Vienna Initiative

Following the successful financial sector coordination meeting on Serbia held in Vienna on 27 March 2009, and in relation to the arrangement with the IMF, the National Bank of Serbia drew up special facilities in support of the country’s financial stability with the aim of upholding confidence in the banking sector and preserving financial and macroeconomic stability. The facilities are designed to enable continuous access to sources of dinar and foreign exchange liquidity, stabilise the forex market, maintain the quality of bank assets (pre-emptive measure) by establishing the framework for the rescheduling of loan repayment terms for bank clients, as well as to reduce the outflow of foreign exchange and alleviate depreciation pressures.

Special facilities are available to those banks that, together with their majority shareholders, assume certain commitments. The majority shareholders of banks commit to maintain their December 2008 level of exposure to the Republic of Serbia until end-2010 (if their head office is located outside of the Republic of Serbia) and to keep bank capital adequacy and liquidity ratios at the levels prescribed, whereas the NBS will asses the future movements in capital adequacy ratios in accordance with the methodology harmonised with the IMF. Banks, on the other hand, have to commit to enable borrowers to convert their foreign currency loans and foreign currency clause-indexed loans into dinar loans, and to provide for the rescheduling of loan repayment terms under the framework defined. 

Banks that meet these conditions gain access to the following facilities: new liquidity sources – dinar loans with a repayment period of no longer than 12 months, and short-term foreign exchange swap transactions, including the abolishment of reserve requirements for deposits and loans received from abroad from October 2008 to December 2010 until their maturity date. Banks can also include in their capital, for regulatory purposes, subordinated liabilities up to 75% of their core capital. Besides, in the calculation of arrears on loans whose repayment terms were rescheduled under the framework defined, and for the purposes of their classification requirements, banks are permitted to apply the subsequently agreed maturity date, as well as to raise foreign exchange risk ratio from 10% to 20% of their capital.