report on dinarisation of the serbian financial system · 1 calculated at the dinar exchange rate...

REPORT ON DINARISATION OF THE SERBIAN

FINANCIAL SYSTEM

December 2018

April 2019

Introductory note

A more extensive use of the dinar in the Serbian financial system and better currency matching of

income and expenses of the non-bank sector would improve the country’s financial stability, lessen

the risk of exchange rate volatility in the most vulnerable sectors of the economy, and enhance the

effectiveness of monetary policy. To support the process of dinarisation, in April 2012 the National

Bank of Serbia (NBS) and the Government of the Republic of Serbia signed the Memorandum on the

Strategy of Dinarisation of the Serbian Financial System. Having in mind that macroeconomic

stability has been ensured and financial stability reinforced since the signing of the 2012

Memorandum, the NBS and the Government signed a new Memorandum on the Dinarisation

Strategy in December 2018, affirming their resolve to additionally support the process of dinarisation

and contribute to the stability of the financial system. In the new Memorandum these institutions

reflected on the results achieved by the measures and activities taken thus far and, based on them,

agreed and defined additional measures and activities so as to encourage further dinarisation and

reduce the foreign currency risk in the system.

Pursuant to the Memorandum, the NBS and the Government have committed to monitoring and

analysing the degree of dinarisation and to regularly informing the public about the measures and

activities undertaken, as well as about the progress achieved in the process of dinarisation. . For that

purpose, the NBS prepares and publishes the quarterly Report on Dinarisation of the Serbian

Financial System as one of its supporting communication tools. The Report provides information

about developments in the dinar market and highlights measures and activities taken or planned by

market players and regulatory authorities with a view to supporting the process of dinarisation.

Making this information accessible to the wider public will help raise awareness of the need to hedge

against the exchange rate risk, as well as understanding of the measures and activities to be taken by

the NBS and the Government in order to encourage the process of dinarisation of the Serbian

financial system.

Reports on Dinarisation of the Serbian Financial System are available on the NBS website

(www.nbs.rs).

Dinarisation strategy

The dinarisation strategy rests on three inter-connected pillars.

The first pillar is the most general, but also the most important one. It envisages monetary and fiscal

policy measures to maintain macroeconomic stability and ensure conditions for sustainable economic

growth.

The second pillar consists of measures to promote development of the dinar securities market and

introduce new dinar products in the domestic financial market.

The third pillar aims to promote hedging against the risks associated with exchange rate exposure in

the non-bank sector and to discourage further build-up of those risks. The NBS will lead the efforts in

this field, working together with the banking sector on introducing and developing FX risk hedging

instruments.

Report on Dinarisation of the Serbian Financial System National Bank of Serbia

ABBREVIATIONS

bn – billion

ЕBRD – European Bank for Reconstruction and Development

lhs – left-hand scale

mn – million

NPL – non-performing loan pp – percentage point

Q – quarter

rhs – right-hand scale Y – year

W – week

Other generally accepted abbreviations are not cited.

Сontents

I. Dinarisation of the Serbian financial system ...................................................................................................... 1

1. Dinarisation of receivables ........................................................................................................................... 1

Corporate and household receivables .................................................................................................... 1 New corporate and household loans ...................................................................................................... 2

2. Deposit dinarisation ...................................................................................................................................... 4

Corporate and household deposits ......................................................................................................... 4 New corporate and household deposits.................................................................................................. 5 Dinar and FX savings ............................................................................................................................. 6 Is it more profitable to save in dinars or foreign currency? ..................................................................... 8

3. Dinarisation of public debt ............................................................................................................................ 9

Currency structure of public debt ............................................................................................................ 9 Primary market of government securities ............................................................................................... 9 Secondary market of dinar government securities .................................................................................10

II. FX hedging instruments ....................................................................................................................................11

1. NBS swap auctions .....................................................................................................................................11

2. FX hedging instruments ..............................................................................................................................12

Table А Dinarisation of receivables, loans and deposits ...................................................................................13

Table B Currency structure of household savings and public debt ...................................................................14

Index of charts and tables .................................................................................................................................17


1

I. Dinarisation of the Serbian financial system

According to the majority of available indicators, the degree of dinarisation of the Serbian financial

system increased in Q4.

Dinarisation of overall receivables went up both in the corporate and in the household sector, reflecting a somewhat faster growth in dinar compared to FX-indexed and FX receivables.

The share of dinar deposits in total corporate and household deposits also increased, thanks to vibrant growth in dinar deposits, typical for the final part of the year. Another contributor was the rise in dinar savings, benefiting from the achieved macroeconomic stability, uninterrupted economic growth and improvement in the labour market.

Moreover, public debt dinarisation increased further, driven by sizeable repayments of the FX part of the debt.

In terms of new business, the degree of loan dinarisation declined – with the indicator rising in the corporate and falling in household segment. Also, as typical for this part of the year, Q4 saw intensified renewal of savings deposits. Given that FX savings remained dominant, this led to a lower degree of dinarisation of new deposits.

1. Dinarisation of receivables

Dinarisation of receivables continued up in Q4, both in

the corporate and in the household sector. As banks

stepped up the approval of FX-indexed loans to

corporates and households, with a slight contraction in

cash loans to households, the degree of dinarisation of

new corporate and household loans declined.

Corporate and household receivables

Corporate and household receivables remained on an

upward path, growing more sharply than in the first

three quarters of 2018 (by RSD 84.2 bn). The cheap

money policy in the euro area and the low country

risk premium continued to spur growth in FX-

indexed and FX receivables (by RSD 50.8 bn in Q4),

driven by somewhat higher lending to companies.

Dinar receivables also recorded a significant

increase (by RSD 33.3 bn), supported by the NBS’s

past monetary policy easing. At end-Q4, dinar

receivables made up 33.0% of total corporate and

household receivables, rising by 0.2 pp from end-

Q3. Compared to end-2017, this indicator stayed

unchanged.

Excluding the exchange rate effect, the degree of

dinarisation of corporate and household receivables

0

20

40

60

80Public debt

Newlyplaced

deposits

Newlygrantedloans

Deposits − outstanding

amounts

Lending − outstanding

amounts

Chart I.1. Dinarization indicators*(%)

2012 2017 Q4 2018

Source: NBS, Ministry of finance.

*Apart from public debt, all the categories indlude household and corporate sector component. Within each category - the share of dinar component in total of the category.

28.0 26.831.2 28.6 31.2

33.0 33.0

0

10

20

30

40

0

500

1,000

1,500

2,000

2,500

I IIIIIIV I IIIIIIV I IIIIIIV I IIIIIIV I IIIIIIV I IIIIIIV I IIIIIIV

2012 2013 2014 2015 2016 2017 2018

Chart I.1.1 Share of dinar receivables in total corporate and household receivables

FX-indexed and -denominated receivables (lhs)

Dinar receivables (lhs)

Share of dinar receivables in total receivables (rhs)

(%)

Source: NBS.

(RSD bn)


2

at end-Q4 stood at 33.0%, up by 0.2 pp q-o-q and by

0.1 pp y-o-y.1

By sector structure, Q4 saw a particularly strong rise

in corporate receivables (RSD 64.2 bn), the most

dynamic quarterly growth since Q1 2012. It should

be noted that this growth was recorded against the

background of continued NPL resolution activities –

i.e. NPL write-off from the balance sheets and sale

to non-bank entities. These loans were primarily

aimed at investment and current assets financing and

were approved to companies in almost all sectors,

primarily in transport, manufacturing and real estate.

In terms of the currency structure of corporate

receivables, the rise in FX-indexed and FX loans

remained the most pronounced (by RSD 45.4 bn).

Dinar corporate receivables, on a decline for the last

two years, increased significantly in Q4 (by RSD

18.9 bn), expanding their share in total receivables

by 0.8 pp to 15.4%. The indicator nevertheless

remained relatively low, dropping by 2.1 pp from

end-2017.

Household receivables slowed their growth in Q4

compared to Q3 (RSD 19.9 bn), due to somewhat

lower loan disbursement and continuation of NPL

write-offs. Growth in household receivables

continued to be led by the rise in dinar loans (RSD

14.5 bn), particularly cash loans which are typically

approved in dinars and at terms longer than five

years. Dinar receivables continued to account for the

bulk of household receivables (53.6%), posting a q-

o-q rise of 0.4 pp and a y-o-y rise of 1.8 pp. FX-

indexed and FX household receivables rose more

moderately than dinar receivables (RSD 5.4 bn).

This growth was almost entirely driven by housing

lending, which benefited from the rebound in labour

and real estate markets and the lowest-as-yet interest

rates on these loans.

New corporate and household loans

The volume of new corporate and household loans

in Q4 2018 was record high.2 Banks approved RSD

428.3 bn worth of new loans or RSD 80.1 bn more

than in Q3.

In the structure of new corporate and household

loans, two thirds (RSD 283.5 bn) were FX-

denominated, which is RSD 62.7 bn more than in

Q3. Dinar loans rose to a somewhat lesser degree

(by RSD 17.4 bn). Compared to a quarter before,

their share contracted by 2.8 pp, while dropping by

3.0 pp from Q4 2017. At the annual level, this

1 Calculated at the dinar exchange rate against the euro, US dollar, Swiss franc, pound sterling and the Japanese yen as at 30 September 2014,

taking into account the currency structure of loan receivables. 2 Starting from Q4 2010, when the data on new loans became available.

24.2

17.515.4

35.1

51.853.6

28.0

33.0 33.0

0

10

20

30

40

50

60

0

500

1,000

1,500

2,000

2,500

31

. 1

2.

20

12

31

. 1

2.

20

17

31

. 1

2.

20

18

31

. 1

2.

20

12

31

. 1

2.

20

17

31

. 1

2.

20

18

31

. 1

2.

20

12

31

. 1

2.

20

17

31

. 1

2.

20

18

Corp. Hous. Total

(%)

Source: NBS.

(RSD bn)

Chart I.1.2 Receivables by sector

Dinar receivables (lhs)

FX-indexed and -denominated receivables (lhs)

Share of dinar receivables in total receivables (rhs)

32.431.3

42.435.9

33.3

36.8

33.8

0

10

20

30

40

50

60

0

100

200

300

400

500


2012 2013 2014 2015 2016 2017 2018

Source: NBS.

Chart I.1.3 Share of dinar loans in new corporate and household loans

Dinar loans (lhs)

FX-indexed and -denominated loans (lhs)

Share of dinar loans in total loans (rhs)

(RSD bn) (%)


3

indicator was 0.8 pp higher than in the previous

year, measuring 36.8% in 2018.

In Q4, the bulk of bank loans were extended to

corporates (RSD 311.6 bn). The volume of corporate

loans expanded by around one third (by RSD 81.7

bn), rising from the quarter before (by RSD 60.4

bn), thanks to the record amount of approved FX-

denominated loans (RSD 250.5 bn).2 Dinar corporate

loans also rose vigorously (by RSD 21.3 bn), which

boosted the dinarisation of corporate loans (by 2.3

pp to 19.6%).

In terms of loan purpose, over half of the amount of

new corporate loans was used for current assets

financing and most of these loans were in dinars.

Thus, the degree of dinarisation of current assets

loans increased (by 4.4 pp), exceeding the

dinarisation of all other loan categories (21.2%).

Interest rates on dinar current assets loans edged up

on average in Q4 (by 0.8 pp to 5.5%), but still

remained lower than in Q4 2017 (when they

equalled 5.8%). Interest rates on FX-indexed loans

used for this purpose remained unchanged on

average relative to Q3 (2.5%), when they touched

their record low.

Compared to other loan categories, investment loans

posted the strongest growth in Q4, accounting for

slightly more than one fourth of new corporate loans

(28.6%). Growth of investment loans in Q4 was

mostly driven by higher approval of FX-indexed

loans. This can partly be put down to the current

investment cycle, i.e. the fact that these loans are

one of the sources of financing investment in

equipment, which is generally imported. Thus, the

share of dinar loans used for this purpose is modest

and contracted further in Q4 (by 0.8 pp to 6.3%).

Interest rates on investment loans continued a

several-year long downward trend, reducing the

expenses of corporates and strengthening their

competitiveness. Interest rates on FX-denominated

investment loans fell by 0.2 pp, dropping to their

lowest level so far (2.9% on average). Interest rates

on dinar loans used for this purpose were at their

lowest level for the second consecutive quarter

(5.8%), having dropped significantly in the last six

years (by 10.1 pp) owing to the NBS’s monetary

easing. However, these interest rates were still

higher than those on FX-indexed loans approved for

the same purpose.

The volume of new loans to households decreased

slightly in Q4. A total of RSD 116.7 bn worth of

loans was approved, down by RSD 1.6 bn from Q3.

New household loans shrank due to somewhat lower

dinar lending (by RSD 3.9 bn), reflecting a

contraction in new cash loans (by RSD 5.1 bn). FX-

indexed and FX loans to households went slightly up

0

20

40

60

80

100

120

140

160

180

Cu

rre

nt

assets

Exp

ort

s/Im

po

rts

Investm

ent

Oth

er

loans

Ho

usin

g lo

an

s

Co

nsu

me

r lo

an

s

Ca

sh lo

an

s

Oth

er

loans

Corporate Household

(RSD bn)

Chart I.1.4 New corporate and household loans in Q4 2018 - by purpose

Dinar loans

FX-indexed and -denominated loans

Source: NBS.

0

20

40

60

80

100C

urr

ent

assets

Exp

ort

s/Im

po

rts

Investm

ent

Oth

er

loans

Tota

l

Ho

usin

g lo

an

s

Co

nsu

me

r lo

an

s

Ca

sh lo

an

s

Oth

er

loans

Tota

lCorporate Household

(%)

Chart I.1.5 Dinarization of new corporate and household loans - by purpose

Share of dinar loans in total loans in 2012

Share of dinar loans in total loans in 2017

Share of dinar loans in total loans in Q4 2018

Source: NBS.

0

5

10

15

20

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

Currentassets

Exports/Imports

Investment Other Total

(%)

Chart I.1.6 Interest rates on new corporate loans

2012 2017 Q4 2018

*FX-indexed and -denominated loans.

Source: NBS.


4

(by RSD 2.3 bn), pushing down the share of dinar

loans in total new household loans (by 2.3 pp to

71.7%). Despite the decrease in Q4, this indicator

remained higher than in Q4 2017 (by 0.2 pp), as well

as relative to the last year’s average (by 2.1 pp).

In terms of purpose, the bulk of new household

loans approved were cash loans (57% of total new

loans), three fourths of which with the maturity of

over five years and almost all (99%) in dinars.

Interest rates on cash loans in dinars stayed the same

as in Q3 (10.6%), while rising slightly (by 0.1 pp to

3.3%) for loans approved at an FX clause.

In Q4, banks approved a slightly higher amount of

housing loans (RSD 20.4 bn, i.e. 0.9 bn more than in

Q3). These loans accounted for 17.5% of new

household loans and were typically approved with

an FX clause. The average interest rate on FX-

indexed housing loans remained at the lowest level

on record (2.8%), for the third quarter in a row.

Compared to the interest rates on dinar loans used

for the same purpose (4.9%), it remained

significantly lower, despite a significant reduction in

dinar interest rates in the previous period.3

2. Deposit dinarisation

The degree of dinarisation of corporate and household

deposits continued to increase, supported by the growth

of dinar savings. Dinarisation of new deposits declined,

as typical for the period around the Savings Week

(month).

Corporate and household deposits

Corporate and household deposits recorded vibrant

growth, typical for the final part of the year. At end-

Q4, the volume of deposits reached RSD 2,304.3 bn,

up by RSD 206.1 bn from the quarter before.

Observing the currency structure, FX-indexed and

FX deposits rose slightly more than dinar deposits

(RSD 114.1 bn vs. RSD 92.0 bn, respectively),

which, given their greater share in total deposits, led

to a further rise in the dinarisation of total corporate

and household deposits (by 1.2 pp), to 32.2%. The

growth in deposit dinarisation in Q4 is more

pronounced when compared to the end of the last

year (by 1.4 pp), when it measured 30.8%.

Excluding the exchange rate effect, the share of

dinar deposits in total corporate and household

deposits in Q4 also went up, by 1.2 pp to 32.2%.

Deposit increase in Q4 resulted mainly from higher

balances in corporate accounts (by RSD 163.0 bn).

Thanks to the FX inflow stemming from FDI,

3 Since Q4 2012, these interest rates contracted 3.5 times (they used to measure 17.1%).

0

5

10

15

20

25

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

Housingloans

Consumerloans

Cash loans Other loans Total

(%)

Chart I.1.7 Interest rates on new household loans

2012 2017 Q4 2018

Source: NBS.

*FX-indexed and -denominated loans.

19.3

23.124.5 27.2 28.8

30.8 32.2

0

5

10

15

20

25

30

35

0

500

1,000

1,500

2,000

2,500


2012 2013 2014 2015 2016 2017 2018

(RSD bn)

Chart I.2.1 Share of dinar deposits in total corporate and household deposits

Dinar deposits (lhs)

FX-indexed and -denominated deposits (lhs)

Share of dinar deposits in total deposits (rhs)

(%)

Source: NBS.


5

exports and external borrowing, Q4 saw further

growth in FX and FX-indexed deposits (by RSD

94.5 bn), with companies in transport,

manufacturing and construction recording the

greatest increases. Dinar account balances of

companies rose to a somewhat lesser degree in Q4

(by RSD 68.5 bn), with increases recorded across

the board, especially in manufacturing, trade and

construction sectors. Despite the growth in dinar

deposits, given the somewhat faster increase in FX

deposits, the dinarisation of corporate deposits edged

down in Q4 (by 2.5 pp), to 53.1% at end-December.

Compared to the end of 2017, the decrease is more

pronounced (3.4 pp).

Household deposits also posted an increase in Q4

(by RSD 43.1 bn), driven by the rise in dinar

deposits (by RSD 23.5 bn). Within dinar deposits,

the most liquid deposit categories increased the most

– transaction account balances (by RSD 19.0 bn).

FX-indexed and FX deposits of households also

went up (RSD 19.6 bn), mainly owing to the rise in

FX savings termed for over two years.

Relatively dynamic growth of dinar deposits resulted

in their higher share in total household deposits.

Following 2012 (when it stood at 8.8%), this share

increased year after year, and in 2018 it gained 2.3

pp, rising to 19.2% at the year-end, the highest value

of this indicator so far.4

New corporate and household deposits

In Q4, corporates and households deposited RSD

379.8 bn worth of new deposits with banks, or RSD

57.1 bn more than in the previous quarter. The rise

in new corporate and household deposits is

attributable to the higher amount of new FX-indexed

and FX deposits (by RSD 70.8 bn), which is typical

for the last quarter of the year when the Savings

Week (and/or Month) is marked. The amount of new

dinar deposits decreased in Q4 (by RSD 13.6 bn),

which entailed their lower share in new deposits (by

14.6 pp to to 58.3%). This share contracted slightly

compared to the same quarter the year before (when

it equalled 59.0%), while increasing in annual terms

(66.7% in 2018 relative to 64.4% in 2017).

The increase in new deposits in Q4 mainly resulted

from intensified depositing of FX funds by

households (up by RSD 43.2 bn), as usual for

October and November, in the period preceding and

immediately following the Savings Week. Up-to-

one-year deposits increased the most, and they

generally represent the dominant category of new

FX deposits of households (52%). New deposits

termed for over two years also stepped up, and so

4 Data are available as of Q4 2008.

43.9

56.5 53.1

8.8

16.919.2 19.3

30.8 32.2

0

10

20

30

40

50

60

70

0

500

1,000

1,500

2,000

2,500

31

. 1

2.

20

12

31

. 1

2.

20

17

31

. 1

2.

20

18

31

. 1

2.

20

12

31

. 1

2.

20

17

31

. 1

2.

20

18

31

. 1

2.

20

12

31

. 1

2.

20

17

31

. 1

2.

20

18

Corp. Hous. Total

(%)

Source: NBS.

(RSD bn)

Chart I.2.2 Deposits by sector

Dinar deposits (lhs)

FX-indexed and -denominated deposits (lhs)

Share of dinar deposits in total deposits (rhs)

0

40

80

120

160

200

240

280U

p to 1

year

1-2

yea

rs

Over

2 y

ears

Up

to 1

year

1-2

yea

rs

Over

2 y

ears

Households Corporates

(RSD bn)

Chart I.2.3 New corporate and household deposits in Q4 2018 - by maturity

Dinar deposits FX-indexed and -denominated deposits

Source: NBS.


6

did their share in the structure of FX savings (from

19% in Q3 to 32% in Q4).

In Q4, interest rates on term deposits of households

were on average higher than in Q3 (by 0.3 pp),

equalling 1.1%. Observed in monthly terms, in

October and November (ahead of the Savings Week)

banks raised interest rates for deposits of all

maturities, only to reduce them in December to

somewhat lower levels. They continued to offer

higher interest rates for deposits termed for over one

year (1.3% on average), аnd lower interest rates on

deposits with shorter maturities (around 0.8% on

average).

The amount of new dinar household deposits also

increased in Q4 (by RSD 5.0 bn), mostly in

November and December, with around 94% of the

total deposited amount referring to up-to-one-year

deposits. Interest rates on dinar household deposits

edged up in Q4 (on average by 0.4 pp to 3.0%).

Though rates on dinar deposits are much higher than

those on FX deposits, households still generally opt

for the latter. Thus, in Q4, 17.3% of new household

deposits were in dinars, or 5.1 pp less than in Q3. In

annual terms, the share of new dinar household

deposits stood at 20.3% in 2018, down by 2.4 pp

from the year before.

In the structure of new dinar deposits of households,

a significant rate increase was recorded for up-to-

one-year deposits (by 0.5 pp to 3.0%). Although

banks offered somewhat higher interest rates for

longer-term deposits (3.6% for one-to-two year

deposits, аnd 4.3% for over-two-year deposits), as

before, households opted for deposits termed for up

to one year (93.9%).

New corporate deposits also increased in Q4 (by

RSD 9.0 bn). This resulted from higher FX deposits

of companies (by RSD 27.6 bn) which were, as

usual, termed for less than one year. The amount of

new dinar corporate deposits decreased in Q4 (by

RSD 18.6 bn), which entailed their lower share in

new corporate deposits compared to Q3 (by 9.9 pp

to 76.2%). Corporates still generally deposit funds

for up to one year (98% of dinar deposits and 94%

of FX-indexed and FX deposits).

Dinar and FX savings

Dinar savings of households (residents and non-

residents) deposited with banks in the Republic of

Serbia continued to increase in Q4 2018. At end-

December they stood at RSD 61.1 bn, up by RSD

4.6 bn (8.1%) from September and by RSD 10.9 bn

(19.3%) from the beginning of the year.

In the structure of dinar savings, deposits of all

maturities increased in Q4, except savings termed

0

20

40

60

80

100

Up

to

1 y

ea

r

1-2

yea

rs

Over

2 y

ears

Tota

l

Up

to

1 y

ea

r

1-2

yea

rs

Over

2 y

ears

To

tal

Households Corporates

(%)

Chart I.2.4 Dinarisation of new corporate and household deposits - by maturity

Share of dinar deposits in total deposits in 2012

Share of dinar deposits in total deposits in 2017

Share of dinar deposits in total deposits in Q4 2018

Source: NBS.

0

5

10

15

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*

RS

D

FX

*Up to 1 year 1-2 years Over 2 years Total

(%)

Chart I.2.5 Interest rates on new term deposits of households

2012 2017 Q4 2018

*FX-indexed and -denominated deposits.

Source: NBS.

17.9

34.0

38.6

46.0

51.1 50.261.1

1.9

3.43.6

4.24.4 4.3

4.9

0

1

2

3

4

5

6

0

20

40

60

80

100

I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV

2012 2013 2014 2015 2016 2017 2018

(%)(RSD bn)

Chart I.2.6 Dinar savings

Dinar savings (lhs)

Share of dinar savings in total savings (rhs)

Source: NBS.


7

for three to six months that edged down slightly (by

RSD 23 bn). Growth in savings termed from six

months to one year was particularly pronounced (by

RSD 2.9 bn). Savings deposits termed for over one

year also increased (by RSD 0.7 bn), with

conspicuous growth in savings termed from two to

five years (by RSD 0.5 bn).

Within dinar savings, up-to-one-year deposits

continued to make up the dominant share (86.7% of

total savings), the major part of which (more than

one half) were savings maturing in six to twelve

months (54.3%), while demand deposits accounted

for almost one third (30.4%).

FX savings also grew, though less vigorously than

dinar savings. At end-Q4, they reached EUR 9,955.1

mn, rising by EUR 172.6 mn (1,8%) from end-Q3,

аnd by EUR 581.9 mn (6.2%) from end-2017.

The rise in FX savings in Q4 was driven by savings

termed for longer than one year (which increased by

EUR 166.3 mn) – with the sizeable growth of

savings maturing in more than two years (EUR

108.8 mn), for which banks offer more favourable

interest rates. Despite the growth in longer-term

savings in Q4, households continued to

predominantly hold savings termed for less than one

year (85.5%), the bulk of them being demand

deposits (63.1% of total savings).

The currency composition of savings improved in

Q4 – the share of dinar in total savings equalled

4.9% at end-December, up by 0.2 pp from end-

September and by 0.6 pp from end-2017.

27%

23%

13%

29%

4%4%

25%

7%

8%

45%

5%

9%

26%

6%

6%

48%

3%

10%Demand deposits

Up to 3 months

3-6 months

6-12 months

1-2 years

Over 2 years

Chart I.2.7 Maturity structure of dinar savings

Source: NBS.

31.12.2012

31.12.2017

31.12.2018

21%

5%

9%

43%

10%

12%

61%

1%2%

20%

6%

11%

63%

1%1%

17%

6%

11% Demand deposits

Up to 3 months

3-6 months

6-12 months

1-2 years

Over 2 years

Chart I.2.8 Maturity structure of FX savings

Source: NBS.

31.12.2012

31.12.2017

31.12.2018


8

Is it more profitable to save in dinars or foreign currency?

Given that savings in domestic currency are an important aspect of dinarisation of the Serbian

financial system, the National Bank of Serbia, in cooperation with the Serbian Government, strives to

highlight the advantages of dinar savings and encourage their growth, by its measures, activities and

public communication (regular publishing of analyses of profitability of dinar versus FX savings).

Same as all prior analyses, the latest one shows that it is more profitable to save in dinars than in

euros, both in the long and in the short term. Higher profitability of dinar savings is supported by:

relatively higher interest rates on dinar than on euro savings,

the fact that interest income from dinar savings is non-taxable, while interest on FX savings is

subject to 15% tax rate and

the achieved and maintained monetary and financial stability.

A person who placed RSD 100,000 in December 2017 for one year, at the interest rate of 3.00%, in

December 2018 would receive almost RSD 3,300 more than the person who placed RSD 100,000 in

euros in the same period, at the interest rate of 0.53% (Table I.2.1).

Also, a depositor who termed RSD 100,000 for a year in any month or year in the last six years would

receive, at the end of the term period, more than the depositor who termed RSD 100,000 in the euro

equivalent for a year in the same period (Chart I.2.9), except in December 2013 and January 2014).

Dinar savings are more lucrative when deposited

on shorter terms as well (three months) – in most

of the observed term subperiods from August

2012 to December 2018 it was more profitable to

save in the domestic currency.

Saving in the local currency was also more

lucrative than saving in euros for longer terms as

well (two years), in all the observed subperiods.

The analysis shows that also in the case of

savings termed for a year with deposit rollover

plus interest (minus tax on interest on FX

savings), in the period from December 2012 to

December 2018 it was more profitable to save in

dinars. Namely, the person who saved in dinars

would receive around RSD 26,500 more than the

person who saved in euros.

In accordance with the new Memorandum on the Strategy of Dinarisation of the Serbian Financial

System, concluded by the Serbian Government and the NBS in late 2018, the NBS will continue to

regularly publish analyses of profitability of dinar and FX savings.

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

(RSD)

Chart I.2.9. Profitability of savings placed on deposit for a year

Difference in favour of RSD savings

Difference in favour of FX savings

Source: NBS.

in RSDin

EUR***

Sav ings in RSD Dec. 2017 100,000 119.1394 3.00 Dec. 2018 118.2772 103,000 871

Sav ings in EUR Dec. 2017 839 119.1394 0.53 Dec. 2018 118.2772 99,724 843

Dif f erence in f av our of sav ings in RSD - deposit placed f or a y ear 3,276 28

Dif f erence in f av our of sav ings in RSD - deposit placed f or a 3M period 523 4

Dif f erence in f av our of sav ings in RSD - deposit placed f or a 2Y period 9,798 83

Dif f erence in f av our of sav ings in RSD - deposit placed f or a 6Y period, annual rollov er 26,490 224

**weighted av erage interest rate on RSD and EUR sav ings placed on deposit f or a y ear - new business.

***f or sav ings in euros, af ter tax on interest income.

Amount of

deposit at the end

*Monthly av erage exchange rate of the dinar against the euro.

Table I.2.1. Profitability of savings placed on deposit for a year

Ty pe of sav ings

Date of

deposit

placement

Initial

deposit

EURRSD

exchange

rate*

Interest

rate

(%,

p.a.)**

Maturity

date

EURRSD

exchange

rate


9

3. Dinarisation of public debt

The volume of both dinar and FX public debt declined

significantly in Q4, while public debt dinarisation

reached the highest level so far.

Currency structure of public debt

In Q4 the government significantly reduced the

amount of public debt. At end-2018, public debt

came at RSD 2,720.2 bn, down by RSD 116.9 bn

from the quarter before.

In terms of the currency composition, FX portion of

public debt decreased by RSD 92.0 bn and the dinar

portion by RSD 24.9 bn. Observed by original

currency, public debt in dollars declined the most

(by USD 978.5 mn), primarily on account of the

payment of matured eurobond issued in the

international financial market in 2013.. A portion of

public debt in euros (EUR 196.9 mn) was reduced

mainly owing to the maturing of euro securities

issued in the domestic market and also, to a large

degree, to the settlement of guarantees that were

issued earlier to public enterprises. On the other

hand, the government increased its debt with

international creditors and under bilateral

agreements with foreign governments. Most notably,

the dirham debt with the United Arab Emirates,

intended as a budgetary support, rose in the euro

equivalent of EUR 184.6 mn.

A considerable reduction in the FX portion of public

debt led to an improvement in the currency structure

of public debt. Thus the dinar share of public debt

increased by 0.2 pp in Q4 and by as much as 3.0%

since the start of 2018. At end-December 2018 this

share reached a record high level (26.0%). The euro

share of total public debt went up in Q4 (by 0.7 pp to

40.0%), while the dollar share dropped significantly

(by 2.0 pp to 26.5%) – despite the dollar’s

strengthening against the euro and the dinar.

Primary market of government securities

Owing to good fiscal results, the government’s

borrowing needs contracted, which is why it did not

auction dinar or FX securities in Q4. It organised

two early buyback auctions of three-year dinar

securities, with the buyback volume of RSD 10 bn

each (RSD 20.0 bn in total).

On account of regular maturing of dinar securities

(with five-year maturity), public debt decreased by

RSD 5.0 bn, to RSD 701.5 bn at end-2018

(including savings bonds).

Q4 also saw the maturing of euro securities with the

initial maturities of 2Y, 53W, 5Y and 3Y, in total

nominal amount of EUR 189.8 mn, so the stock of

public debt in FX-denominated securities issued in

19.120.3 21.4

22.2 20.9 23.026.0

0

5

10

15

20

25

30

0

500

1,000

1,500

2,000

2,500

3,000

3,500


2012 2013 2014 2015 2016 2017 2018

(%)(RSD bn)

Chart I.3.1 Share of dinar debt in total public debt

Dinar debt (lhs)

FX debt (lhs)

Share of dinar debt in total RS public debt (rhs)

Source: Ministry of Finance.

19%

51%

23%1%

6%1%

23%

42%

29%0%3%

2%

26%

40%

26%0%3%

4%

RSD

EUR

USD

CHF

SDR

other currencies*

* GBP, JPY, DKK, SEK, NOK, CNY, KWD.

Chart I.3.2 Currency structure of RS public debt


31. 12. 2012

31. 12. 2017

31. 12. 2018

0

200

400

600

800

1,000

1,200


2012 2013 2014 2015 2016 2017 2018

(RSD bn)

Chart I.3.3 Maturity and currency structure of government securities issued in the domestic fin. market (end-quarter data)

Short-term dinar denominated securities (T-bills)Long-term dinar denominated securitiesLong-term EUR denominated securitiesLong-term USD denominated securities



10

the domestic financial market declined to EUR

2,956 mn. Observing the currency structure of the

portfolio of government securities sold in the

domestic market, dinar securities continued to make

up the dominant share (67.3%), which increased

from the month before (by 1.6 pp).

Secondary market of dinar government securities

Despite the lower offer of dinar government

securities in the primary market, secondary trading

in these securities expanded. It reached RSD 70.5

bn in Q4, rising by RSD 21.0 bn from the previous

quarter. Trading in almost all available maturities

increased, most notably in securities with initial

maturity of two years (by RSD 8.2 bn) and three

years (by RSD 6.6 bn). Only trading in securities

with the longest, ten-year maturity contracted. Still,

these securities continued to account for the largest

share of the overall trading (30%).

Secondary trading in dinar government securities in

the Belgrade Stock Exchange almost quadrupled in

Q4 compared to the quarter before, coming at RSD

13.1 bn. The share of BSE trading in total secondary

trading in these securities increased as well (from

7.4% to 18.6%).

0

50

100

150

200


2012 2013 2014 2015 2016 2017 2018

(RSD bn)

Chart I.3.4 Secondary trading in dinar government securities

OTC trading Trading on Belgrade Stock Exchange

Sources: Ministry of Finance and CSD.

0

50

100

150

200


2012 2013 2014 2015 2016 2017 2018

(RSD bn)

Chart I.3.5 Secondary trading in dinar government securities, by maturity of securities

3-m 6-m 12-m 53-w 18-m 2-y 3-y 5-y 7-y 10-y

Sources: Ministry of Finance and CSD.


11

II. FX hedging instruments

1. NBS swap auctions

In Q4, the NBS organised 26 regular three-month

FX swap actions, in which it swap sold and swap

bought EUR 55.0 mn each. Total bank demand at

three-month swap FX sale auctions amounted to

EUR 106.0 mn, while the total demand at three-

month swap FX purchase auctions reached EUR

326.0 mn. The largest performance in Q4 was

recorded in October, when the NBS swap sold and

bought EUR 39.0 mn each. The weighted average

accepted swap points at three-month swap auctions

of sale of foreign currency in Q4 amounted to 7,617,

moving in the range from 5,715 to 9,532, while

weighted average accepted swap points at swap

auctions of purchase of foreign currency amounted

to 8,461, moving from 6,015 to 10,509.

The NBS also organised 26 regular two-week FX

swap auctions. The total demand of banks at two-

week swap auctions of sale of foreign currency came

at EUR 111.0 mn, while the total demand at two-

week swap auctions of purchase of foreign currency

equalled EUR 559.0 mn. At the two-week swap

auctions held in Q4, the NBS sold and bought EUR

82.0 mn each. The weighted average accepted swap

points at these auctions of swap sale and purchase of

foreign currency amounted to 1,205 and 1,319,

respectively.

In 2018, 100 two-week swap auctions were held,

with the NBS swap purchasing and selling EUR 134

mn each, as well as 100 three-month swap auctions,

at which it swap sold and bought EUR 190 mn each.

At all auctions held, the NBS swap sold and bought

the same amount of foreign currency, but with a

positive difference in swap points.

Unlike Q3 when there were none, in Q4 three

interbank swap transactions of the purchase and sale

of FX for dinars were concluded (EUR 20 mn in

total), with the average maturity of 13 days.

In Q4, the NBS continued to organise regular three-month and two-week swap auctions of foreign currency. In the same period, residents concluded forward FX purchases with banks worth EUR 66.5 mn, up by EUR 2

mn from the quarter before, and forward FX sales worth EUR 6.9 mn, up by EUR 2.1 mn q-o-q.

PeriodSwap FX

sale

Total amount

offered by banks

on swap FX sale

auctions

Swap FX

purchase

Total amount

offered by banks

on swap FX

purchase

auctions

2012 171.0 497.0 188.0 903.1

2013 124.0 1,214.0 124.0 189.0

2014 180.0 649.5 180.0 689.5

2015 550.5 1,519.5 550.5 905.0

2016 440.0 1,293.9 440.0 805.0

2017 546.5 1,145.2 546.5 1,020.0

2018

Q1 102.0 300.0 102.0 301.0

Q2 31.0 286.0 31.0 89.0

Q3 54.0 483.0 54.0 67.0

Q4 137.0 217.0 137.0 885.0

Source: NBS.

Table II.1.1. NBS swap transactions, quarterly data

(EUR mln)

3M 2W 3M 2W

Reali-

zation

Offered

by banks

Reali-

zation

Offered

by banks

Reali-

zation

Offered

by banks

Reali-

zation

Offered

by banks

January 28.0 97.0 15.0 71.0 28.0 58.0 15.0 39.0

February 19.0 37.0 7.0 24.0 19.0 60.0 7.0 50.0

March 33.0 41.0 0.0 30.0 33.0 46.0 0.0 48.0

Total in Q1 80.0 175.0 22.0 125.0 80.0 164.0 22.0 137.0

April 12.0 28.0 0.0 19.0 12.0 32.0 0.0 20.0

May 9.0 82.0 0.0 34.0 9.0 14.0 0.0 5.0

June 7.0 71.0 3.0 52.0 7.0 8.0 3.0 10.0

Total in Q2 28.0 181.0 3.0 105.0 28.0 54.0 3.0 35.0

July 13.0 88.0 10.0 68.0 13.0 13.0 10.0 10.0

August 7.0 98.0 2.0 86.0 7.0 17.0 2.0 2.0

September 7.0 100.0 15.0 43.0 7.0 9.0 15.0 16.0

Total in Q3 27.0 286.0 27.0 197.0 27.0 39.0 27.0 28.0

October 39.0 73.0 30.0 54.0 39.0 120.0 30.0 175.0

Nov ember 9.0 24.0 3.0 3.0 9.0 110.0 3.0 227.0

December 7.0 9.0 49.0 54.0 7.0 96.0 49.0 157.0

Total in Q4 55.0 106.0 82.0 111.0 55.0 326.0 82.0 559.0

Total in 2018 190.0 748.0 134.0 538.0 190.0 583.0 134.0 759.0

Source: NBS.

Table II.1.2. NBS swap transactions in 2018, monthly data

(EUR mln)Month

Swap FX sale Swap FX purchase


12

2. FX hedging instruments

In Q4, the share of forward FX purchases by

residents from banks in total FX purchases equalled

1.6% (vs. 1.8% in Q3) and was the highest in

October – 2.4%. In Q4, fourteen domestic

enterprises hedged against FX risks by entering into

this type of transactions with banks. The weighted

average maturity of forward FX purchases was 46

days, while the longest maturity of forward FX

transaction was recorded in December – 223 days.

The average value of forward FX purchase contracts

of residents equalled EUR 0.5 mn.

In terms of the currency structure of forward FX

purchases, the euro accounted for 89.9%, and the US

dollar for 10.1%.

Q4 saw forward FX sales by three residents, in the

total amount of EUR 6.9 mn (compared to 4.8 mn in

Q3), and the weighted average maturity of 427 days.

Amount in

EUR mln

Weighted

av erage

maturity in

day s

% share in

total

purchase

Amount

in EUR

mln

Weighted

av erage

maturity

in day s

% share in

total sale

2012 754.7 38 6.7 1.3 18 0.0

2013 533.8 24 5.0 1.4 39 0.0

2014 430.0 24 5.0 0.8 49 0.0

2015 531.0 16 4.8 1.5 77 0.0

2016 450.5 22 3.9 12.9 263 0.1

2017 388.8 37 3.0 17.1 349 0.2

2018

Q1 46.8 77 1.5 20.0 474 0.7

Q2 34.9 59 1.0 18.2 411 0.6

Q3 64.5 45 1.8 4.8 525 0.1

Q4 66.5 46 1.6 6.9 427 0.2

Source: NBS.

Table II.2.1. FX forward transactions between residents and banks,

quarterly data

Period

Forward purchase by residents Forward sale by residents

Amount in

EUR mln

Weighted

av erage

maturity in

day s

% share in

total

purchase

Amount

in EUR

mln

Weighted

av erage

maturity

in day s

% share in

total sale

January 24.6 84 2.5 3.0 365 0.4

February 10.0 61 1.1 12.8 512 1.5

March 12.2 75 1.0 4.2 436 0.4

Total in Q1 46.8 77 1.5 20.0 474 0.7

April 4.4 33 0.4 3.7 329 0.4

May 24.5 89 2.1 11.2 411 1.2

June 6.0 19 0.5 3.3 508 0.3

Total in Q2 34.9 59 1.0 18.2 411 0.6

July 14.7 48 1.2 1.0 66 0.1

August 31.0 42 2.6 2.6 617 0.2

September 18.8 47 1.7 1.1 724 0.1

Total in Q3 64.5 45 1.8 4.8 525 0.1

July 29.4 24 2.4 3.4 32 0.3

August 6.6 57 0.6 2.3 43 0.2

September 30.5 66 2.0 1.2 731 0.1

Total in Q3 66.5 46 1.6 6.9 427 0.2

Total in 2018 212.7 55 1.5 49.9 450 0.4

Source: NBS.

Table II.2.2. FX forward transactions between residents and banks in

2018, monthly data

Month

Forward purchase by residents Forward sale by residents

USD10%

EUR90%

Chart II.2.1. Currency structure of FX forward transactions between residents and banks in Q4 2018

Source: NBS.


13

Table А Dinarisation of receivables, loans and deposits

(%)

Corporates Households Total Corporates Households Total Corporates Households Total Corporates Households Total

2008 33.8 22.2 29.2 0.0 0.0 0.0 50.3 12.5 27.6 0.0 0.0 0.0

2009 26.2 22.1 24.7 0.0 0.0 0.0 52.5 10.9 25.6 0.0 0.0 0.0

2010 32.2 27.6 30.5 41.8 50.5 43.4 45.0 8.5 19.8 51.4 2.7 25.0

2011 27.3 32.6 29.2 33.3 44.0 36.0 44.9 10.1 21.5 51.3 3.8 32.8

2012 24.2 35.1 28.0 27.5 55.8 32.4 43.9 8.8 19.3 62.0 4.6 38.1

2013 20.0 37.9 26.8 29.9 63.6 37.6 52.4 11.5 23.1 65.2 8.2 44.1

2014 25.0 41.0 31.2 27.6 63.7 38.1 53.6 12.3 24.5 67.6 12.3 46.5

2015 19.4 42.8 28.6 20.1 64.3 32.3 55.6 13.9 27.2 69.1 16.0 52.8

2016 19.4 47.0 31.2 21.5 74.1 36.8 54.0 15.8 28.8 69.3 20.1 56.6

Q1 2017 19.1 47.9 31.7 19.5 70.5 37.6 51.8 15.4 27.5 77.9 27.3 68.7

Q2 2017 19.4 49.4 32.8 20.8 69.7 37.6 53.3 16.0 28.5 71.2 24.4 61.6

Т3 2017 17.5 50.8 32.4 16.9 72.3 32.8 54.4 15.7 29.1 78.1 22.7 68.5

Q4 2017 17.5 51.8 33.0 20.6 71.5 36.8 56.5 16.9 30.8 74.5 18.9 58.7

Q1 2018 16.2 51.9 32.5 17.3 71.4 37.7 56.0 16.5 29.9 81.1 19.7 67.5

Q2 2018 14.6 52.8 32.3 18.4 75.1 39.8 55.1 17.3 30.5 81.2 24.0 69.5

Q3 2018 14.6 53.2 32.8 17.3 74.0 36.6 55.6 18.1 31.0 86.1 22.4 72.9

Q4 2018 15.4 53.6 33.0 19.6 71.7 33.8 53.1 19.2 32.2 76.2 17.3 58.3

Source: NBS.

* Unless otherwise stated, indicators show data at end-period.

** Indicators are calculated based on data on the amount of new loans and deposits during the period. For the y ear 2010, indicators relate to the period

September-December.

Period*

Share of dinar in total receiv ables,

outstanding amounts

Share of dinar in total loans, new

business**

Share of dinar in total deposits,

outstanding amounts

Share of dinar in total deposits,

new business**


14

Table B Currency structure of household savings and public debt

Dinar

sav ings

(RSD mn)

FX sav ings

(EUR mn)

Total sav ings

(RSD mn)

Share of dinar

sav ings in total

sav ings

(%)

Public debt in

RSD

(RSD bn)

Public debt in

f oreign

currency

(RSD bn)

Total public

debt

(RSD bn)

Share of RSD public

debt in total public

debt

(%)

2008 10,575.0 4,679.1 425,145.0 2.5 19.9 758.1 778.0 2.6

2009 12,400.0 5,904.5 578,577.0 2.1 120.6 823.8 944.4 12.8

2010 13,848.7 7,105.8 763,495.8 1.8 187.1 1,095.4 1,282.5 14.6

2011 19,664.1 7,611.2 816,110.9 2.4 248.9 1,298.6 1,547.5 16.1

2012 17,882.9 8,272.3 958,597.0 1.9 385.4 1,629.3 2,014.8 19.1

2013 34,015.4 8,418.5 999,125.2 3.4 469.1 1,840.0 2,309.0 20.3

2014 38,615.1 8,524.6 1,069,732.9 3.6 588.6 2,164.6 2,753.2 21.4

2015 45,968.2 8,628.6 1,095,435.6 4.2 668.9 2,349.7 3,018.6 22.2

2016 51,063.9 8,987.3 1,160,744.3 4.4 639.8 2,424.8 3,064.6 20.9

Q1 2017 51,994.0 9,084.2 1,178,145.0 4.4 622.6 2,420.5 3,043.1 20.5

Q2 2017 51,316.7 9,136.9 1,155,495.5 4.4 632.9 2,254.8 2,887.7 21.9

Т3 2017 49,261.5 9,262.9 1,154,930.1 4.3 633.6 2,244.1 2,877.7 22.0

Q4 2017 50,152.0 9,373.2 1,160,614.5 4.3 632.5 2,117.2 2,749.7 23.0

Q1 2018 51,495.8 9,566.1 1,183,980.5 4.3 702.0 2,106.2 2,808.2 25.0

Q2 2018 53,312.0 9,687.3 1,197,071.2 4.5 706.3 2,131.9 2,838.2 24.9

Q3 2018 56,526.0 9,782.5 1,214,948.4 4.7 733.3 2,103.8 2,837.1 25.8

Q4 2018 61,079.9 9,955.1 1,237,718.9 4.9 708.4 2,011.8 2,720.2 26.0

Household sav ings Public debt (central gov ernment)

Sources: NBS, Ministry of Finance.

* Indicators show data at end-period.

Period*


15

Table C Overview of measures and activities contributing to dinarisation of the Serbian

financial system

Period of adoption of

measure/implementatio

n of activ ity

Description of measure/activ ity Expected ef f ects

Маy 2011

LTV limit f or FX-indexed mortgage loans of 80%, with no such limit prescribed f or dinar loans. In December 2017

this limit was loosened to 90% in cases when the loan is approv ed as a measure of gov ernment support to

certain categories of natural persons.

Ensuring pref erential treatment of dinar lending to

households

Mаy 2011Prescribed minimum mandatory downpay ment/deposit f or FX and FX-indexed loans to natural persons (except

mortgage loans) of 30%

Ensuring pref erential treatment of dinar lending to

households

Since May 2011Limiting the ratio of net open FX position to capital at 20%, as of 2011 (increased f rom 10%, with a v iew to

encouraging credit activ ity )

Limiting the amount of FX and FX-indexed loans relativ e to

FX sources of f unding

Prescribed requirement f or banks to inf orm clients in writing, prior to signing an agreement, of the risks they

assume if they opt f or an FX-denominated or FX-indexed serv ice. Also, the of f ered agreement must contain the

inf ormation on the currency in which the serv ice is agreed

Prescribed requirement f or adv ertising of credit and deposit serv ices and leasing operations: when the

adv ertising message contains numerical data, the currency in which the serv ice is denominated must be stated

in a representativ e example

Prescribed requirement f or banks and lessors to of f er f inancial serv ices in dinars, unless the consumer requires

otherwise

April 2012The NBS and the Republic of Serbia Gov ernment signed the Memorandum on the Strategy of Dinarisation of

the Serbian Financial Sy stem

Def ining objectiv es, measures and activ ities that the NBS

and the Republic of Serbia will implement in order to

strengthen conf idence in the national currency and its use

in the f inancial sy stem

May 2012Societe Generale Bankа Srbija a.d. Beograd issued the f irst dinar bond in the domestic market, without a

currency clause, with three y ear maturityCapital market dev elopment

September 2012By the adoption of the Law Amending the Law on Personal Income Tax, the tax on interest on FX sav ings was

increased f rom 10% to 15%

Giv en that interest income on dinar sav ings is exempted

f rom the personal income tax, this measure is an

incentiv e to households to giv e pref erence to sav ing in

domestic currency ov er FX sav ing

Nov ember 2012 Erste bank a.d. Nov i Sad issued a two-y ear dinar bond Capital market dev elopment.

2012First-degree liquid receiv ables include also 90% of f air v alue of dinar RS securities with minimum maturity of 3

months. This does not apply to FX securities.

Capital market dev elopment, incentiv ising banks to rely

more on dinar sources of f inancing

April 2013

The NBS included dinar securities without an FX-clause issued by IFOs with the top credit rating in the portf olio

of securities used by the NBS in open market operations and on the list of eligible collateral in approv al of

NBS’s daily liquidity f acilities and short-term loans against the pledge of securities

Capital market dev elopment, through incentiv e to banks

to hold in their portf olios dinar securities issued by the

IFOs f or the purpose of loan f inancing

Nov ember 2013

The NBS adopted the Decision on Terms and Conditions of Perf orming Foreign Credit Transactions in Dinars,

which prov ides f or more f av ourable conditions under which international f inancial institutions and dev elopment

banks or f inancial institutions f ounded by a f oreign state (IFO) may approv e dinar loans to domestic banks,

legal persons and entrepreneurs, as well as conditions and manner in which domestic banks may approv e dinar

loans to non-residents

Increasing credit activ ity of domestic banks in dinars

May 2014 The Republic of Serbia Gov ernment adopted the programme f or subsidising dinar loans to corporates. Increasing loan dinarisation - of a temporary nature

Оctober 2014 A f irst-time issue of a 10-y ear dinar bond by the gov ernment

Financial market dev elopment and building a y ield curv e

f or longer maturities – enabling banks to price long-term

dinar loans

Nov ember 2015 Long-term gov ernment securities admitted to the prime listing of the Belgrade Stock ExchangeBoosting liquidity and dev eloping secondary market of

gov ernment securities

January 2016

RR rate on the portion of FX base comprised of dinar liabilities indexed to an FX-clause was increased to 100%

f rom 50% which had been applied since June 2012 Disincentiv e f or use of FX-indexed dinar deposits

February 2016A f irst-time larger-size issue of benchmark dinar bond by the gov ernment, with a v iew to reopening the issue and

selling the bond sev eral times a y ear

Boosting liquidity and dev eloping secondary market of

dinar gov ernment securities

Оctober 2016Domestic banks started to of f er non-FX indexed housing loans in dinars, at relativ ely f av ourable terms (rates

below 5%) and with a long repay ment term (up to 30 y ears)Rise in long-term household lending in dinars

December 2016The domestic f inancial market saw the f irst issuance of a dinar bond by an international f inancial institution –

EBRD. The nominal size of the issue was RSD 2.5 bnFinancial market dev elopment

June 2017 The f irst trading in EBRD-issued dinar bonds in the Belgrade Stock Exchange (in the amount of RSD 60 mn) Secondary f inancial market dev elopment

June 2017A part of EBRD proceeds f rom the issue of dinar bonds in the domestic market was onlent to corporates through

domestic banks. The loans were mainly used f or f inancing of agriculture and ref inancing Increasing the dinarisation of corporate loans

June 2017

The NBS set the sy stemic risk buf f er rate at 3% of total FX and FX-indexed receiv ables of a bank approv ed to

corporates and households in the Republic of Serbia, f or banks whose share of FX and FX-indexed in total

corporate and household receiv ables exceeds 10%.

Limiting the risk of euroisation, one of the key structural

non-cy clical sy stemic risks to the stability of the f inancial

sy stem of the Republic of Serbia.

December 2017 The Gov ernment issued a new ty pe of bond in the domestic f inancial market ̶ sav ing bond.

Dev elopment of the f inancial market by promoting

alternativ e f orm of sav ings and f acilitating access to the

gov ernment securities market f or the general public

Since April 2018 (the

last change), as well as

bef ore

Dif f erentiated RR remuneration rate: 1.25% on dinar RR, no remuneration on FX RR Stimulating banks to rely more on dinar sources of f unding

June 2018 The Law on Financial Collateral was adopted.

Achiev ement and improv ement of the legal certainty and

ef f iciency relating to the perf ormance of obligations in the

f inancial market (regulating f inancial collateral

arrangements as well as procedures f or enf orcement of

the collateral), as preconditions f or f urther dev elopment of

the f inancial market.

December 2018The NBS and the Republic of Serbia Gov ernment signed the new Memorandum on the Strategy of Dinarisation

of the Serbian Financial Sy stem

Bearing in mind that macroeconomic stability has been

achiev ed and f inancial stability strengthened and also

being aware of the gradual and long-term nature of the

dinarisation process, the Gov ernment and the NBS

rev iewed the results of measures and activ ities taken so

f ar and, starting f rom them, agreed on additional

measures and activ ities aimed at f urther increase in

dinarisation and curbing of the FX risk in the sy stem.

December 2011Promoting hedging against FX risk f or f inancial serv ice

consumers


16

Methodological notes

Dinarisation indicators, for each category, represent the share of dinar component in the total amount of

that category.

Receivables include dinar and FX loans (including FX-indexed ones), advances, securities, corporate shares

and receivables from interest and fees. Dinar receivables are receivables extended in dinars without an FX-

clause. An FX-clause is a currency clause as defined by the Law on Foreign Exchange Operations and any

other clause stipulating hedge against the risk of dinar exchange rate volatility.

The corporate sector (enterprises) comprises public enterprises and companies. Public enterprises are

enterprises founded by the state, performing activities in the general (public) interest. Companies also

include bank clients in the area of health and education not financed from the budget (private clinics,

hospitals, schools and other institutions charging fees for their services based on production costs).

The household sector comprises domestic natural persons, foreign natural persons – residents, private

households with employed persons, registered farmers and entrepreneurs, and non-profit institutions

serving households (NPISH).

Receivables are expressed by the gross principle, i.e. not reduced by allowances for impairment. When

excluding the exchange rate effects, the exchange rate of the dinar against the euro, the US dollar, Swiss

franc, UK pound sterling and Japanese yen is taken into account.

In line with the ECB methodology, the category of newly granted loans also includes re-scheduled loans.

Deposits include dinar and FX (including FX-indexed) deposits.

Household savings include savings of residents and savings of non-residents.

Public debt of the Republic of Serbia refers to the debt of the central level of government.


17

Index of charts and tables

Charts

I.1. Dinarisation indicators 1

I.1.1 Share of dinar receivables in total corporate and household receivables 1

I.1.2 Receivables by sector 2

I.1.3 Share of dinar loans in new corporate and household loans 2

I.1.4 New corporate and household loans in Q4 2018, by purpose 3

I.1.5 Dinarisation of new corporate and household loans, by purpose 3

I.1.6 Interest rates on new corporate loans 3

I.1.7 Interest rates on new household loans 4

I.2.1 Share of dinar deposits in total corporate and household deposits 4

I.2.2 Deposits by sector 5

I.2.3 New corporate and household deposits in Q4 2018, by maturity 5

I.2.4 Dinarisation of new corporate and household deposits, by maturity 6

I.2.5 Interest rates on new term deposits of households 6

I.2.6 Dinar savings 6

I.2.7 Maturity structure of dinar savings 7

I.2.8 Maturity structure of FX savings 7

I.2.9 Profitability of savings termed for a year 8

I.3.1 Share of dinar debt in total public debt 9

I.3.2 Currency structure of RS public debt 9

I.3.3 Maturity and currency structure of government securities issued in the domestic financial

market 9

I.3.4 Secondary trading in dinar government securities 10

I.3.5 Secondary trading in dinar government securities, by maturity of securities 10

II.2.1 Currency structure of FX forward transactions between residents and banks in Q4 2018 12

Tables

I.2.1 Profitability of savings termed for a year 8

II.1.1 NBS swap transactions, quarterly data 11

II.1.2 NBS swap transactions in 2018, quarterly data 11

II.2.1 FX forward transactions between residents and banks, quarterly data 12

II.2.2 FX forward transactions between residents and banks in 2018, quarterly data 12

Table A Dinarisation of receivables, loans and deposits 13

Table B Currency structure of household savings and public debt 14

Table C Overview of measures and activities contributing to dinarisation of the Serbian financial

system 15

report on dinarisation of the serbian financial system · 1 calculated at the dinar exchange rate...

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