Skopje, 28 November 2022 

The financial system in the country is stable, despite the prolonged escalation of geopolitical tensions created by Russia’s military invasion of Ukraine, as well as the global challenges related to the energy crisis and high inflation rates.  However, amid increased uncertainty, there is a more pronounced need for thorough risk assessment, adequate risk management and further capital building in order to provide greater financial capacity.  The competent regulators monitor the situation in a coordinated manner and are ready to act fast, to adjust the policies in accordance with the developments and to maintain the financial stability, which is a priority. These are some of the conclusions from today’s session of the Financial Stability Committee, at which the participants discussed the latest developments in the financial sector. 

The session was chaired by the Governor of the National Bank, Anita Angelovska Bezhoska, and was attended by the Minister of Finance, Fatmir Besimi, the Chairwoman of the Securities and Exchange Commission (SEC), Nora Aliti, the Chairman of the Board of Experts of the Agency for Supervision of Fully Funded Pension Insurance (MAPAS), Maksud Ali and the President of the Council of Experts of the Insurance Supervision Agency (ISA), Krste Shajnoski. This is the first session of the Financial Stability Committee since the adoption of the Law on Financial Stability by the end of July this year. With this law, the Committee for Financial Stability becomes legally established as an inter-institutional body responsible for monitoring the implementation of the macro prudential policy in the country and for coordinating activities in the identification and monitoring of systemic risks in the individual segments of the financial system and the financial system as a whole when taking macro prudential measures and the preparation and financial crisis management. The Law provides for establishment of two subcommittees: Subcommittee for monitoring systemic risks and proposing macro prudential measures and Subcommittee for financial crisis management.

It was pointed out that geopolitical tensions arising from the military invasion of Russia over Ukraine adversely affect the economic outlook and create further pressures on the prices of the world primary commodity markets and the inflation. This leads to slower post-pandemic recovery and deepening of the energy crisis that reflects the consumer prices, which will adequately affect the activities and the risk profile in the financial sector.  For this purpose, increased caution is necessary when conducting policies, as well as strengthening of good practices for risk management.  

Referring to the conditions in the banking sector, the Governor Angelovska Bezhoska pointed out that according to the latest data as of 30.09.2022, the capitalization and liquidity of the banking system remain at an appropriate level, providing banks the capacity for constant credit support to companies and households, as well as for absorption of possible unexpected losses from their operation.  She said that non-performing loans remained at a record low level. 

“On 30.09.2022, the capital adequacy ratio increased by 0.4 percentage points, to a level of 17.7%, which is the maximum value registered in the past ten years.  The banking system traditionally maintains a solid volume of liquid assets, which provide it with high resilience to shocks, but also capacity for a further credit support to the real sector. However, given the environmental risks, there is a need for greater prudence of policies and strengthening of good practices for risk management by the banks. In such conditions of high uncertainty and gradual increase of systemic risks, the National Bank took measures which preventively strengthen the domestic banks’ capital by introducing the rate of countercyclical capital buffer for banks’ exposure to the Republic of North Macedonia and for exposures to other countries.  The situation is carefully monitored and if necessary, other measures will be taken to maintain the resilience and stability of the banking sector”, said Angelovska Bezhoska.

“The Ministry of Finance, as a competent authority for the operation of the financial and leasing companies, continuously monitors the operation in this segment.  Their share in the financial system is still insignificant, however the increase of assets in the financial companies sector by 27.9% and leasing companies by 15.4% indicates that these companies have a continuous growth in the financial sector of the country, and thus much closer monitoring of their situation is needed” said the Minister Besimi.

He added that for the purpose of strengthening the regulatory framework for the operation of the financial companies on the market of the RN Macedonia, as well as increasing the confidence of population and companies in the gravity and importance of these financial institutions, amendments to the Law on Financial Companies have been prepared, which is in governmental procedure and is expected to be adopted by the Parliament in early 2023.

“Despite the reduced indicators of the securities market compared to the previous year, it remains stable, without larger price oscillations, while the Securities and Exchange Commission still makes sure that this segment of the financial system operates continuously and without disturbance” pointed out the Chairwoman of the Securities and Exchange Commission (SEC), Nora Aliti.

“With the entire operations, the SEC as a proactive regulator contributes to the compliance with the recognized standards of supervision and inspection for the purpose of maintaining a secure and transparent market and strengthening of investor confidence.  At the same time, we encouraged issuance of new instruments on the securities market, therefore we met the requirements of the investment public on diversification of the investment risk”, said Aliti. 

The Chairman of the Agency for Supervision of Fully Funded Pension Insurance (MAPAS), Maksud Ali, pointed out that the current global conditions such as the pandemic, the energy crisis, the military conflict, the increase in the inflation rate and the movements on the financial markets are recognized both by MAPAS, as a regulator and supervisor, and by the pension companies as drivers of the investment process, i.e. the management of pension funds.  The investment cycles are being analyzed and assessed through the activities for monitoring the return and risk, encouraging change of regulations, assessment of the investment opportunities and at the same time reconsideration of risks established in the supervision based on risk assessment.    

The supervision based on the risk assessment conducted by MAPAS follows the qualitative and quantitative parameters of the instruments in which the pension funds’ assets are invested, diversification of instruments, exposure by asset classes, as well as the manner of risk management by the pension companies.  Taking into account that pension saving is a long-term saving and most of the pension funds’ members are on average young, the expectations and assessments are that this crisis, like the previous ones, is only a periodic cycle of the long-term investment period of pension funds’ assets”, pointed out Ali.

In his speech, the President of the Council of Experts of the Insurance Supervision Agency (ISA), Krste Shajnoski emphasized that the growth of both groups of insurance, life and non-life, continued in all three quarters of 2022

“This is reflected not only in the increased volume of written premiums and the paid insurance claims, but also in total assets and net technical provisions (liabilities based on insurance contracts). The aggregated financial results for the first three quarters of 2022 show significant improvement of the profitability in both market segments, compared to the first three quarters of 2021.  The conservative policies and the regulations of valuation of the technical reserves and the investments of the assets that cover the technical provisions, as well as the high quality of the instruments that are included in the calculation of the capital of the insurance companies, are a good basis and guarantee for the preservation of the solvency in the operation of companies.  The total assets of the sixteen insurance companies as of 30.9.2022 exceeded the threshold of euro 500 million for the first time in the history.  More than 2/3 of the total assets are highly liquid financial instruments, of which euro 200 million are investments in government securities”, said Shajnoski.

At the session, it was pointed out that all financial regulators will continue with further coordinated monitoring of the situation and timely exchange of all relevant information and that they are ready to respond in an appropriate manner to the developments, each within the competences of their mandate. It was determined that all financial system regulators have enough instruments they can use if necessary, which guarantees that the financial stability will be maintained in the following period.