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Serbian Banking Law Reform Sees Major Overhaul
Belgrade, Serbia - In a major move to strengthen the country’s financial sector, the Serbian government has introduced significant reforms to its banking law. The new legislation aims to enhance internal controls and governance at banks, as well as increase transparency and accountability.
Time-Bound Plans for Bank Reform
The new law requires banks to adopt a time-bound plan by end-2004 to strengthen their internal controls and governance structures. This includes:
- Strengthening on-site and off-site supervision
- Strictly enforcing existing regulations
Minimum Capital Requirement
Under the new legislation, banks that do not meet the minimum capital requirement of £10 million will have their licenses withdrawn by end-2004, unless they are recapitalized by reputable investors with banking experience or merge with another bank.
Financial Reporting Standards
All banks, insurance companies, and leasing companies in Serbia will be required to publish their financial results in accordance with International Accounting Standards (IAS) by the end of June 2005.
EU Directives Inspire Reform
The Serbian government has drawn heavily from EU banking-related directives, including the EU Banking Directive and the EU Financial Conglomerates Directive. However, instead of adopting a “copy and paste” approach, Serbia has carefully blended these directives with internal banking legislation from more advanced countries.
Banking Legislation a Model for Developing Countries
The new Serbian Banking Law is seen as a model for developing countries seeking to establish robust banking systems. The law’s approach to incorporating EU directives with domestic legislation from advanced countries provides a practical solution for countries looking to harmonize their banking regulations with international standards.
Strengthening Bank Ownership and Control
The new law also addresses issues of indirect ownership and real influence, introducing the concept of “qualifying holdings” to ensure that banks are owned and controlled by entities that can demonstrate their financial stability and integrity. The NBS is now empowered to scrutinize persons who could exert significant influence over a bank without formal share ownership or controlling rights.
Highlights of the New Serbian Banking Legislation
- Bank ownership and control: clearer criteria for ownership and control of banks, including the concept of “qualifying holdings” and stricter supervision of indirect ownership and real influence.
- Minimum capital requirement: banks that do not meet the minimum capital requirement of £10 million will have their licenses withdrawn by end-2004, unless they are recapitalized or merge with another bank.
- Financial reporting standards: all banks, insurance companies, and leasing companies in Serbia will be required to publish their financial results in accordance with International Accounting Standards (IAS) by the end of June 2005.
The new Serbian Banking Law is a significant step towards establishing a robust and transparent banking system in the country. It sets a high standard for other developing countries seeking to strengthen their own financial sectors.