The NBS has hosted  a meeting with bank representatives to discuss provisions of the Decision on Measures for Safeguarding and Strengthening Stability of the Financial System to come into effect on 30 June 2011.

A focus was placed on the need for banks to design and supply dinar loans, notably household, indexed to the key policy rate or consumer price growth. Present at the meeting were representatives of the Ministry of Environment, Mining and Spatial Planning, the National Mortgage Insurance Corporation and the Construction Directorate of the Republic of Serbia.

Vice-Governors Mira Erić-Jović and Bojan Marković highlighted that the NBS adopted its set of measures to control and mitigate risks in the financial system more efficiently, as well as to encourage a gradual shift in household lending towards dinars without foreign currency clause indexation.

As most foreign currency clause indexed loans are approved to households that receive income in dinars, measures are aimed at natural persons. Furthermore, the NBS introduced a ban on loan indexation in any currency but the euro. It also prescribed mandatory downpayment or deposit placement of 30% for non-housing, euro-indexed loans.

Besides, banks may approve euro-indexed mortgage loans provided that the loan amount does not exceed 80% of the property mortgaged. The two latter provisions do not apply to dinar non-indexed loans.

NBS representatives underscored that the Decision does not stipulate minimum participation of the loan beneficiary of 20% as the criterion of loan-to-value ratio does not apply to dinar loans.

In case of indexed loans, the beneficiary may fulfil the 20% criterion by pledging other eligible property as well. It should be noted that these measures are much milder than rules adopted by other countries to mitigate systemic risk. In view of this, the NBS Decision does not contravene the Government’s Decree on Subsidising of Housing Loans.

Data of the National Mortgage Insurance Corporation on insured housing loans were also presented at the meeting. According to these data, the amount of insured loans, subsidised under the Government’s Programme, declined by 57% in Q1 2011 year-on-year. A decline in commercial housing loans insured by the Corporation was much smaller – 16%, which was by no means prompted by any NBS decision.