At yesterday’s extraordinary meeting, the National Bank of Serbia (NBS) Executive Board adopted the Decision on Temporary Measure Regarding the Calculation of Bank Capital.
The new decision gives banks a possibility to mitigate the negative effects of the change in securities’ prices on capital, the change arising from upheavals in global financial markets, according to the NBS website.
The temporary measure, as said, relates to debt securities issued by the Republic of Serbia, autonomous provinces or local self-government units of the Republic of Serbia, which are measured at fair value through other comprehensive income in line with IFRS 9.
In addition to cushioning the impact of the change in securities’ prices on bank capital, with the said measure the NBS aims to:
– encourage banks to keep the purchased RS securities in their portfolios;
– open room for new bank investments in these securities; and
– help unlock banks’ capacity to continue with lending, particularly in the corporate segment, with a view to sustaining the domestic economic activity.
This way, according to the bank’s website, the NBS seeks to strike a balance between monetary tightening, needed to contain the effects of inflationary pressures in the global and domestic markets, and bolstering bank lending for continued support to the real sector and further economic growth.
The regulation enables banks to exclude from the calculation of CET 1 capital until the end of the year 70% of the net unrealized losses and gains from the valuation of the said debt instruments.
Banks can apply the temporary measure from June 30 to December 31, 2022.
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