The National Bank of Serbia has published a list of nine systemic banks of special importance for the stability of the domestic financial system, which will have to maintain certain rates of the protective layer of capital from June this year. The list of banks is the same as last year, with the proviso that after the sale of Komercijalna Banka, only one state-owned bank is now on the list. Some economists suggest introducing a stress test for systemically important banks to check their resilience to unforeseen events such as the coronavirus epidemic.
There are nine systemically important banks in our country.
According to the criteria of the National Bank of Serbia, there are nine systemically important banks in our country which, if their financial situation worsens or stops working, would disrupt the stability of the domestic financial system. The list includes: Banka Intesa, Unicredit Bank, Komercijalna Bank, OTP Bank, Raiffeisen Bank, Erste Bank, Postanska Stedionica, AIK Bank and Vojvodjanska Bank.
The list of systemically important banks is adopted by the central bank at least once a year from June 30, 2017, and compared to last year, there were no changes in the list. When asked by “Business and Finance” how to determine that list and the rate of protective layer of capital for those banks in the central bank, they said that their assessment is based on using at least one of the following criteria: size of the bank, importance for the economy, importance of cross-border activities. the bank’s connection with the financial system, the bank’s substitutability in the financial system or the complexity of the bank’s operations.
Systemically important banks in Serbia have been identified on the basis of criteria and indicators determined by the guidelines of the European Banking Agency and valid for the countries of the European Union.
“At the end of 2011, the Basel Committee for Banking Supervision published a methodological framework for determining the global systemic importance of banks, and at the end of 2012, a framework for identifying the systemic importance of banks at the national level. Aligning the legal framework with international standards and regulations of the European Union and taking into account the specifics of domestic regulations and markets, the National Bank of Serbia, after adopting regulations introducing Basel III standards in the Republic of Serbia in December 2016, made decisions determining rates and methods of maintaining hedging layers of capital,” they stated in the NBS.
As they explained, the adoption of these regulations is part of the harmonization with the Basel III standards, since they transpose the provisions of the Directive on capital requirements for credit institutions, which regulate the protective layers of capital in the European Union, into the domestic regulatory framework. Article 131 of the said directive regulates the protective layers for systemically important banks.
Based on the domestic regulatory framework that is fully harmonized with the European regulatory regulation of capital buffers, the National Bank of Serbia identifies systemically significant banks and applies the same restrictions on the level of capital buffer rates for these banks according to the same indicators and criteria established by relevant regulations and guidelines at the level of the European Union.
From June this year, systemically important banks will have to maintain certain rates of the protective layer of capital, ie the percentage of basic share capital that each of them is obliged to maintain above the prescribed minimum.
For Intesa, Unicredit and Komercijalna Banka, the percentage of the protective layer of capital is two percent, and for all other systemically important banks, one percent.
Protective layers of capital represent additional share capital that banks are required to maintain above the prescribed regulatory minimum. It is an instrument that contributes to preserving and strengthening the stability of the financial system because it increases the resilience of the banking sector, affects the limitation of excessive or underestimated exposures, increases the quality of banks’ capital and limits its distribution.
Bankers from systemically important banks were reluctant to comment for Business and Finance on what merit they are on that list and whether prescribing a protective capital rate makes it difficult for them to do business in any way. Unofficially, they acknowledge that stricter requirements are set and that the list is determined on the basis of a procedure that takes into account the size of each bank, its importance to the economy, scope of cross-border activities, connection to the financial system, business complexity and substitutability.
Also, they claim that, having in mind their market share and other business indicators, they have no problem increasing the rate of the protective layer of capital in relation to other banks, and that this is not a limiting factor in their work.
Professor of the Belgrade Banking Academy Zoran Grubisic believes that it is important for the NBS to determine the list of systemically important banks and prescribe stricter criteria when it comes to protective capital, because in the past global economic crises hit big banks, spilling over the economy and citizens, BiF reports.
