Macedonia Central Bank Statement

Author: | Published: 5 Sep 2017
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During this challenging period of subdued financial recovery and prolonged shaping of post-crisis financial regulation, the Republic of Macedonia has continued in its efforts to strengthen the banks' capital positions by increasing their quality, requiring adequate coverage of Pillar 2 risks, introduction of capital buffers and reporting of the level of leverage ratio. To address these issues, the National bank of the Republic of Macedonia (NBRM) has developed several methodologies, facing the most important challenge of finding a proper balance between raising banks' stability and resilience to unexpected shocks without impeding their ability to support the economy and the development of the financial markets. Thus, starting from March 1 2017, banks in the country are required to maintain capital conservation buffer of 2.5%, while the banks that are identified as systemically important, will have to achieve an adequate level of capital buffer no later than March 2018.

These new requirements are closely aligned with international standards and best practices, i.e. Basel III and the Capital Requirements Directive and Regulation (CRDIV/CRR) requirements, and enable a level playing field for all domestic and foreign banks operating in the country. However, there are some impediments on our road to establishing equal opportunities for all banks. Having in mind the credit rating of the Macedonian sovereign debt, according to the CRR, EU banks present in the country will have to apply 100% risk weight in their consolidated reports, to their subsidiaries investments in Macedonian government and central bank securities, until the EU Commission adopts a decision that determines that supervisory and regulatory arrangements in Macedonia are at least equivalent to those applied in the Union. This capital requirement for the parent banks has already resulted in limiting their domestic sovereign exposure, which adversely affects fiscal policy as well as the transmission channel of monetary policy and may put a pressure on the domestic currency. In this sense, we have continuously pinpointed the necessity for EU authorities to carry out the assessment of the equivalence of Macedonia's regulatory and supervisory framework with the European framework.

The global financial crisis also highlighted the need to make banks safer and the system as a whole to be more resilient. Banks are required to have robust plans for scenarios that could threaten their own stability or the interests of their customers. In this regard, the NBRM has prescribed minimum requirements for recovery plans that should be developed by the systemically important banks, as a first step towards implementation of substantive recovery and resolution planning processes. In the following period, the NBRM will be working with banks to ensure that recovery plans are credible and practically implementable in times of stress. At the same time, the NBRM and the Ministry of Finance are faced with a colossal challenge of implementing the international framework for bank resolution, starting from endorsement of crisis management powers to a national resolution authority, identification of appropriate resolution tools, development of adequate resolution plans, etc.

 


 

 

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