Although our work is hindered by the difference between domestic regulations and those of the EU, the most important legal aspect for improving the efficiency of our office is related to the way regulations are applied and interpreted by state bodies, primarily the courts. We hope that this will change
You represent a large number of banks in Serbia. What have been the most significant changes in the banking market since your establishment in 1976?
One of the biggest changes to the banking market is the privatisation of banks that began after 2002. Privatisation was preceded by high inflation, or rather hyperinflation, beginning in 1992 and lasting until 1994. After that, domestic banking faced numerous challenges, which led to the illiquidity of the banking sector.
According to a decision of the National Bank of Serbia, 15 banks lost their operating permits, and the transition of our country to democratic state structures marked the launch of structural reforms in the banking sector. The restructuring strategy for the banking sector led to the bankruptcy and liquidation of large state-owned banks in Serbia, while the rest were privatised successfully.
An important issue for the banking system generally is represented by the emergence of electronic banking, which includes electronic money transfer, internet marketing, automatic data collection systems, electronic negotiations with clients, as well as the provision of banking services through electronic systems.
From the perspective of users of banking services, electronic banking is the most convenient way of doing business with a bank. I would also like to stress the importance of the legal regulating of this type of business, because high-tech crime advances in step with the progress of technology, so we need more experts in this area to anticipate and prevent a wide range of possible abuses.
In our collegium of our office there are more women, which is to an extent a reflection of the trend in the legal sector and some other professions. However, the essential factor is that each member of our collegium contributes to the work and quality of the office
How would you assess the current situation in the banking sector, given that we are now, after several years, in a clear period of consolidation?
The consolidation of the banking sector began with the onset of the world financial crisis, and in Serbia, it has lasted for about five years. From the perspective of the citizens, it is important to note that increased competition raises the quality of services, which can be seen in increasingly favourable loan offers. Good news for citizens, related to the rights and obligations of contracts concluded with banks’ legal predecessors, is that contracts continue under the same conditions with the legal successor bank.
We shouldn’t shy away from the consolidation process itself, given that the National Bank of Serbia, in accordance with its legal powers, oversees the actual process by deciding on banks’ requests for approval to merge or issue a license for the operations of merged banks. It also monitors the impact of consolidation on the state of the financial market, in order to prevent negative consequences. The consolidation process is desirable because without it there would be a large number of banks on the market, and though this generally means “healthy” competition, on a small market like ours it would have the opposite effect.
The existence of multiple banks implies higher costs for their maintenance, for which clients would have to be charged. Thanks to our consolidation, our banks are well-capitalised, while the banking sector represents the healthiest branch of the economy. Most banks in Serbia operate without losses, generating significant profits.
What are the most common disputes within the banking sector today?
The most common disputes relate to the collection of receivables from overdue debtors. The specificity of Serbia, which it shares to some extent with some of the other countries of the region, is a large number of cases being led by banks against lenders with currency indexed in Swiss francs seeking the termination of contracts due to the change in circumstances or, more precisely, because of the rise in the exchange rate of this foreign currency compared to the Serbian dinar.
To what extent are valid laws regulating relations within the banking sector harmonised with European laws, and what is lacking that would improve the efficiency of your office?
Despite the implementation of reforms and the harmonisation of laws regulating relations within the banking sector with those of Europe, there is a problem of certain domestic regulations not complying with the rules that are valid in the EU. This primarily applies to rigid foreign exchange regulations, and foremost to the Law on Foreign Exchange Operations, which represent a limiting legal framework for banking sector operations. As such, liberalisation in this area is essential, while on the other hand, we need stable judicial practises, without arbitrary applications of the law, because that has a negative impact on operational efficiency.
Many years were required to develop security protocols in order for electronic banking to be safe for users, and time was certainly needed for users to gain trust in banking operations of this type
Your clients include both private individuals and legal entities (retail and corporate). To what extent do you use the process of out-of-court settlements as the most effective form of settling disputes?
The process of out-of-court settlements is indeed the most effective form of settling disputes, because it allows an exit from controversial situations through mutual concessions, through the reprogramming of debt, payment in instalments, partial write-offs of principal and interest, and all of that with minimal costs. As such, our office uses this process wherever possible, or whenever the other party in the dispute agrees to this type of dispute settlement.
With the goal of effectively protecting the rights of banks, as our most important clients, we monitor and apply in practise regulations that allow the burden of debts in a bank’s tax balance to accept the write-off of uncollectible or difficult claims on the basis of credit, thereby providing tax incentives for banks, as the largest creditors. According to the decision on the accounting write-off of banks’ balance sheet assets, brought at the end of last year, a case was stipulated in which a bank is obliged to conduct an accounting write-off of balance sheet assets with a low level of recoverability.
Your office has about 180 employees, from legal trainees to professors of law. Apart from the banking sector, which branches of industry are most represented in your office?
Alongside the banking sector, our office represents large corporate clients, primarily foreign and domestic investors in the field of investment and public-private partnerships in energy and infrastructure facilities. Likewise, also present are real estate management, mineral resource exploitation, agriculture and the food industry, as well as transport and trade. We provide corporate clients with a comprehensive legal service, starting from the very establishment of a company or non-status forms of investment (various types of business cooperation agreements), tax advisory services, and even the hiring of workers, or labour law.