Governors from the region on financial stability

Published: 1/4/2016

The 4th meeting of central bank governors from the region was held today at Hotel Lone in Rovinj. The meeting is organised by Lider Media d.o.o. and it is an opportunity for improving cooperation among financial institutions from Croatia's immediate surroundings, sharing experiences in suppressing and mitigating the consequences of financial crises and in the overall economy.

The meeting was opened by Czech National Bank Governor Miroslav Singer, who presented the financial sector in the Czech Republic and the role of the central bank. Governor Singer described the development of the banking system in the Czech Republic and the experience of integrated supervision of financial markets in the circumstance of the financial crisis. He also elaborated on the central bank's position on the banking union and concluded his presentation by an overview of macroprudential policy measures implemented by the Czech central bank.

The round table on the topic of Financial stability: open issues, moderated by eminent economist Velimir Šonje, was the opportunity for discussion of current challenges with which central banks in the region are faced in terms of preserving financial stability. Dimitar Bogov, Governor of the National Bank of the Republic of Macedonia, Milojica Dakić, Governor of the Central Bank of Montenegro, Boštjan Jazbec, PhD, Governor of the Bank of Slovenia, Senad Softić, Governor of the Central Bank of Bosnia and Herzegovina and Boris Vujčić, Governor of the Croatian National Bank, described the main elements of the system related to financial stability in their respective countries and explained the role played by central banks.

Governor Vujčić emphasised that contribution to the stability of the overall financial system was added among the objectives of the Croatian central bank only by the amendments to the Act on the Croatian National Bank of 2013. However, even before that, the Croatian National Bank carried out a very active policy, which was oriented to the strengthening of financial system resilience and prevention and deceleration of the process of accumulation of systemic risks, which could jeopardise financial stability. He also stressed the importance of the establishment of the Financial Stability Council, an inter-institutional body, which consists of representatives of the Croatian National Bank, the Croatian Financial Services Supervisory Agency, the Ministry of Finance and the State Agency for Deposit Insurance and Bank Resolution.

The Croatian Governor said that there were no obstacles to the full implementation of Article 114 of the CRR and that – taking into account the deadlines remaining until the full implementation – we have the possibility to prepare for its implementation and enable it to be implemented without any unwanted consequences. In accordance with accounting standards for determining risk weights, kuna exposures of banks in the Republic of Croatia are treated the same regardless of whether they are indexed to foreign currency or not.

"As far as the dynamics of non-performing loans (NPLs) is concerned, the situation has improved," the Croatian Governor also said and added that "in 2014 banks wrote off approximately one billion kuna in receivables, whereas in 2015 they wrote off almost three billion kuna related to bad loans.    The demand for recovering those receivables has grown and companies that provide such services in the European Union are turning increasingly to smaller markets like Croatia. In 2016, new amounts are being prepared to be written off, which is very positive, and the situation could be even better because it depends on the legal and regulatory framework, but we are still waiting for that," Governor Vujčić concluded.

The governors from the region also discussed the specific challenges in the implementation of financial stability measures in their respective countries. With this regard, Governor Vujčić underscored the experiences with the implementation of the system of insuring deposits and the setting up of the framework for the recovery and resolution of credit institutions and investment corporations. He announced that "the State Agency for Deposit Insurance and Bank Resolution (DAB) would, as of 1 June 2016, introduce the model of the payment of insurance premiums based on the risk of an individual financial institution."

The closing topic of the round table included lessons that may be learned from the experiences of other countries for future actions and the manner to improve the exchange of experiences. After the round table the governors responded to questions from the audience.

The meeting was closed by the round table on banking of the future and fighting global recessions.