CONTENTS
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WE DEFEND STABILITY AND THE INTERESTS OF CITIZENS AND BUSINESSES JORGOVANKA TABAKOVIĆ, GOVERNOR OF THE NATIONAL BANK OF SERBIA
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BANKING IDENTITY AS A UNIVERSAL IDENTITY PAVEL MACO, PRESIDENT OF THE EXECUTIVE BOARD OF MOBI BANKA
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SERBIA NEEDS A STABLE BANKING SECTOR VLADIMIR VASIĆ, SECRETARY GENERAL OF THE ASSOCIATION OF SERBIAN BANKS
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HIGH-END, TRUSTWORTHY AND RELIABLE PREDRAG MIHAJLOVIĆ, EXECUTIVE BOARD PRESIDENT AND CEO AT OTP BANKA SRBIJA
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EFISCALIZATION HAS CLEAR BENEFITS VIOLETA JOVANOVIĆ, NALED EXECUTIVE DIRECTOR
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A SUSTAINABLE TOMORROW IS BUILT TODAY ŽELJKO PETROVIĆ, MEMBER OF THE EXECUTIVE BOARD AND DIRECTOR OF THE DIVISION FOR BUSINESS WITH INDIVIDUALS AND SMALL BUSINESS, BANCA INTESA
AOFI, ANOTHER NAME FOR SECURITY DEJAN VUKOTIĆ, DIRECTOR, EXPORT INSURANCE AND FINANCING AGENCY AOFI
WE’VE YET TO SEE THE FULL BENEFIT OF DIGITALISATION IN THE INSURANCE SECTOR ALEKSANDAR LJUBIĆ, EXECUTIVE DIRECTOR OF THE FOREIGN INVESTORS COUNCIL OF SERBIA
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INFLATION IS THE BIGGEST CHALLENGE NEBOJŠA NIKOLIĆ, DIRECTOR IN RISK ADVISORY, DELOITTE SERBIA
IMPRESSUM EDITOR IN CHIEF Neda Lukić n.lukic@aim.rs ART DIRECTOR Branislav Ninković b.ninkovic@aim.rs PHOTOS Zoran Petrović COPY EDITOR Mark Pullen mrpeditorial@mail.com
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PROJECT MANAGERS Biljana Dević b.devic@aim.rs Vesna Vukajlović v.vukajlovic@aim.rs Mihailo Čučković m.cuckovic@aim.rs OFFICE MANAGER Svetlana Petrović s.petrovic@aim.rs FINANCE Dragana Skrobonja finance@aim.rs
Financial Sector Serbia 2022
EXECUTIVE DIRECTOR Maja Vidaković m.vidakovic@aim.rs PUBLISHER Ivan Novčić i.novcic@aim.rs DIRECTOR Ana Novčić a.novcic@aim.rs a.novcic@cordmagazine.com
PRINTING Rotografika d.o.o. Segedinski put 72, Subotica FINANCIAL SECTOR SERBIA 2022 Published by: alliance international media Prote Mateje 52, 11111 Belgrade 17, PAK 126909, Serbia Phone: +(381 11) 2450 508 E-mail: office@aim.rs; office@cordmagazine.com
www.aim.rs; www.cordmagazine.com No 40 ISSN: 2560-4465 All rights reserved alliance international media 2022 The views expressed in this publication are those of the presenter; they do not necessary reflect the view of publications published by alliance international media THIS PUBLICATION IS FREE OF CHARGE
Financial Sector Serbia 2022
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INTERVIEW JORGOVANKA TABAKOVIĆ, GOVERNOR OF THE NATIONAL BANK OF SERBIA
WE DEFEND STABILITY AND THE INTERESTS OF
CITIZENS AND BUSINESSES We remain determined, even under conditions of increased geopolitical uncertainty, to implement – without delay – all measures necessary with a wide range of regulatory mechanisms, with the aim of protecting the financial stability and interests of citizens and businesses
T
he development of events at the global level suggest that we’re entering a period of inflationary struggles. After a long period without change, Serbia’s central bank, the National Bank of Serbia (NBS), was recently compelled to raise the key policy rate, within the framework of broader measures taken by the Government of Serbia to curb the effects of inflation. We asked NBS Governor Jorgovanka Tabaković about the central bank’s forecasts on how long these inflationary pressures will last. “We took the decision to increase the key policy rate in an environment of inflationary pressures on the global and domestic markets that are stronger and more persistent than expected, and here one should bear in mind that we started the moderate tightening of monetary conditions back in October last year,” explains our interlocutor. “When it comes to how long the pressures will persist, they are largely related to the duration of the conflict in Ukraine, but also its outcome and ramifications, so it isn’t possible to predict its full impact on food and energy prices.” Nevertheless, under the assumption that a solution to the ongoing crisis in Ukraine will be found in the coming months, Tabaković believes that it could be said that inflation will start to fall from the middle of this year, supported by the effects of the previous tightening of monetary conditions and a lower than planned fiscal deficit. The Government’s measures on restricting fuel price hikes will also contribute to reducing inflation, as will the temporary ban on exports of certain cereals and other food products.
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Financial Sector Serbia 2022
INFLATION
STABILITY
SUPPORT
Under the assumption that a solution to the ongoing crisis in Ukraine will be found in the coming months, we could say that inflation will start to fall from the middle of this year
The ongoing geopolitical crisis and growing uncertainty on the international financial market haven’t impacted on the relative stability of the exchange rate or the smooth functioning of the foreign exchange market
Since the outbreak of the crisis in Ukraine, all state institutions have been working to help companies resolve certain operational problems that they have encountered
What is your opinion on how the expected growth of interest rates on loans on the domestic market will reflect on lending activity as a whole and banks’ operational results? - We’ve been tightening monetary conditions gradually since October 2021, and to date that hasn’t had a major impact on conditions for financing businesses and citizens in dinars, which have remained favourable. The average interest rate on dinar loans in February stood at 3.2% for loans to businesses and 8.7% for retail loans, which is around the 2021 level. Although the raising of the key policy rate and the previous tightening of monetary conditions can be expected to cause a slight increase in interest rates, it should be noted that it is often the case that several months pass before the effect of higher interest rates on the money market is reflected in rising interest on loans. Furthermore, due to increased competition in the banking sector, banks can partly compensate for the increase in the key policy rate by reducing their margins, which actually often happens in practise. When it comes to domestic lending activity, we expect it to continue growing and supporting economic growth, though we project growth rates of lending activities to be slightly lower than was the case in previous years, when they hit double digits, also given the high base from the previous period.
times of crisis. Under conditions of increased uncertainty, it is a particularly important fact that the NBS, with its timely and decisive responses, succeeded in preserving stability and securing the operations of all banks in Serbia, as well as preserving citizens’ trust in the banking sector. A significant contribution to that was also provided by activities aimed at maintaining the relative stability of the
banking sector is ready and able to respond to all potential challenges. The NBS’s responsible approach, which was also recently confirmed with the swift action taken in response to events with the Sberbank Group, the careful monitoring of challenges and a timely response to risks, always serve the function of preserving macroeconomic stability and the stability of the financial system.
Rising inflation usually also causes an increase in interest rates on savings. Will this gradually happen despite banks still having plenty of money that isn’t easy to place at their disposal? - As I’ve noted already, the NBS has implemented a number of measures to respond to rising inflation in the right way – in a timely and adequate manner. In accordance with that, we also expect a certain increase in interest rates on financial instruments denominated in dinars, including dinar savings. It is advised that impulsive spending and hasty decisions – such as converting dinar savings into foreign currencies – be avoided during
The results of a survey on credit activity indicate that loan demand is on the rise and is also being led, among businesses, by the financing of investments, alongside needs for liquid assets, while among retail clients it is being driven by the need to purchase real estate exchange rate. Likewise, the regular halfyear analysis of the cost-effectiveness of savings for the period from December 2012 to December 2021 confirmed that it pays off more to save in our local currency, both over the long and short term. We entered the Covid-19 crisis much better prepared than we were during the financial crisis, at least when it comes to the banking sector. What is the situation like now and do you expect certain companies or citizens to be unable to settle their obligations regularly, given that enterprises that work with Russia and Ukraine are suspending production and forcing their employees to take holiday leave? - Thanks to all NBS activities during the previous period, and despite the pandemic, we have preserved banking sector liquidity, profitability and high capitalisation, while maintaining high lending activity growth rates. The share of non-performing loans has also declined further compared to the pre-crisis period, down to 3.46% at the end of February, so even under the new circumstances, with NBS support, the
What instruments do the Government of Serbia and the NBS have at their disposal to curb these unfavourable trends, which could have a more lasting impact on social product development? - Since the outbreak of the crisis in Ukraine, all state institutions have been working to help companies resolve certain operational problems that they have encountered. The key policy rate is being increased in order, among other things, to gradually impact on domestic demand and discourage excessive lending, thereby reducing inflation, which is a prerequisite for us to have sustainable and high rates of economic growth over the medium term. The decision for us to increase the interest rate also eases inflationary expectations, which is particularly important from the perspective of preserving price stability over the medium term. You had to intervene a month ago when lunacy over the crisis caused the euro to strengthen sharply against the dinar. How far can the NBS go in making interventions from foreign exchange reserves, given the major instability on the global market? - We have spent more than ten years successfully maintaining the relative stability of the dinar exchange rate against the euro. Even under the conditions of the ongoing geopolitical crisis and growing uncertainty on the international financial market, neither the relative stability of the exchange rate, nor the smooth functioning of the foreign exchange market, have been imperilled for an instant. Contributing to this has been the
Financial Sector Serbia 2022
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INTERVIEW macroeconomic stability achieved, as well as the high level of foreign exchange reserves, which have been further strengthened in recent years with our purchasing of foreign currency amid appreciation pressures. The NBS will thus continue, with such strengthened funds, to act continuously to preserve stability. Moreover, as of the second half of February, we began implementing additional operations and activities through which we’ve provided banks with a sufficient level of dinar and foreign currency liquidity. The NBS intensified its supplying of banks with foreign cash, without delay, in order to overcome the problem of supplying citizens with cash, which prevented panic from spreading further. In addition to this, we have instructed banks that there must be absolutely no interruption in supplying exchange offices with cash, in order for them to be able to respond to the increased demand of citizens quickly and efficiently. This need has also led to the NBS strengthening its control over the operations of exchange offices. Some insurance companies have announced that, following the end of the pandemic, they expect more intensive work on the further development of the “soft infrastructure” of the financial market among regulators, insurance companies and the Association of Serbian Insurers, as well as the Government. What is on your agenda when it comes to this area? - We cooperate actively with all insurance market participants, as well as with the Association of Serbian Insurers [UOS], in order to protect the rights and interests of the users of insurance services. One area in which we cooperate is the drafting of regulations in the field of insurance, where public debates are organised and include the main participants of the insurance industry who provide suggestions and proposals for draft regulations, in accordance with best practices in insurance oversight. The UOS is also a participant in the working group for drafting a new regulation on compulsory transport insurance, and we expect full cooperation when it comes to amending regulations related to financial reporting. The volume of e-services, online payments and digitalisation in general increased sharp-
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We are committed to contributing to improving market stability, and thus the quality of insurance services, by exchanging opinions and experiences on all issues of importance to insurance market participants ly during the Covid-19 pandemic, both among players on the financial market and among citizens. Which direction should further modernisation in this area take? - The number of non-cash transactions increased during the pandemic, as did the use of digital services generally, but this isn’t about a sudden leap, rather constant and high growth. For instance, over the course of the past ten years, the number of transactions we perform on a quarterly basis using mobile banking has increased 100-fold. This is, of course, a result of the development of technology and the altered habits of users, but it is also a result of our dedicated work. We pay particular attention to the digitalisation of financial services, especially non-cash payments, through our normative activities and by providing citizens and businesses with the latest payment infrastructure. The pandemic only made more visible that which we’ve already done in this area and directed users towards
communicating with financial institutions exclusively through digital services, including through the use of video identification, which we’ve enabled in a regulatory sense. The start of the process of using artificial intelligence (AI) among banks and insurance companies is being monitored with great attention by regulators in many countries around the world, as well as efforts to prevent possible misuses of AI. Under the conditions that we have, who should be tasked with monitoring the ethical use of AI in the banking and insurance sectors? - Regulators and supervisors have a responsible role to play when it comes to finding a balance between protecting users of financial services and ensuring fair competition, on the one hand, and removing regulatory barriers and actively stimulating the development of technology, on the other. Protecting the clients of banks and insurance policyholders from possible misuse, as well as protecting their data, is one of our priorities, and the NBS, in its role as a supervisor of financial institutions, also influences the implementing of adequate measures and controls to ensure that financial institutions apply protection measures when using modern technological solutions. It is very important for consumers to receive financial education, which we are also working on continuously.
PAVEL MACO, PRESIDENT OF THE EXECUTIVE BOARD OF MOBI BANKA
BUSINESS
100% DEDICATED TO DIGITALISATION
BANKING IDENTITY AS
A UNIVERSAL IDENTITY Mobi Banka recently reached two milestones: a hundred thousand completely online loans; and a hundred million transactions. The bank ended last year with 650,000 clients and expects to have been chosen by another 100,000 users by the end of this year
A
would seem that you’re striving to become the leading provider of mobile and online financial services in Serbia. Is that correct? - As the first provider of digital financial services in Serbia, we don’t only desire to be a leader, but are bound to be a leader in banking sector digitalisation. We ended last year with 650,000 clients and expect another 100,000 users to choose us by the end of this year. Our client pool includes tens of thousands of retirees, which proves that we’ve made mobile banking simple and accessible to everyone. I believe that, with this dynamic, we will be able to strengthen our leading position when it comes to digital banking.
s the first provider of digital financial services in Serbia, we don’t only desire to be leaders, but are bound to be leaders in the digitalisation of the banking sector. Our client pool includes tens of thousands of retirees, which proves that we’ve made mobile banking simple and accessible to everyone ~ Pavel Maco. You were visionaries when you created the first completely mobile bank in the region, and then the pandemic encouraged others to follow suit. Is mobile banking our reality and our future? - We live in the digital era, and that’s best expressed through numbers. Mobi Banka recently reached two milestones: 100,000 completely online loans; and 100 million transactions. People easily get used to the fact that financial services are now available to them in just a few clicks, within a few minutes. However, we haven’t forgotten that we’re still transitioning, which is why we’ve formed a network of 40 credit advisors at Yettel shops, with whom clients can consult on everything related to our offer. Also, the support of institutions is extremely important for the further development of mobile banking and I have to commend the NBS [Serbia’s central bank], headed by Governor Jorgovanka Tabaković, for embracing emerging trends and for being so innovation oriented. In cooperation with the Association of Serbian Banks, the Government of Serbia and the NBS, we last year implemented the project My Data for Bank and launched an eGovernment service that allows citizens
We’ve formed a network of 40 credit advisors at Yettel shops, with whom clients can consult on everything related to our offer to submit all necessary data for banking products online. In a very short period of time, 3,000 citizens sent their data for loans and almost 4,000 credentials for eGovernment registration were issued. Given the constant expansion of your offer and increasing client numbers, it
In your opinion, what’s crucial to the further digitalisation of the Serbian banking sector? - I come from the Czech Republic, where a consortium of banking institutions has provided a favourable environment to implement a system of banking identity. This ’banking identity’ allows us to securely verify the identity of users and create a completely digital onboarding experience for new clients, all in accordance with KYC needs. Banking identity can also be used for different identifications beyond the banking sector. Imagine if all 3.5 million users of internet banking in Serbia could instantly access the many eGovernment digital services. I thus believe that banking identity would represent a great step towards the complete digitalisation of the banking sector, and I’m sure that Serbia is once again ready to spearhead global innovations.
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BUSINESS VLADIMIR VASIĆ, SECRETARY GENERAL OF THE ASSOCIATION OF SERBIAN BANKS
SERBIA NEEDS
A STABLE BANKING SECTOR Crisis situations show best that Serbia definitely needs its Association of Banks, an organisation that performs important work for banks and the entire financial system. This has been the case for the past 100 years of the Association's existence, and will remain so in the future
S
tating with optimism that events in Ukraine cannot lead to great risk for our banks, Vladimir Vasić, Secretary General of the Association of Serbian Banks, spoke to CorD Magazine about inflation, the indebtedness of individuals and industry, the consolidation of the banking sector and other topics. You recently stated that the quality of service provided by banks in Serbia and the overall stability of the banking system are at a very high level. How resilient are our banks to external, global influences? - If anyone thinks they can be resilient to global events today, they are definitely
Inflation is a consequence of rising fuel prices and broken global supply chains, which no central bank can currently influence mistaken. Globalisation is a process that has long taken hold of all segments of life and no one, including Serbia and, therefore, the banking system in Serbia, is completely beyond the influence of the global market. This is a general view, but if the real question is whether our banks are in danger or at a greater risk due to events in Ukraine and beyond, then the answer is negative. This is firstly because the banking system confirmed its satisfactory capitalisation and stability during the pandemic. Furthermore, banks are savings and loan organisations, the money they have at their disposal is the money of Serbian clients, and is not even directly tied to the international owner, let
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alone foreign banks. So, in that sense, we can remain calm.
standards through growing wages and stable disbursement of pensions, while at the same time showing a significant increase in confidence in the local currency and the banking system. The fact that we are witnessing growth in both retail and commercial activities is a positive sign.
Inflation has already reached 9.6% and is expected to increase further, while the NBS has intervened only once, increasing interest rates by one percentage point. Do you believe this measure was enough? - If we take a look at the past several years, it is difficult to find a period when the dinar exchange rate was this stable, and inflation this predictable. No stronger argument than this can be found to show that the current leadership of the National Bank has really conducted its monetary policy well, and I see no reason to doubt that it will continue to do so in the future. Regarding inflation, we need to understand that it is global, the world’s largest economies are currently experiencing year-on-year inflation of 9 or 10%. This inflation is also imported, mainly caused by an increase in fuel prices and broken global supply chains. This is not something any central bank can currently have any influence over. Projections by the NBS indicate that inflation will start to settle during the middle of the year, and in my opinion we can believe this assessment. In any case, the NBS still has many instruments it has not used and it has ways to react to unforeseen circumstances. The merger of NLB Bank Belgrade and Komercijalna Banka into the new NLB Komercijalna Banka was recently completed. Do you think this consolidation should continue? - Every consolidation produces a stronger banking group and usually introduces new services and technologies to the market, generating a positive signal for the banking system, and therefore for the entire Serbian economy. Whether bank mergers should continue is a question for their owners. If they assess that they have an interest in new acquisitions, if the market shows such a need, rest assured that we will witness new consolidations. Total lending increased by 9.7% in 2021. Individuals mainly took out cash and housing loans, which is assessed as a positive signal of economic activity. What is the situation now?
Every person in Serbia has a debt of just under 2,000 euros, in Croatia it is 3,000, while the average debt of the Slovenian population is around 5,000 euros. Is the risk of borrowing higher now? - Regarding personal risk for each of us, we always appeal to citizens to be well informed and to make responsible financial decisions on their own. The extent to which borrowing is a risk depends not only on the global situation, but far more on one’s personal financial status. When it comes to potential over-indebtedness, I must say that citizens and companies have continued to settle their obligations to banks in a highly regular manner during the crisis, and the share of high-risk loans has never been lower. It is currently around 3.5%, whereas we may recall that only a few years ago it was as high as 18%.
Positive trends in our banking system have been present for years and have not stopped, even during the severe crisis caused by the Covid pandemic - Our banking sector has been showing positive trends for years without stopping, not even during the severe crisis caused by the Covid pandemic. We are still showing growth in both savings and loans. I believe this indicates at least two things: first, that we have achieved a real increase in
Although membership of your Association has been voluntary for the past 100 years, it actually includes all the banks that operate in Serbia. Is the justification for the existence of the Association best seen in times of crisis? - The fact that literally all banks in Serbia are part of our Association is a great compliment for us. This shows that there is a true need for us, and that we are doing important things for the banks and for the entire financial system. In fact, this was best seen when certain crisis situations had to be resolved. Banks, by the nature of their work, are oriented towards daily communication with clients and state bodies, and this is just one of their many duties. Therefore, some of the most important initiatives were shown to have originated from the Association of Banks. Furthermore, the ASB was one of the key factors in resolving these situations. I am convinced that, at this precise moment, when the Association is celebrating 100 years of its work, we have shown that we are very much necessary for another 100.
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BUSINESS
PREDRAG MIHAJLOVIĆ, EXECUTIVE BOARD PRESIDENT AND CEO AT OTP BANKA SRBIJA
HIGH-END, TRUSTWORTHY
AND RELIABLE
We create value through our distinctive approach, which places the client at the centre of everything we do at OTP banka. Whether providing capital to fund growth or refinancing debt, we offer solutions that support the right capital structure to meet companies' short- and long-term financing needs
B
y working in partnership with our clients, we help provide a full range of solutions to meet their ongoing needs, including liquidity management, but also structured finance. With our regional presence in 11 countries, OTP Group helps clients grow internationally ~ says OTP banka Srbija Executive Board President and CEO Predrag Mihajlović, speaking in this CorD Magazine interview. It has been precisely a year since the merger of OTP banka and Vojvođanska banka? What are your impressions and takeaways? - I can highlight a few takeaways: integration has been done smoothly, without neglecting business targets and daily business operations. The aligning of different corporate cultures is still ongoing; this is not something that can be done with an integration date. The cultures may have differed, but focus and hard work were equally represented at both banks, resulting in the creation of not only a bigger bank, but a more efficient and better one. This is proven by our business results for both 2021 and Q1 2022. Today, OTP banka is the no.1 creditor on the Serbian market, both in retail and corporate, holding a leading position in factoring, e-commerce and leasing services, with an extensive footprint of 170 branches in 91 cities across the country. The secret of our successful merger and business results lies in the great teamwork coming from teams in Belgrade, Novi Sad and Budapest. The fact that it was mostly done during the pandemic, under quite challenging circumstances, brings additional value to our success. What would you highlight among business results?
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Financial Sector Serbia 2022
- In 2021, which was undoubtedly one of the most demanding years for the banking market, we managed to achieve excellent business results, with over €228 million in revenue and high profitability of €68 million, which is almost seven times higher than the preceding year. An historic result was also recorded in factoring, where turnover of €400 million strengthened OTP’s long-term status as a leader in this field. We have continued in the same direction in 2022 and generated income of €57.7 million, while our assets stand at €5.78 billion, representing an increase in net assets of €521.8 million compared to the first quarter of 2021. When it comes to loans, OTP banka recorded nearly €4.5 billion in Q1 2022, representing an increase of 13.5%, and we thus retained first place on the Serbian market, with a share of 17.5%. Our housing loans stand at a billion euros, with a market share of 21.9% in Q1, and a surge has also been recorded in terms of cash loans, which have reached a value of 1.1 billion euros and thereby represent a high market share of 20.3%. Our OTP Leasing maintained its leading position on the market in Q1 2022 as well, with an increase in new production of 17.4% y-o-y, and total financing of €24.4 million in new placements, which represents a 20.2% market share in new production. We are also quite satisfied with the results of life insurance service provider OTP Osiguranje and the synergy it has formed with the Bank. We are witnessing banking consolidation and it seems the competition is quite strong, especially in the corporate segment. What do you think distinguishes OTP banka’s approach to corporate clients? - We can say that loan demand in Serbia is growing, and investment lending in particular, both in the retail and corporate sectors, which means that banks are keeping pace with market demands. The consolidation of banks has generally enabled them to financially support significantly larger projects than was previously the case. It is important to emphasise that banks’ possibilities depend significantly on their access to long-term sources of financing, so the financing period is in line with the
economic life of the actual investment. We continued our excellent results in the corporate segment in Q1 2022, recording growth of 16.2%, with €2.4 billion y-o-y. In this way, OTP banka continues to be ranked number one, with a 16.6% market share in corporate lending. As such, we have clients from all industries, from entrepreneurs and SMEs, to large domestic and multinational companies. I would say that we create value through our distinctive approach, which places the client at the centre of everything we do at OTP banka. Whether providing capital to fund growth or refinance debt, we offer solutions that support the right capital structure to meet companies’ short- and long-term financing needs. By working in partnership with our clients, we help provide a full range of solutions to meet their ongoing needs, including liquidity management, but also structured finance. Through coordinated business lines and proven expertise, OTP banka provides a full range of innovative solutions adapted to clients’ needs, such as traditional and
Our goal, as a leader in corporate and retail lending, is to actively participate in building a sustainable future and to be an example of environmentally responsible business specialised financing, payment operations, cash management, access to treasury services, capital markets and financial advisory services, as well as securities services. We have been the market’s top bank in factoring services since 2013, with the largest market share, and we continued along the same path in 2022, with an increase exceeding 30% in production. The Euromoney Awards for Excellence 2021 awarded OTP as the best bank in CEE, while Global Finance recently awarded OTP banka as the best bank for SMEs and the best private banking bank in the CEE region. This recognition confirmed our efforts to create a leading bank in these segments in particular, and the fact that we received this award for results achieved
during the pandemic and the process of integrating the two banks makes it even more valuable. Ever since the establishment of our private banking operations in 2004, which was in fact the first private banking setup in Serbia, we have managed to successfully secure our presence in this segment and ensure we are perceived by clients as a high-end, trustworthy and reliable banking institution. We today have two premises dedicated to private banking, in Belgrade and in Novi Sad. Bearing in mind that our readers are diplomats and people from international companies, does OTP banka have special services or forms of cooperation with them? - Yes, we devote special attention to clients who are non-residents in Serbia, including foreign offices, diplomatic missions, international companies and their employees. Our long and fruitful cooperation with embassies and diplomatic missions and their staff is something we are proud of, as it requires the special expertise of our employees in branches and different departments in headquarters where they have a single point of contact for daily business with the Bank. It seems that OTP banka is a true green bank? - Absolutely, in every sense. Green is our colour and our philosophy of doing business and everyday life. I am very proud of our strategic focus on the green transition and all activities, especially the results we achieved with the Generator Zero project focused on reducing the carbon footprint. That is one of our most important and largest projects, which we’ve been implementing with the same enthusiasm for five years and which deals with current topics through each new edition, resulting in ever-more innovative solutions. Our goal, as a leader in corporate and retail lending, is to actively participate in building a sustainable future and to be an example of environmentally responsible business. The very recent Grand Prix 2022 Award for our CSR is confirmation that we are on the right track.
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INTERVIEW VIOLETA JOVANOVIĆ, NALED EXECUTIVE DIRECTOR
eFiscalization
HAS CLEAR BENEFITS We see eFiscalization as a powerful weapon against the grey economy, which causes incomparably more damage to responsible entrepreneurs than other negative influences. And we will very quickly see the benefits of this change, both as individuals and as a society
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ccording to the assessment of the latest NALED study, the economic grey zone has an annual turnover exceeding seven billion euros. The new system of fiscalization, which should lead to significant reductions in unfair competition, was introduced with great haste and without the extending of deadlines for those resisting this change. Violeta Jovanović, executive director of NALED – an organisation that has long since advocated in favour of this reform – believes that we’re readily entering a system that was introduced by many countries a full decade ago. Are we now really ready for this step? - The new system of fiscalization brings great change to Serbia’s business climate, because it will significantly improve supervision of the recording of retail turnover and help improve tax culture and responsibility among both citizens and businesses when it comes to the issuing or accepting of fiscal receipts. eFiscalization will also encompass a much larger number of entrepreneurs than were included under the pre-existing system, thus giving us a clearer picture of the volume of retail turnover. We are now replacing the extremely outdated technology that we introduced more than a decade and a half ago with a modern solution that’s being introduced by ever more countries. The Tax Administration is gaining an effective means of control and thus has a higher level of responsibility to use this tool to its full extent. Croatia introduced this system back in 2013 and, thanks to eFiscalization, improved the efficacy of tax inspectors who had the “luxury” of reducing the number of onsite inspections threefold while detecting four times as many irregularities. It’s tough to find justifiable reasons for why we’ve had to wait so long, because the first preparations for eFiscal-
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ization in Serbia also began almost 10 years ago. The statistic showing that slightly more than 120,000 businesses applied for fiscalization by the beginning of April demonstrates that, with every reform, we have a significant number of businesspeople who always wait until the last minute to adjust to new ways of working or don’t sufficiently inform themselves with regard to obligations. That’s why all the training we’ve organised on eInvoicing and eFiscalization – and we’ve conducted more
than 30 workshops and training courses for many thousands of users, in cooperation with the Ministry of Finance and with the support of the British Embassy, within the scope of the Small Business Info project – we placed our focus on accountants because they are, according to research that we’ve conducted, the main source of information for approximately 80% of small enterprises. That’s why we believe that the vast majority of businesses are ready for 1st May.
THRIVE
MISSION
INFLATION
The introduction of eInvoices and eFiscalization is something that should be welcomed by every society that wants to thrive both socially and economically
Our aim is to build a society with responsibility and solidarity that will thrive economically for the benefit of all citizens and businesspeople, which is why we must all contribute equally
Reduced consumption caused by rising prices will inevitably also influence budget revenues, which will make a realistic overview of the initial effects of the introduction of eFiscalization difficult
For many skilled craftsmen and traders, such as hairdressers, beauticians, painters and plasterers, ceramists, sporting associations and many other smaller businesses, this was an additional burden that came when they’d already been weakened by Covid-19 and inflation. When will they see the first positive effects of this change? - We welcome the Ministry of Finance’s decision to secure subsidies for all those who shift to the new system of fiscalization or are just becoming taxpayers. Those 100 plus 100 euros have significantly reduced the costs to businesses. On the other side, we always view the transition to eFiscalization as an investment. Taxpayers will feel the first positive effects of fiscalization already during the first year, as it will eliminate the costs associated with the need to store copies of invoices, maintain a mandatory cash register etc. However, they will benefit much more from fiscalization’s indirect effects. First and foremost, we see eFiscalization as a powerful weapon against the grey economy, which causes incomparably more damage to responsible entrepreneurs than other negative influences. Unfair competitors, who don’t keep records of their turnover and sell smuggled goods or unregistered products, are much more price competitive and reduce the turnover of responsible enterprises. Just last year, the Tax Administration temporarily closed 41% of controlled facilities due to irregularities in the issuing of invoices, which testifies to the scope of the challenge we’re confronting.
their customer base and securing a higher turnover. The value of noncash payments in Serbia increased from 4.6 to 5.7 billion euros last year alone, and is increasing at double-digit rates annually, thanks to having proven their practicality, efficiency and reliability, both around the world and in our country. We plan
The National Cashless Payment Initiative has launched the website boljinacin.rs, which is intended to help transitioning entrepreneurs. How much interest has this programme generated? - The boljinacin.rs website is currently running pre-registrations for participation in the POS programme, through which we want to provide help to small traders and all other entrepreneurs in improving their operations by introducing noncash payments and thereby broadening
We welcome the Ministry of Finance’s decision to secure subsidies for all those who shift to the new system of fiscalization or are just becoming taxpayers to distribute about 4,000 POS terminals and software solutions for regular and online shops during this year and a total of 25,000 over the course of the three years of the project, thus expanding the acceptance of infrastructure significantly. Do you expect inflation, which threatens to hit double digits, to influence the eFiscalization process and its ability to increase budget revenues? - The inflation being seen around the world today is a direct consequence of the conflict in
Ukraine and its negative effects won’t bypass any country, Serbia included, so reduced consumption caused by rising prices will inevitably also influence budget revenues, which will make a realistic overview of the initial effects of the introduction of eFiscalization difficult. Starting from 1st May, more than 10,000 users of public funding will switch to the new model of electronic invoicing, and they will be joined by all 125,000 VAT payers by January 2023. What has this practise brought in the many countries that have already introduced it? - At this moment, around 80 countries around the world are in some phase of introducing eInvoices, which are already strongly present in Europe. According to European Commission data, the costs of producing invoices have been reduced by 95% in Lithuania and Finland, while the time required to process one invoice in Poland has been reduced by as much as 90%, thanks to them having shortened the process from 30 minutes to just three. Croatia has calculated that its economy’s operating costs have been reduced by €350 million annually thanks to eInvoices. Increased efficiency and reduced costs are the basic advantages, while – as with eFiscalization – the state has received another important instrument for monitoring the transparency of financial flows, this time in the wholesale domain. The latest NALED Grey Book included your recommendation that the Ministry of Finance expand the scope of fiscalization to include lawyers, taxi drivers, veterinarians and other sectors that often remain beyond the reach of fiscalization. Do you expect the Ministry to implement this recommendation? - These activities will inevitably come under the scope of fiscalization at some point, and thus we shouldn’t wait too long. Our aim is to build a society with responsibility and solidarity that will thrive economically for the benefit of all citizens and businesspeople, which is why we must all contribute equally.
Financial Sector Serbia 2022
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BUSINESS ŽELJKO PETROVIĆ, MEMBER OF THE EXECUTIVE BOARD AND DIRECTOR OF THE DIVISION FOR BUSINESS WITH INDIVIDUALS AND SMALL BUSINESS, BANCA INTESA
A SUSTAINABLE TOMORROW
IS BUILT TODAY
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Since it arrived on the local market, Banca Intesa, part of the Intesa Sanpaolo Group, has profiled its services for all types of customers. To contribute to the quality of life and business of its customers, it has focused equally on individuals and companies, but also on the agricultural sector
s Banka Intesa is an important support for both industry and individuals, one of the most important tasks of its management is to provide a range of services that will be relevant in any given context, but also to respond to current trends that shape customer needs. Business results in the first quarter of 2022 show that your highly diversified and resilient business model is delivering excellent results. Is that the way to continue? - One contribution to the good results of the first quarter was undoubtedly our improved processes and services, service models that speed up and simplify interaction with the bank, both through implementing and further developing innovative functions on digital channels and transforming our branches across the country. We are dedicated to working on achieving the goals we have set for ourselves, which focus on the client, the only guarantee of future success. It is a special pleasure that our work in this has been recognised by reputable world magazines such as Global Finance, which awarded Banca Intesa the recognition of Best Bank in Serbia in 2022. Is it enough to meet the expectations of customers or should we go one step ahead of them and repeatedly offer them innovative products and services? - The banking sector is one of the most important pillars of a country’s economic development. It is undoubtedly expected to drive and support economic transformation and progress. I think we must anticipate and respond to emerging trends in time, to “build a sustainable tomorrow today” including housing loans for energy efficient buildings, consumer loans for energy efficiency and support to industry and agriculture for energy efficiency projects with further digital innovation. An important support for this is our parent group
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Dedicated work on achieving the goals we have set for ourselves, which focus on the client, is the only guarantee of future success Intesa Sanpaolo, whose innovation centres in Turin and Tel Aviv are working on developing technologically innovative projects in the field of the circular economy, artificial intelligence and neuroscience. What can your clients do today without going to your branches and waiting in front of the counter? - For us at Banca Intesa, the digital transformation began in 2019 when we shifted to a new core system as the basis for improving
services that will provide our customers with an even more advanced user experience. We continued to work on improving the digital platform during the challenging pandemic period, to introduce a new digital banking application for individuals last year, with innovative features that make daily transactions even faster and simpler. In addition to the standard options of making payments or checking the balance, our customers can transfer money via the new Banca Intesa Mobi application without entering the recipient’s account number, withdraw cash from ATMs using a mobile phone with #withCASH, check their PIN, pay bills even faster and easier using IPS Scan and IPS Show options, make foreign currency payments, or take out a cash loan or overdraft arrangement, all via their mobile device.
DEJAN VUKOTIĆ, DIRECTOR, EXPORT INSURANCE AND FINANCING AGENCY AOFI
BUSINESS
AOFI, ANOTHER NAME
FOR SECURITY AOFI supports exporters with direct financing for preparing exports through a range of credit programmes and by insuring the risk of unpaid invoices both at home and abroad. This is important both in regular and now in extraordinary circumstances
I
world is yet to come. The war in Ukraine will undoubtedly have great consequences on the world economy and that’s already reflected in the average growth of inflation.
t is extremely important that our businesses, especially exporters, are sure of collection and that the risks of foreign trade are as low as possible. The certainty that receivables from foreign and domestic business will be realised is a condition for uninterrupted business and planning, for sustainable economic growth.
Despite everything that’s happened over the last two years, the Serbian economy has preserved exports, investment and employment. How did you contribute? - The Republic of Serbia responded in good time to the challenges posed to the economy, and above all to fiscal policy, by the pandemic. Despite the pandemic and difficult business conditions, exports were preserved, investment and employment were preserved, and at AOFI we actively participated in the implementation of the programme of economic measures to support Serbian industry. In cooperation with the Government, both during and after the pandemic, we intensified our activities related to credit insurance of claims by domestic exporters and helped a large number of export-oriented businesspeople to continue their business without hindrance. How do the war in Ukraine and Western sanctions against Russia affect our economy? - The Serbian economy is closely connected with the economy of the region and the EU, but also the rest of Europe, which certainly includes the Russian Federation and Ukraine, so any instability and crisis in those markets strongly affects us. Our economy has managed to withstand the first blows of the global crisis, exports are
Over the past two years, the Export Insurance and Financing Agency has actively participated in the programme of economic measures to support Serbian industry growing and other parameters are good, but we must be careful, because we think that the crisis in the world and from the
Is the risk of uncollectable receivables and the interest of export insurance companies growing? Do you expect the situation to stabilise? - We are facing a challenging period that we cannot influence so much, because of the problem’s global nature. However, despite the challenges, the Serbian economy continues to grow and we are far from a recession. The challenges facing the economies of the whole world are enormous, because wars, energy crises, sanctions and instability are factors that put the world in danger of inflation. Fortunately, our state has taken a number of measures to protect the interests of industry and the Serbian public, from the controlled price of fuel and low prices for electricity, to prices limits on foodstuffs, which are in sufficient supply. We continue to cover payments for Serbian exporters in more than 80 countries on all continents. Just as in the middle of the pandemic, this is extremely important now because there are definitely unforeseen circumstances and a war, and market changes can lead the most trusted long-term clients into a situation where they are unable to meet their obligations. It is important to note that AOFI also deals with short-term lending, which means providing financial resources to finance the working capital of exporters. This has a number of advantages, including improved liquidity, simpler lending procedures and lending services tailored to the needs of exporters.
Financial Sector Serbia 2022
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INTERVIEW ALEKSANDAR LJUBIĆ, EXECUTIVE DIRECTOR OF THE FOREIGN INVESTORS COUNCIL OF SERBIA
WE’VE YET TO SEE THE FULL BENEFIT OF DIGITALISATION
IN THE INSURANCE SECTOR
The Foreign Investors Council of Serbia has a multitude of ideas on how to continue the wave of digitalisation and render numerous financial sector services even more accessible to citizens
D
igitalisation, which the FIC has spent years advocating for, has brought advances in many fields, from e-government to the financial sector. Now, according to FIC Executive Director Aleksandar Ljubić, it is very important for further reforms in this field to continue.
The pandemic brought us hitherto unseen acceleration in all fields, and particularly when it comes to the digitalisation of financial services. How has Serbia’s financial system responded to these challenges? - We’ve seen a sharp increase in electronic transactions since the outbreak of the pandemic, but also
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in the wider application of contactless payment options using digital “wallets”, which have been made available to a large number of financial institutions. In addition to this, significant progress in the area of the legal framework that enables the further digitalisation of financial services in Serbia has also led to the acceleration of digitalisation. The exceptional advances that Serbia has made during the time of the pandemic, and which will have a lasting positive impact on the competitiveness of the Serbian economy, are represented by the introducing of the service of issuing qualified funds for the creation of a remote electronic signature, a so-called cloud qualified signature, then the
real-time electronic recording of transactions via the internet, or online fiscalization and electronic invoicing, and the introduction of the first registered electronic identification scheme, as well as the enabling of payments of monthly bills, shopping at retail outlets and online in an exceptionally simple way, via the national IPS (Instant Payment System) using QR codes. Simultaneously, Serbia’s e-government system has reached a critical juncture at which there is sufficient infrastructure and the technical and personnel capacity required to quickly develop new services (such as the “My Data for Bank” service) and place them in the function of resolving urgent social issues. The
greatest progress has been achieved in the field of electronic payments on the eGovernment portal, where citizens are now able to make direct electronic payments without the need to submit paper evidence confirming payment. The banking system has experienced a significant transition to e and m services over the previous period. As advocates of digitalisation and the development of e-services, what does the FIC today see as the main avenue for further changes in this sector? - Although the greatest strides on digitalisation have been made in the financial services sector, many challenges remain ahead of us. Our members particularly emphasise the importance of easing the use of digital identity/signatures in such a way that they become accessible to the widest circle of citizens, in a simple way and without high costs, as well as enabling the application of the institute “digital bills of exchange”, which should be registered as such in a unified register of bills of exchange, i.e., signed electronically. Alongside the public administration’s further digitalisation, it is also extremely important to conduct continuous educational campaigns to ensure citizens are informed about the possibilities and advantages of digitalisation, but also to empower them to utilise the digital tools of public administration that are available. When talk turns to the financial sector, we most commonly discuss banking. However, there is also ample room in the insurance sector for the changes that you’ve long advocated for. Do you see progress in that area? - A large number of insurance companies, as well as other participants in the insurance market, are striving to adapt their services to suit the digital world. However, alongside technical, cultural and other obstacles, regulation also represents an important limiting factor. Despite recent years having seen huge steps taken towards the creation of regulatory conditions for digital operations, room still exists to make further improvements, especially in the insurance domain. Apart from this, FIC members are of the opinion that it would be extremely important for the Serbian economy and citizens to improve solutions when it comes to group insurance contracts that would enable direct communication with all insured parties prior to the concluding of insurance contracts, access to information on the way a claim is submitted
and the prescribed deadline for filing a damages claim, i.e. the exercising rights on the basis of insurance, as well as the way the rights and interests of insured parties are protected with insurance companies etc. It is vital to determine a strategy for catastrophe and natural disaster insurance, and to create conditions for tax breaks to apply when paying premiums for all types of life insurance, which would both stimulate the development of the insurance sector and create conditions to improve the social function of these types of insurance. V The last FIC White Book included several recommendations related to simplifying and easing
The greatest progress has been achieved in the field of electronic payments on the eGovernment portal, where citizens are now able to make direct electronic payments without the need to submit paper evidence confirming payment international financial transactions. Has progress been made on this front in the meantime? - Improvements were achieved in the period between the last two editions of the White Book when it comes to the solutions of individual bylaws, but even more significant improvement was achieved in terms of transparency and the availability of the views of the National Bank of Serbia regarding the interpreting of provisions,
primarily of the Law on Foreign Exchange Operations. It is extremely important for this process to continue and speed up in the period ahead. Our members gave a series of constructive proposals that, when implemented, would bring essential improvement to the business climate in Serbia. Our members expect, among other things, the further easing of administrative requirements, a switch to ex-post reporting on cross-border financial loans, simplification of the so-called “settlement” of claims for all types of current and capital transactions, but also relaxation in terms of providing residents with warranties for international credit transactions and the like. We’re already halfway through 2022 and nearing the completion of the implementation of the Government’s programme to develop e-government services, which have had a strong impact on the development of financial sector services. How would you today summarise the successes achieved and challenges that remain in fulfilling that plan? - In the process of overcoming the challenges posed by the pandemic to the Serbian economy, but also the society as a whole, the fact that the Government of the Republic of Serbia placed digitalisation high on its agenda of priorities was critical. Great efforts have been made and progress achieved, especially when it comes to regulations aimed at enabling the further digitalisation of the economy and the public sector. The readiness of all state institutions to continue in this spirit in the period ahead is extremely encouraging, because digitalisation is an endless process that permanently demands innovative and swift solutions, provided we want to find ourselves in the company of developed countries. From the perspective of the FIC, and under today’s conditions, what are the most important next steps when it comes to guaranteeing financial stability and the further development of financial services? - Financial stability is largely conditioned by essential economic growth, fiscal consolidation and the implementing of structural reforms. Furthermore, the privatisation and corporatisation of public enterprises and the reform of public administration will impact total macroeconomic indicators significantly, thereby also impacting the further development of the financial services sector.
Financial Sector Serbia 2022
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BUSINESS NEBOJŠA NIKOLIĆ, DIRECTOR IN RISK ADVISORY, DELOITTE SERBIA
INFLATION IS THE
BIGGEST CHALLENGE The outbreak of the pandemic led to uncertainty becoming a new reality, after which the world entered a period of even more pronounced uncertainty due to the war in Ukraine, which came on a wave of inflation that was already growing rapidly. This, unfortunately, will have a negative impact on the financial sector, which is always inextricably linked to challenges
I
example, the unusual statement of European Central Bank President Christine Lagarde, who characterised rising inflation on these two continents as “a completely different beast”. This raises an additional question regarding the effective and efficient fight against inflation, as well as a question over the appropriate levers of fiscal and monetary policy that should be applied to curb inflation. The absence of a unified stance on inflation at the global level leads to suspicions that the fight against inflation will be neither easy nor short. We all know what’s brought by this process and the fight against inflation: rising prices, higher unemployment, increased credit risk, entry into a recession.
t is common knowledge that investments should always be coordinated with risk aversion, desired returns, macroeconomic expectations and the planned investment horizon. We spoke to Nebojša Nikolić, risk advisory director at Deloitte, to find out how all this is achieved today. We’re living in turbulent times. How is the financial sector being impacted by the pandemic and the war in Ukraine? - The financial sector is always inextricably linked to the challenges confronting the economy and the population. Multinational companies that have their operations and part of their revenue linked to Russia and Ukraine need to make up for unexpected losses, while alongside that it is also necessary to harmonise their operations with the new lists of sanctions against Russia. New ways of reaching fresh sources of income will be sought, which won’t be an easy mission, given that demanding regulations and the banking system’s inertness are causing certain delays in the implementation of digital agendas. Some groups will utilise the market turmoil and there will probably be further consolidate of the banking sector, and perhaps also withdrawals from the market. Rising inflation will be the main driver of further uncertainty. There’s likely to be a nominal increase of income in banks’ balance sheets, due to rising interest rates as a result of inflation. Such a situation could also impact on the expenditure side of the balance sheet through an increase in loan-loss provisions and growth in NPLs as a consequence of increased credit risk.
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We all know what’s brought by this process and the fight against inflation: rising prices, higher unemployment, increased credit risk, entry into a recession According to Serbia’s central bank, the National Bank of Serbia (NBS), the country should maintain strong, sustainable and diversified growth. Do you share that optimism? - The road to realising these optimistic forecasts will be filled with challenges. Let’s take, for example, the fact that mutual incompatibility exists at the level of the EU and the U.S. related to the causes and impact of inflation. Let’s also take, for
Which areas now have the greatest investment potential and the least risk? - As a result of increased market uncertainty, due to the war, inflationary pressures, the recurrence of the virus and Covid-19 lockdowns in China, investors at the global level are running to some safer and traditional “tangible” forms of investment: in gold, other precious metals and real estate. We are currently seeing on the market, both around the world and on our market, an increase in the value of these investment categories, while declines are being recorded on the stock market and the cryptocurrency market. Still, exaggerated demand and the excessive influence of investors in the aforementioned investment categories can create price bubbles, which are usually followed by “bursting”, i.e., a price inversion and the return to long term price averages.
Financial Sector Serbia 2022
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Financial Sector Serbia 2022
