29/12/2022

Press release on NBS results in 2022

NBS in 2022 – working proactively to mitigate the effects of a multifaceted global crisis

We have done much in 2022 as well, the year that will be remembered for huge challenges and intertwined crises.

• In 2022, the dinar gained 0.2% against the euro, and the NBS’s purchases in FX market interventions exceeded the sales by over EUR 700 mn.
• Gross FX reserves reached their historical highs, exceeding in December EUR 18 bn for the first time ever.
• Gold, as part of FX reserves, was boosted in 2022 as well, by 1.1 tonnes to the record 38.5 tonnes.
• 2022 is the fifth in the past six years which the NBS ended as the net FX buyer – in the total amount of EUR 4.9 bn.
• 2022 also boasts a record high inflow of foreign direct investments (FDI). At the level of 2022, gross FDI inflow will amount to between EUR 4.3 bn and EUR 4.4 bn, by around 10% more than in 2021.
• The share of non-performing loans (NPLs) in total loans was brought down to its historical low of 3.0%, while in 2012 every fifth loan was non-performing.
• We adopted a regulation capping the price of a payment account with basic features to RSD 150, which permanently protects household standard regarding the payment services essential for everyday life. The overall effects of capping the fees, thanks to the package of NBS measures from August, are estimated at over RSD 7 bn during a 12-month period.
• Despite huge global shocks, we are a step away from investment grade, which adds value to each individual company in the country.

Inflation is lower than in other countries running a similar monetary policy regime

Inflation movements since early 2022 were driven by supply-side factors, primarily the surging food and energy prices exerting both direct and indirect effects on the Serbian inflation – by fuelling inflation in our key trade partners. 

• By its nature, around 70% of headline inflation in Serbia is imported.
• The NBS did not allow the depreciation of the dinar against the euro to amplify the effects of imported inflation, as was the case in 2010 and 2012 when Serbia faced a similar level of inflation, though the global price shock was several times weaker than now.
• Headline inflation in Serbia reached 15.1% in November and was lower than in other countries running a similar monetary policy regime.
• Core inflation in Serbia stayed at a much lower level than headline inflation, while our monetary policy regime peers faced double-digit core inflation.

Relative stability of the EUR/RSD exchange rate was preserved in what was the most challenging year in the past decade

Even in the year behind us, the most challenging for the domestic FX market in more than a decade, the NBS preserved the relative stability of the EUR/RSD exchange rate.

• The dinar strengthened 0.2% against the euro.

The impacts from the international environment – geopolitical tensions and the rise in energy prices were the main factor behind strong depreciation pressures in the first four months of the year, fuelling strong household demand for foreign cash in exchange offices and banks. The NBS reacted timely and decisively in that part of the year:    

• From January to April we sold in the FX market EUR 2.27 bn net,
• We provided to banks almost half a billion euros of foreign cash in exchange for foreign exchange, to ensure smooth cash supply to exchange offices and households.

The fact that we managed to safeguard the stability of the FX and other segments of the domestic financial market even throughout such a turbulent period led to a reversal, where, underpinned by a rise in confidence and renewed workings of the FX supply-side factors, dinar appreciation pressures have prevailed again since May.

• In the period since May, the NBS bought EUR 2.98 bn net in the FX market,
• In the segment of FX market interventions, in annualised terms, the NBS bought over EUR 700 mn more than it sold,
• 2022 is the fifth in the past six years (since 2017) in which the NBS was the net FX buyer – in the total amount of EUR 4.9 bn.

FX and gold reserves reached new record highs

In 2022, our country’s FX reserves increased to new record highs, despite the unprecedented multifaceted crisis that hit the world.

At end-November, gross FX reserves reached EUR 17.3 bn, their highest end-of-month level on record, while in December they for the first time exceeded EUR 18 bn! Тhus, this year again FX reserves were increased by over 10% i.e. EUR 1.8 bn.

2022 also saw a further boost to gold reserves, through the purchase of 1.1 tonnes of domestically manufactured gold – in quantity terms, gold reserves reached the record high 38.5 tonnes in November, whose total value was EUR 2.1 bn.

Serbia retained the status of an attractive investment destination

The year 2022 will go down as the year of the record high FDI inflow – between EUR 4.3 bn and EUR 4.4 bn (according to operational data for December). 

As in the previous years, more than a half of these inflows went to tradable sectors, mostly to manufacturing as the key export sector of the Serbian economy. We expect manufacturing exports to exceed EUR 23 bn in 2022, which is by around EUR 4 bn more than a year earlier.  

A step away from investment grade

That Serbia is perceived as an attractive investment destination is also confirmed by its credit rating, which has been maintained one notch below investment grade despite global shocks.   

In its latest assessment from December 2022, S&P highlights in particular Serbia’s credible macroeconomic policy framework, as well as adequate FX reserves as an important buffer against shocks coming from the external environment. S&P cites the credible monetary policy pursued by the NBS as a significant factor behind the decision to affirm Serbia’s rating.

“The S&P’s latest report is yet another confirmation of the sound results achieved by Serbia in tackling the multifaceted global crisis. By taking measures and acting proactively, in full coordination with other economic policy makers in the country, we have preserved the foundations of growth even in unprecedentedly challenging global circumstances. In this way, investment and consumer confidence have been maintained, as an important precondition of our economy’s further growth”, commented Governor Jorgovanka Tabaković.

In addition to maintaining banking sector stability, the NBS continued to facilitate loan repayment and access to financing

• High capital adequacy of the banking sector has been maintained (capital adequacy ratio of 19.5%), along with a favourable capital structure (almost 95% being CET 1 capital, which is of the highest quality).
• All the relevant banking sector liquidity indicators have been maintained, and they continue to record values that are twice higher than the regulatory minimums.
• The quality of the banking sector credit portfolio has been not only preserved, but also further improved – the share of NPLs was slashed to the lowest level on record, to 3.03% at end-November 2022.  

 Trust in the banking system was maintained even when we faced challenges regarding the operation of Sberbank Srbija.

• The NBS was agile and the first in the region to respond. After all actions prescribed by law were implemented, AIK banka became the owner of Sberbank Srbija a.d. Beograd, having acquired 100% of its shares.

Prudential measures

To preserve the citizens’ living standard, in August the NBS mandated all insurance undertakings that unjustifiably raised the MTPL insurance premium by around 22% on average as of 1 August to restore the premium to the previous level in the shortest time possible.

We also adopted the regulation precluding any such new occurrences. We separately defined the decision-making process in insurance undertakings concerning the terms and tariffs of mandatory insurance premiums. Our regulation also envisages a higher degree of responsibility of management members and certified actuaries in insurance undertakings who participate in the making of these decisions.

Improved conditions of exchange operations for citizens

To stabilise the exchange market, which is a part of the FX market, and after the escalation of the Ukraine conflict, we adopted amendments to the regulations governing the terms and manner of performing exchange operations, and the terms and manner of conducting supervision of these operations.

• The amount of the commission that an authorised exchange dealer and the public postal operator may charge when selling cash is capped to 1%, and the manner of performing exchange operations outside the exchange office is defined more comprehensively, which ensures more adequate and efficient supervision of exchange operations by the NBS.
• In 2022, the authorisation to perform exchange operations was temporarily revoked from 187 exchange dealers.

Further development of instant payment services and projects supporting digitisation in Serbia

• Over 52 mn transactions, or 25% more than a year earlier, were realised in the NBS Instant Payments Serbia (IPS) system during 2022 (concluding with 25 December 2022).
• In 2022, the IPS Test Lab tested 34 different technical-technological solutions devised by banks for the issuance and acceptance of an instant payment instrument.
  • Two banks enabled for their consumers – citizens the issuance of a payment instrument for instant payments at points of sale.
  • Three banks enabled the payment of bills/invoices by scanning the NBS IPS QR code.
  • Three banks implemented the Transfer service into their mobile applications.
    • Тhus, as at end-2022 a total of seven banks enabled their consumers to transfer funds simply, swiftly and safely, at any time and place, by choosing the payee’s mobile phone from their contact list and entering the intended transfer amount.
  • Six banks enabled to clients IPS online payments via deep link technology.
  • Seven technical-technological solutions were assessed as ready for the acceptance of instant payments at physical and online points of sale.
• On the IPS website we enabled the use of a separate Application Programming Interface – API for automatic generation and validation of a large number of codes whose scanning enables a simple and quick (instant) payment of bills/invoices. This allows consumers to simply and swiftly pay their bills/invoices by printing the NBS IPS QR code on them.
• With a view to broadening the network of provision of instant payment services, we continued to work on the inclusion of payment institutions and e-money institutions in the NBS IPS system, so that payment service providers other than banks can also provide instant payment services.  
• In cooperation with the Office for IT and eGovernment, the NBS continued to support the further enhancement of the e-Payment portal by enabling instant payment of fees and commissions charged by public administration bodies on the eGovernment portal, which is accomplished by scanning the NBS IPS QR code on the unique payment order. This way we contribute to further digitisation of the public administration and increase efficiency in the provision of public services.
• We enabled cash withdrawal when the purchase is paid with the Dina card at one of the largest retail chains in the country.
• We continued activities relating to the issuance of DinaCard – UnionPay cards which, in addition to the local, are also used in the international UnionPay acceptance network. As part of this, we enabled the acceptance of DinaCard – UnionPay cards in the entire acceptance network, i.e. all POS terminals and ATMs, and online points of sale in Serbia. The first issuing bank that will begin with mass-scale issuance of these cards is Banka Poštanska štedionica. UnionPay cards issued abroad are now accepted at more than 60% of POS terminals and more than 85% of ATMs in the DinaCard acceptance network.

Digitisation of the bill of exchange

• We continued activities on the project to introduce the electronic bill of exchange and we are in the final stage of developing an IT solution of the Central Register of Electronic Bills of Exchange and connecting it with banks.
• Given that more than 7 million paper bills of exchange are currently registered with the NBS, it is obvious that the introduction of the electronic bill of exchange will have an immense impact on the day-to-day business life.
• In addition to all other improvements (i.e. video identification, contract signing using a mobile phone or a computer) introduced by the NBS, as a leader in financial sector digitisation in the region, enabling the use of the electronic bill of exchange in a safe way will lead to the full digitisation of some processes in the financial sector, especially when the bill of exchange is used as a collateral.

Licences for the provision of virtual currency services and supervision over the virtual currency market

In December 2022, the NBS issued the first two licences for the provision of virtual currency services, based on the Law on Digital Assets, in effect since June 2021. This enabled the use of virtual currency services in Serbia, which are covered by these licences through licensed Serbian companies comprehensively supervised by the NBS, fully in line with international standards (FATF Recommendation 15).

Individual and collective protection of rights and interests of financial services consumers

During 2022 the NBS continued to perform its function of the protection of financial services consumers in a responsible and active manner.

• By mid-December, 1,764 consumer complaints were resolved, 30% of which were founded.
• The bulk of complaints pertained to bank conduct (994 complaints), 36% of which were founded (resolved in favour of bank clients).
• The direct financial effect for consumers through these procedures amounted to around RSD 64 mn, while the value of concluded agreements in mediation procedures was around RSD 5 mn.
• The removal of irregularities upon individual consumer complaints mostly implied that banks removed those same irregularities in relation to other consumers as well. Otherwise, the NBS undertakes further measures in supervision procedures. Currently, the direct material effect within the supervision procedures is around RSD 22 mn, though it will be much higher by the end of the year as banks are still implementing activities based on the NBS’s measures issued this year.
• Independently of supervision procedures, the NBS also took measures whose effects will be felt over several years, and two of them stand out. The first measure was taken in respect of a bank where, based on the NBS’s stance, around EUR 1.7 mn a year is saved for the bank’s clients. The second measure pertains to all banks in regard to early repayment of loans, and the total effect for consumers that repay their loan early is around EUR 5 mn annually.

“Despite challenges unprecedented in the global economy in the past decades, during 2022 the Serbian economy continued to grow and develop, against the backdrop of several intertwined crises. The NBS also played a role in overcoming the challenges, mitigating the economic consequences of the pandemic and the energy crisis, and continuing economic growth and development – all thanks to measures adopted in full coordination with the Serbian Government.
We were able to respond thanks to the built buffers and accumulated reserves. At the level of 2022, Serbia’s FX reserves reached a record high, the relative stability of the dinar exchange rate was not threatened at any point, and our banking sector remained stable and well capitalised. Serbia has a strong track record of solid macroeconomic performance, and all the results achieved even in the most challenging conditions are an important pillar of our defence against any shocks going forward, as well as a guarantee of the preservation of our growth prospects”, concluded Governor Tabaković.

Governor's Office