Macedonia’s Financial System Faces Challenges with Mandatory Second Pension Pillar

Introduction

The implementation of a mandatory second pension pillar in Macedonia has raised concerns about the country’s financial system, particularly its ability to finance transition deficits and create financial instruments for investment.

Challenges Facing the Macedonian Banking System

• The Macedonian banking system is one of the smallest in Central and Eastern Europe, with assets amounting to only 39% of GDP.
• Despite having a high number of banks (21) and savings houses (17), the system lacks depth and diversity.
• The largest three banks account for more than 60% of total bank assets.

Challenges Implementing the Mandatory Second Pension Pillar

• The Macedonian Development Bank, which is state-owned and does not attract deposits from the public, has a limited capacity to provide financing for the transition.
• The country’s insurance companies are also facing challenges, with only five operating in the market, including one composite insurer providing both life and non-life insurance.

Government Efforts to Address Challenges

• The Macedonian government is working on a new regulatory framework for savings houses.
• Measures have been introduced to improve the banking sector’s capital adequacy.

Expert Opinion

• “Macedonia’s financial system needs to be strengthened to support the country’s economic growth and development,” said an international expert. “The implementation of the mandatory second pension pillar provides an opportunity for the country to modernize its financial system and improve its competitiveness.”

Conclusion

Macedonia’s financial system is facing significant challenges with the implementation of a mandatory second pension pillar. The government and financial institutions need to work together to create financial instruments that can invest in assets and generate returns to ensure the sustainability of the pension system.