The NBS Head Office Building was built from 1888 – 1890, on the basis of blueprints designed by Konstantin Jovanovic (Vienna 1849 – Zurich 1923), son to distinguished artist Anastas Jovanovic...
Liquidity risk is the risk of potential occurrence of adverse effects on the bank’s financial result and capital caused by the bank’s inability to meet its due obligations as a result of:
A bank’s liquidity level is indicated by:
The Decision on Liquidity Risk Management by Banks sets out detailed conditions and manner of managing the liquidity risk by banks, the manner of calculating the above ratios and the limits pertaining to the banks’ exposure to the liquidity risk.
The Decision on Reporting Requirements for Banks sets out the method, form and the timeframe for banks’ reporting on individual liquidity ratios (reporting forms LIK, PPLA 1-4, EOSF, EZSF and NSIF).
The liquidity ratio of a bank is the ratio of the sum of level 1 and level 2 liquid receivables of the bank and the sum of liabilities payable on demand or with no agreed maturity and liabilities falling due within a month from the date of liquidity ratio calculation.
The narrow liquidity ratio is the ratio of level 1 liquid receivables of a bank and the sum of liabilities payable on demand or with no agreed maturity and liabilities falling due within a month from the date of liquidity ratio calculation.
Daily reporting on the liquidity ratio and the narrow liquidity ratio enables insight into whether the bank has sufficient liquid receivables at all times to cover its current stock of liabilities falling due within a month from the date of ratio calculation.
Liquidity coverage ratio is the ratio of the bank’s liquidity buffer and net liquidity outflows over a 30-day stress period. The liquidity buffer is the amount of liquid assets which the bank may include in the calculation of the liquidity coverage ratio, while net liquidity outflows mean the amount which results from deducting liquidity inflows from liquidity outflows, set in accordance with the Decision on Liquidity Risk Management by Banks.
Through monthly reporting on the liquidity coverage ratio, it is determined whether the bank has sufficient high-quality liquid assets which meet the prescribed general and operating conditions to last through a 30-day stress period, i.e. to cover net liquidity outflows over a 30-day stress period.
Net stable funding ratio is the ratio of a bank’s available stable funding to its required stable funding.
The amount of available stable funding is calculated by multiplying the accounting value of various categories or types of liabilities and the bank’s capital by the appropriate haircuts.
The amount of required stable funding is calculated by multiplying the accounting value of various categories or types of assets and off-balance sheet items by the appropriate haircuts.
The application of appropriate haircuts to capital and liabilities results in the amount of available stable funding expected to be reliable over the horizon of one year, while the application of haircuts to assets and off-balance sheet items results in banks’ required stable funding over the same time horizon. The ratio of available stable funding and required stable funding which exceeds 100% indicates that the bank has sufficient stable funding over the horizon of one year.
A critically low liquidity level is present in the following cases:
A critically low liquidity level is also present where the bank rightly expects the liquidity coverage ratio and/or the net stable funding ratio to be below the prescribed minimums.
If the bank establishes that its liquidity level is critically low, it is required to promptly notify the National Bank of Serbia thereof, not later than the following business day. Such notification will specify the liquidity ratio which is or is expected to be below the minimum prescribed level, and the reasons that have led or will lead to critically low liquidity. Along with the notification, the bank is also required to submit a plan for removing the causes behind such low liquidity and for timely reaching the minimum ratio levels. The National Bank of Serbia will monitor the implementation of the bank’s plan and may request the bank to comply with the minimum ratio levels within a timeframe shorter than the one specified in the plan if, on the basis of available data, it assesses this as necessary for preserving the liquidity and solvency of the bank.
Serbia’s liquidity risk management framework is harmonised with the Basel standards and relevant EU regulations (Regulation (EU) No 575/2013 on prudential requirements for credit institutions, Regulation (EU) No 2021/451 laying down implementing technical standards for the application of Regulation EU No 575/2013 with regard to supervisory reporting of institutions and Delegated regulation (EU) No 2015/61 to supplement Regulation (EU) No 575/2013 with regard to liquidity coverage requirements).
