The NBRM Council held its second session
Skopje, 27 February 2017
PRESS RELEASE OF THE NBRM
Today, the National Bank of the Republic of Macedonia Council held its second session and reviewed and approved the Financial Statements of the National Bank of the Republic of Macedonia and the Annual Account for 2016, which were audited by an independent audit company. In the opinion of the independent auditor, the Financial Statements of the National Bank of the Republic of Macedonia present fairly, in all material aspects, the financial position of the National Bank of the Republic of Macedonia as at 31 December 2016, and the results of its operations and cash flows for the year than ended, in accordance with the International Financial Reporting Standards (IFRS).
At today's session, the National Bank of the Republic of Macedonia Council discussed and adopted the Internal Audit Report for 2016, ascertaining that the Internal Audit Department has fully implemented its Plan of Activities. The NBRM Internal Audit has performed its main objectives through systematic assessment and making recommendations toward improvement of the risk management process, adequacy and effectiveness of internal controls, giving assurance of efficient and economical use of resources, safeguarding of assets, reliability and integrity of financial and other information, and compliance with the laws and regulations, internal policies and operating procedures.
At today's session, the Council also adopted the Report on the implementation of the Plan of Activities of the National Bank of the Republic of Macedonia for 2016. According to the Report, it can be concluded that the Plan of Activities has a high level of realization, given that the planned program activities have been completed or are regularly carried out in accordance with the established schedule. Beside regular, many new activities and projects were implemented that enable further improvement of the National Bank operations through improved quality, efficiency, accurateness and safety in conducting operations, as well as adjustment to certain regulatory requirements and standards.
At today's session of the Council, decisions resulting from amendments to the Banking Law from October 2016, towards harmonization with the Basel Capital Accord, the so-called Basel 3, as well as relevant European regulations, were discussed and adopted. Pursuant to the amendments to the Banking Law made in October 2016, the banks are required to maintain adequate amount of capital to cover the so-called capital buffers. The Law prescribes four capital buffers: (1) capital conservation buffer maintained at 2.5% of the risk weighted assets; (2) countercyclical capital buffer which can be up to 2.5% of the risk weighted assets, and more depending on other systemic factors/indicators, (3) capital buffer for systemically important banks which can range from 1% to 3.5% of the risk weighted assets, and (4) systemic risk buffer which can range from 1% to 3% of the risk weighted assets. Pursuant to the provisions of the Banking Law on that basis, the Council adopted the following decisions.
- Decision on the Methodology for Identifying Systemically Important Banks, which prescribes the manner of identifying the systemically important banks, i.e. the banks the operations of which are important for the stability of the entire banking system. In addition, the amount of the capital buffer that the systemically important banks should meet depending on the level of system importance, has been set. Also, the Decision on the Methodology for Developing Recovery Plan for Systemically Important Banks, that requires systemically important banks to submit a Recovery Plan to the National Bank, was adopted at today's session. This plan contains preparatory activities (from organizational aspect and from the aspect of taking appropriate measures) that the bank would undertake in case of possible deterioration of its financial standing.
- Decision on the Methodology for Determining the Rate of Countercyclical Capital Buffer for Exposure in the Republic of Macedonia. This capital buffer is aimed at limiting the risk arising from high credit growth, so it is introduced in case of high credit growth, on the basis of prescribed criteria.
- Decision on the Methodology for Determining the Maximum Distributable Amount, envisaging restriction of the bank's earnings distribution if it fails to maintain adequate amount of capital buffers. The capital buffers can be covered only by the highest quality capital positions, i.e. core equity tier 1 capital.
The Council also discussed and adopted the Methodology for Managing Leverage Risk, which is a standard of the Basel Capital Accord Basel 3 and the European banking regulations, which introduces the leverage ratio, as a correlation between the capital and activities of the bank. Banks in RM register extremely low indebtedness, and the purpose of introduction of this standard at the international level was protection against possible excessive borrowing by banks, in terms of satisfactory level of capital adequacy.
At today's session, the Council adopted the Decision on Amending the Decision on Exposure Limits and the Decision on Amending the Decision on Accounting and Regulatory Treatment of Foreclosed Assets, which ensure compliance with other bylaws of the National Bank, with the European regulations and with the amendments to the Banking Law from 2016.
The National Bank Council adopted also the Rulebook for Amending the Rulebook for Research Activity, for the purpose of more efficient implementation.
The Council also discussed other matters within its jurisdiction.