and companies in Serbia can accurately assess whether the banks’ response was good. Did they receive and send money in the usual way? Have they been granted loans within the usual deadlines? Was there always enough money to withdraw at the bank’s branch and ATMs? Did the banks provide regular services during the state of emergency and did they go out of their way to help the citizens and the businesses in a difficult situation? Considering that the answers to all these questions are without a doubt positive, I think that the banks responded very well to an unusual challenge. Certainly, not everything was perfect, but I think that in this difficult situation, one should not look for perfectionism.
“Individual savings in banks have been growing, continuously and at a high pace, from 2012 to date”
Banks quickly had to shift their business to online space. Has the coronavirus accelerated digitalization and is our market ready for such a rapid change?
The banking system has readily accepted the challenges of digitalization payment services, primarily thanks to the activities that the state, the National Bank of Serbia and banks carried out prior to the pandemic. These activities related to the implementation of fully digitalized systems (instant payments, QR code). Digitalization would have taken its course had we not had a pandemic. The last year would have been more “digital” than the previous one, and the next one even more. COVID-19 did expedite all that and raised it to a higher level. If we were jogging until the outbreak of the pandemic, today we are sprinting towards digital. Technology is no longer a possibility, but a necessity, as new circumstances become a reality.
From financial stability, we have crossed into the pandemic-induced uncertainty, where we all feel fear and insecurity. How will all this affect the retail and corporate indebtedness?
Financing conditions on the domestic market are favourable with interest rates moving close to the previously recorded lowest values during the second quarter. In the previous period, we also had numerous measures devised by the National Bank of Serbia which encourage both retail and corporate lending. Although the health situation is still uncertain, the forecasts for economic growth for next year are favourable.
The International Monetary Fund forecasts that the decline in the domestic product will amount to 2.5% this year, while the growth of 5.5% is projected for next year. We believe that the lending activity will continue to grow, too. Therefore, even during the coronavirus pandemic, thanks to the measures and activities of the National Bank of Serbia and the Government of Serbia, low inflation, stability of the exchange rate, the stability of public finances and macroeconomic stability, in general, have been preserved.
The regulations devised by the NBS and the supervision carried out in the segment of risk and capital management have been boosted in recent years. How do banks react to that?
We see tougher regulation all over the world, and especially in the EU. Our regulatory solutions and supervisory practices are largely in line with the solutions applied in this area in the EU. Alignment with the new regulatory requirements after the global economic crisis, globally and locally, has caused additional costs and operational adjustment challenges for banks. On the other hand, as a result, the Serbian banking sector is highly capitalized, very liquid and able to support the needs of its clients in every sense. In the time of the coronavirus-induced crisis, banks represent one of the most vital segments of the economy that has shown great resilience in times of crisis.
“The banking system has readily accepted the challenges of digitalization payment services”
What is the situation like with banking clients, big companies, SMEs and retail clients, fulfilling their obligations towards their banks this year?
This year, there is a noticeable regularity in settling liabilities to banks. Default refers to matured liabilities outstanding for over 60 days. for natural persons, or 15 days for legal entities and entrepreneurs. The data show that, at the end of September this year, the share of default in debt was 3.6% (4.3% for legal entities, 4.5% for entrepreneurs, 2.5% for individuals). Compared to the same month last year, default stood at 4.9%. On the one hand, this is a trend that has been present for a long time as a result of measures to reduce non-performing loans, which the National Bank of Serbia has been working on with commercial banks for years. On the other hand, the citizens also used the moratorium as a break in loan repayment to settle old debts.
The first week of November is known as Savings Week. How has the crisis affected the savings of Serbian citizens and do they save more during a crisis?
Individual savings in banks have been growing, continuously and at a high pace, from 2012 to date. These are encouraging data because they show that the Serbian economy is moving in the right direction and that the banking sector is stable and adequately capitalized.
Savings in dinars are growing faster and increased fourfold from 2012 to date. At the end of the third quarter of this year, it reached the amount of 87 billion dinars. More than half of the growth of dinar savings took place in the last three years, and the most during 2019. Individual savings are an important economic and social category for all participants in the socio-economic life of each country. Regularly setting money aside for savings, even smaller amounts, can mean a lot to each individual later.
How is the sale of Komercijalna Banka going to affect the consolidation of banks, and how will this affect the further tendencies in the banking industry?
The banking market has been very developed for years. We have stiff competition of large European banks and the know-how they have brought to Serbia. I think that the fact who owns which bank does not significantly affect the market itself and the bank’s retail and corporate offer. In any case, it is important for Serbia that another bank from the European Union will invest in our market.
Good forecasts
According to the latest projection of the European Commission and the IMF, Serbia has recorded the smallest GDP decline in Europe, only 1.5 per cent. What are your forecasts for this year and the first half of next?
Although the current situation does not seem cheerful to anyone in the world, our forecasts are optimistic. Thanks to previously stabilized public finances, as well as the banking system, the decline of the Serbian GDP will be minimal, and the country’s expected growth in 2021 will be one of the largest in Europe. Serbia is a proven regional leader in terms of the value of foreign investments. This gives us a basis to expect a quick recovery, and the banking system, which itself is very stable, will give the recovery its maximum support.