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Vladimir Vasić, Secretary General Of The Association Of Serbian Banks

Bank Consolidation Strengthens The Market

Although conditions for doing business have changed completely over the past 100 years, a strong need remains for the continued existence of the Association of Serbian Banks, which is among the rare institutions that can boast of such longevity, but also of its huge contribution to the banking sector

I can confirm that the banking sector in Serbia is very stable; that it is adequately capitalised and that it actually showed during the pandemic how well it was able to endure the serious stress that the whole world experienced, but predicting what 2022 will be like is thankless at this juncture – notes Vladimir Vasić, Secretary General of the Association of Serbian Banks, speaking in this interview for CorD Magazine.

You’ve navigated the pandemic successfully, but that doesn’t mean the time of risks and challenges is in the past. How, in that sense, did you see the beginning of this year? Will this year be a good one for banks and bankers, for your clients, and also for the Serbian economy?

The times are actually confirming that challenges are coming one after another, which is why it’s important for us not to celebrate the abating of one crisis, but rather to get ready for the next one, which will emerge sooner or later.

At this juncture, that challenge is global and related to the conflict in Ukraine, which will impact on literally every point on the planet, and which has proportions that are still difficult to assess. That’s why it’s really a thankless task, and I would say an irresponsible one, to more precisely predict what kind of a year 2022 will be in business terms. That depends to the greatest extent on whether the situation in Eastern Europe will move in the direction of pacification or whether it will escalate further.

However, what’s important for us is to be aware of the extent to which we, ourselves, are ready for the challenges. My assessments are positive, but I really wouldn’t like to get into arbitrary speculations regarding the general economic situation.

Despite the fact that consolidation was launched successfully, we still have a higher than optimal number of banks. How do you think the dynamics of banking sector consolidation will unfold? Why is this process important?

The consolidation of banks is important because it creates more stable banking groups on the market, with increased credit potential, providing a higher level of service for all customers. And that’s what’s most important to the citizens of Serbia, and its economy. The nominal number of banks is really of lesser importance compared to the quality they offer and the overall stability of the banking system, and both are at a very high level in Serbia currently.

The direction that further consolidation will take actually depends the most on the decisions of management, or the owners of banks, and in that sense it’s possible that the major business steps that they take in the period ahead will be influenced more by the global geostrategic situation than by any assessment of the state of the Serbian market.

The nominal number of banks is really of lesser importance compared to the quality they offer and the overall stability of the banking system, and both are at a very high level currently

No significant Euribor growth is expected over the next year or two. Will that encourage citizens to take out loans? How does this impact on the decision of the National Bank of Serbia to prevent excessive borrowing and maintain banking sector stability?

Lending activity in Serbia is showing constant growth, and has done so for a lengthy period. There’s no reason for us to doubt that such a process will continue, given that interest rates still stand at levels that are around the historical minimum and that, in our country for example, we have high growth in the construction of housing, i.e., the supply of real estate on the market. All this growth, of course, doesn’t threaten stability, nor does it come close to some high-risk indebtedness, which stands at around EUR 1,600 per capita and, as such, remains below the level of countries with which we are comparable in terms of economic potential.

There is ever more, and ever louder, discussion of sustainable banking. To what does this term even refer? What are the base conditions for sustainability?

Sustainability in banking is a really broad concept. Through their lending activity, banks have a social and environmental impact, while – on the other side – the banking sector itself is exposed to climate risks through its placements. These risks impact client’s credit potential, but also the quality of banks’ assets.

You stated recently that the future of banks is in the green agenda. Does this mean you’ll provide greater support in the future to projects related to environmental protection, energy efficiency and renewable energy sources?

Support for environmental protection, energy efficiency and renewable energy projects are some examples of credit lines that banks are directing towards the private and public sectors. This will certainly be even more evident in the period ahead, and that’s because – among other things – Serbia’s national policy is to raise the nation’s environmental awareness and directly resolve some of the issues that citizens have through financial incentives for environmentally responsible construction. Environmentally friendly and sustainable operations have already been implemented in many segments of banking, and that applies to both the National Bank of Serbia and commercial banks that operate on the market. Support for environmentally sustainable development is also provided by the project of issuing “green” bonds, with the aim of implementing and financing specific projects in the area of environmental protection.

There is an ever-increasing number of banks continuously committing themselves to respecting the UN’s Principles for Responsible Banking, and the signatories to these Principles also include the largest banks in Serbia, mostly those that are members of international banking groups.

How will Russia’s invasion of Ukraine and the war, the duration of which no one can guess, impact on the work of banks – not only in Serbia, but elsewhere too? Are we threatened by a dramatic rise in inflation and a new economic crisis?

There’s no doubt that the conflict in Ukraine will have a certain impact on the entire world economy. We’re already seeing that through energy prices and supplies, but we’ll certainly also see it reflected in the food market, in which both Ukraine and Russia are very important players, and also in exports to these two extremely large markets. However, there’s no room for catastrophic scenarios even in a certain crisis like this one. We don’t have any indicators of inflation that show extreme values. As I said previously, it’s necessary for us all to assess our capacities well, to adapt to this situation, and certainly to make decisions rationally and calmly.

You celebrated the centenary of the Association of Serbian Banks just a few months ago. What do you think makes it such a valuable and glorious association?

What makes us proud, apart from everything the Association has done during this century, is the fact that even today – when conditions for doing business have changed completely compared to the time when the Association was founded – we continue to see the need for a banking association of this form to exist. I will remind you that membership in our Association is voluntary, and that our members really encompass all banks that operate in Serbia. Nothing testifies better than that to the claim that there is a purpose to our existence and that there would have been none of the evident improvement of the banking system without the contribution of the Association of Serbian Banks.

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