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03/12/2018

The Financial Stability Council held its forty-second meeting today, chaired by Radoje Žugić, the Governor of the Central Bank and the Chairman of the Council. All other members of the Council attended the meeting: Darko Radunović, Minister of Finance, Branko Vujović, President of the Council of the Insurance Supervision Agency, and Zoran Djikanović, President of the Capital Market Commission. Upon invitation, Predrag Marković, the Director of the Deposit Protection Fund attends the Council meetings.

At today's meeting, the Council discussed the Information on the state of financial stability for the third quarter of 2018, and the current issues under the competence of the Council.

Considering international macroeconomic environment, the Council acknowledged the continued positive quarterly growth rates of GDP recorded in the euro area, even though the economic growth rate of 0.2% in Q3 was the lowest during the last four years. Such result was mostly due to negative growth rate of Germany (-0.2%), as the largest economy of the euro area. On the other hand, the US economy grew 3.5% in the third quarter compared quarterly, recording the highest growth in the last two quarters since 2014.

Regarding the domestic macroeconomic environment, economic indicators for the nine months of 2018 also point to the continued positive developments from the previous year. The industrial output sector recorded the highest y-o-y increase of 24.4%, with increase recorded in retail trade turnover (4.3%), the number of tourist arrivals (12.4%), and the volume and value of construction works (31.5%) as well.

Some fiscal indicators also recorded positive trends. Preliminary data show that source revenues of the budget for the nine months of 2018 were 14.1% higher compared y-o-y. Budget expenditures increased 7.9% compared to the same period of the previous year (due to higher realisation of capital budget in the current year), yet being 5.8% lower than the plan. 

The Council noted that the indicators of stability and quality of operations at the banking, insurance and capital markets were positive and recorded positive trends.

As at the end of Q3 2018, the total assets of banks amounted to 4.41 billion euros and it recorded quarterly growth of 2.4%. Total loans and deposits in Q3 2018 recorded respective increase of 2% and 3.3%. The share of non-performing loans and receivables in total loans and receivables was 6.7% as at end Q3 2018, which was quarterly decline of 0.3 percentage points. Despite its decline, the non-performing loans ratio in some banks is still a challenge requiring intensified measures for it resolving.

Based on the impact analysis of all abovementioned factors on the overall economic stability, with particular focus on financial sector stability, the Council concluded that the financial system is relatively stable with present moderate risks.

The Members of the Council also discussed other issues under its competence.