Ekonom:east Media Group organized the Bankar Magazine Roundtable, The European Bank Coordination (Vienna) Initiative-One Year Later and What the Future Holds, yesterday at the National Bank of Serbia in Belgrade.

One year after the Vienna Agreement, the European banking sector was dealt a blow but has not collapsed, what does this mean for Serbia and how will this affect domestic banks bound by the Vienna Agreement?

The Governor of the National Bank of Serbia, Radovan Jelasic, said today at the Banker magazine Roundtable, that the agreement was an extraordinary measure for extraordinary conditions that no longer should be applied.As of April, banks can withdraw 20 per cent of their placements.

The Vienna Agreement is an agreement which obliged banks to not reduce their level of placements in Serbia during 2009.

As of April 2010, banks will be able to withdraw 20 percent of placements in relation to the same period last year.

According to the Governor, Banks are not currently planning to take this opportunity to such an extent, although even if they did, it would not affect projected macroeconomic indicators. The Governor said that as of January 1, 2011, the Vienna Agreement shall cease to be valid.

“The possibility for banks to reduce placements by 20 percent will reduce the uncertainty of what will happen on May 1, 2011, which is the deadline for the arrangement with the IMF,” he said.

The Governor reiterated the fact that the Vienna treaty was necessary because unpaid loans amounted to EUR four billion of private debt, and that the possibility that banks would withdraw all of these funds would jeopardize the exchange rate and would affect inflation and other macroeconomic indicators.

Jelasic said that banks have enough capital and increased their exposure or volume of placements in 2009 by two percent. At this time, domestic banks capital adequacy is 19 percent, which is seven percentage points more than the minimum required by law.

This, according to the governor, means that at this moment banks have twice the capital than the level of unpaid claims or loans that are difficult to bill with a lag longer than 90 days.

In the first half of March, the Serbian government and the National Bank of Serbia (NBS) should agree on new measures aimed at the Serbian economy and citizens, State Secretary with the Finance Ministry Slobodan Ilic said.

"The government is focused on how to invest the loans, which will serve as a stimulant to both the economy and the citizens, in dinars instead of Euros," Ilic told reporters at NBS. He said that a complete package, not limited to the government measures, is currently being discussed with NBS.

Ilic said that if it is decided to focus only on investments in dinars, corrections will be needed to the already adopted government package of measures for 2010. Whether the proposal will be adopted depends not only on the state and NBS, but also on other business banks, Ilic explained.

The banks present at yesterday’s roundtable, including Banca Intesa, Procredit Bank, Vojđanska Bank (NBG Group), OTP, Hypo Alpe-Adria Bank, Marfin Bank, Alpha Bank, EFG Eurobank, and others stressed their commitment to the Serbian market over the long term.

These local subsidiaries continue to keep up dialogue with supervisors and government representatives, helping to put in place policies which will help divert future crises.