PRO Business MS

The Council of the National Bank, at its regular session, made a decision on the further separation of the mandatory reserve rates from a currency aspect, in order to stimulate savings in domestic currency. The National Bank reduced the mandatory reserve for Denar liabilities from 6.5% to 5%, and at the same time increased the mandatory reserve rate for liabilities in foreign currency from 16.5% to 18%.

This measure, which is the second in a row after the March change in the mandatory reserve ratio, is intended to further encourage the denarization of the banks’ balance sheets, which would be achieved through changes in the banks’ interest policy, namely through the offer of relatively more favorable interest rates on the denar deposit products. At the same time, as a further strengthening of the effect of the changes in the rates for allocating mandatory reserves, the National Bank also increased the part of the mandatory reserve in foreign currency that banks meet in euros, from the current 70% to 75%.

The package of changes to the mandatory reserve system also includes an increase in the portion of the mandatory reserve in euros that banks meet on an average basis, from 5% to 10%, which creates conditions for more flexible management of banks’ foreign currency liquidity on a daily basis. The application of the new conditions for setting aside a mandatory reserve will begin in the August period of the mandatory reserve, that is, from August 10, 2022.

The changes made to the reserve requirement instrument are in accordance with the Strategy for reducing the Euroization of the domestic economy, which is significant for the further maintenance of macroeconomic stability.

The Council also reviewed the Report on the risks in the banking system of the Republic of North Macedonia for the first quarter of 2022. With the beginning of the conflict between Russia and Ukraine, the unfavorable environment had a certain unfavorable impact on the dynamics of the activities of the banking system, which, however, as in previous crisis episodes, successfully copes with the challenges. 

Deposits from non-financial entities, in the first quarter of 2022, recorded an annual growth of 4.6%.

In the first quarter, the effects of seasonal factors were felt, but also the negative effects of the Russian-Ukrainian conflict, which caused even greater uncertainty and worsened expectations. Placements in loans to non-financial entities grew solidly in the first quarter as well, with an annual growth of 10.1%. Most of the quarterly credit growth was aimed at enterprises, but growth was also observed in household loans.

In the first quarter, the solvency of the banking system remained at a stable and solid level, with a capital adequacy ratio of 17%. Liquidity indicators are still at a satisfactory level and point to adequate management of the banks’ liquidity risk. The share of non-performing loans in the total loans of the non-financial sector was reduced to the historically lowest level of 3.1%, i.e. lower than the pre-pandemic level, so the quality of the banks’ loan portfolio is still solid.

Uncertainty about the further course of events related to the covid-19 pandemic, which is still present, rising energy prices and fragmented and disrupted supply chains due to the conflict in Ukraine, as well as the strict restrictive measures introduced in China, are the most significant risk factors that will affect the future dynamics of the growth of economic activity and the activities of the banking system, the Report states.