Today, the National Bank has hosted the seventh meeting of the Financial Stability Committee. The Committee consists of the National Bank Governor Anita Angelovska Bezhoska and the Deputy Finance Minister Shiret Elezi, as well as ten high representatives of both institutions. The Committee has discussed issues important for the financial stability of the country.
The latest Financial Stability Report for the Republic of North Macedonia for 2018, adopted by the National Bank Council on 25 July 2019 states that the financial stability was maintained in 2018, while enhancing the financial intermediation. Financial institutions operated in a relatively favorable domestic environment, and the risks arising from the international environment had a limited impact.
The Committee has also discussed the main trends of the financial system segments in 2018, in particular financial institutions risk arising from both operations and interrelations. It was concluded that the interdepartmental connection in the financial system and the possibilities of risk spillover are low.
The banking system, as a crucial segment of the financial sector, improved the risk exposure indicators, while the stress tests indicate a solid shock-absorbing capacity. Favorable credit and deposit market developments continued and intensified amid prudent risk management and improved bank risk profile. Also, the banking sector in the euro area, as a domicile area of most of our banks' foreign parent entities, is stable, adequately capitalized and resilient to shocks.
The Committee has shed light upon operations of other financial institutions, concluding that they have a rather small volume of activities and do not represent a source of major risks to the overall financial stability in the country. The share of each of these institutional segments does not exceed 1% of the total assets of the financial system, and their share in the total assets of the financial system is merely 2.2%. Still, the Committee members have noted the high double-digit growth of activities of the financial companies, leasing companies, investment funds and brokerage companies in 2018. In this context, the Committee has underlined the need for close monitoring of their activities, in particular the rapid growth of the activities of financial companies.
In 2018, the supervision and regulation of the financial and the banking system in particular, were subject to detailed scrutiny of FSAP, a joint program of the IMF and the World Bank, which positively assessed the domestic supervisory and regulatory standards in relation to the internationally accepted standards in this field. This program also provided some useful recommendations for improving the country's macro-prudential framework and for monitoring systemic risks. Recommendations for improving consumer protection have also been considered, as well as recommendations for establishing a bank resolution framework to improve the existing framework and to make it fully compliant with the relevant European directives. The Committee has addressed these findings and recommendations made by FSAP, while considering steps and dynamics for their implementation.
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