Financial stability

Articles 3 and 4 of the Law on the National Bank of Serbia mandate the National Bank of Serbia (NBS) to contribute, without prejudice to its primary objective, to the maintenance and strengthening of the stability of the financial system, and to create and implement measures and activities to that effect. 

Financial stability means that the financial system – financial intermediaries, financial markets and financial infrastructures – is capable of ensuring not only efficient allocation of financial resources and fulfilling its key macroeconomic functions in normal conditions but also in the situation of financial imbalances or shocks in the domestic and international environment.

Under conditions of financial stability, economic agents have confidence in the banking system and ready access to financial services, such as payments, lending, deposits and hedging.

The intensity of the global financial crisis from 2007/2008 highlighted the need for a systemic approach to the regulation and supervision of the financial sector. The crisis has taught us three important lessons: (а) the degree of development of the financial system has by far greater impact on economic activity than thought earlier; (b) the costs of financial crisis are very high; (c) price stability does not guarantee financial stability. The accelerated development of macroprudential policy in the aftermath of the global financial crisis, aimed at limiting systemic risks to which the financial system as a whole is exposed, as well as the implementation of macroprudential instruments and measures, enabled the global financial system to become more resilient to potential future crises.

As part of the financial stability measures and activities, the NBS undertakes regular and comprehensive analyses of the macroeconomic environment and functioning of key financial institutions, markets and infrastructure; presents an overview of risks that pose a threat to the stability of the financial system; identifies trends that may increase the vulnerability of the financial system; and initiates debates on new regulatory initiatives and their potential effect on the financial system and the real economy. The NBS acts both preventively and correctively by adjusting the financial regulatory framework and implementing macroprudential instruments. If necessary, the NBS also manages the consequences of external shocks and other crisis situations, lessening potentially negative effects on financial stability.