Meeting of the National Bank Council
Skopje, 3 August 2021
Meeting of the National Bank Council
At today’s meeting, the National Bank Council reviewed the latest indicators and assessments for the banking sector, in light of the adopted Decision on temporary restriction of dividend distribution and payment to bank shareholders. This decision was made in February this year, following the recommendations of the International Monetary Fund and the European Central Bank. This decision was adopted for preventive purposes and to further increase the banking system resilience and stability, amid uncertainty and protracted COVID-19 pandemic effects. As announced at the adoption of the Decision, by September 2021, the National Bank Council was supposed to reevaluate the circumstances that actually led to the adoption of this Decision.
Therefore, the Council reviewed the current global and domestic circumstances and the banking system indicators for the first half of this year and decided to repeal the Decision on temporary restriction of dividend distribution and payment. This Decision shall enter into force on the date of publication in the Official Gazette of the Republic of North Macedonia.
According to the assessments of the international financial institutions and the central banks of the leading economies, the economic environment is improving in global terms, supported by the mass vaccination against COVID-19, which together with the monetary and fiscal stimulus to support economies mitigates the risks for global economic growth. Considering the mitigated risks arising from COVID-19, on 23 July 2021, the European Central Bank decided to lift restrictions on bank dividends, and on 30 June 2021, the US Federal Reserve System ended the temporary restrictions on dividend payments.
It is expected that this global context will help Macedonian economy to recover. This will have positive effects on the balance sheets of domestic banks and the sustainability of their capital positions. The results of the latest National Bank cycle of stress testing of the domestic banking sector showed solid resistance to the assumed shocks. Besides the regular macro-stress test, a comprehensive and consistent individual stress test of each bank was conducted for the first time. These stress tests incorporate the specifics of each bank and its clients, which enables a more comprehensive macro- and micro-prudential risk assessment. The results from both stress tests show adequate capital buffers and further credit support for both citizens and corporations.
The Council reviewed the initial banking sector indicators as of the end of the first half of 2021 and concluded that its performance since the beginning of the year is favorable with growing credit support (at an annual rate of 5.1%), improved profitability and further strengthening of the capital position of the banking system as seen through further capital increase of nearly Denar 5.4 billion. This is a reflection of the stable environment, the prudent behavior of banks, as well as the decision of the National Bank.
It was also stressed that given the uncertainty surrounding the COVID-19 pandemic, banks should continue to carefully design their capital needs and primarily to preserve and further strengthen their capital positions, in line with the operating risks taken. Within the regular supervision process, the National Bank will continue with the regular monitoring and evaluation of the banks’ capital positions. Capital requirement will continue to be assessed on an individual basis, in accordance with the risk profile of each bank.