Serbia’s outgoing national bank governor, Radovan Jelasic, yesterday brushed off immediate concerns over the impact of Greece’s debt woes on the country’s banking system but admitted that worries over the crisis continued to weigh on the Serbian public.
Speaking as an IMF delegation arrived in Belgrade ahead of further talks about its E2.9 billion stand-by loan agreement, Jelasic said that with 16% of banking market share in Serbia held by four Greek banks alone, the threat of a spill-over from the debt crisis remains a big concern, despite provisions of E10 billion within the bailout targeted at Greece’s banks.
He called for more concrete action following the E110 billion European Union and IMF-led bailout announced this week. “The devil is in the detail,” Jelasic said.
“Regardless how strong banks in Serbia are from standpoint of liquidity capital, news from Greece are making headlines, and depositors are concerned,” he told Emerging Markets.
He insisted he was “positive” following the bailout announcement, and that Serbia had a “tested contingency plan” in place after “learning [its] lesson” following a run on the banks in late 2008, when 16% of deposits were withdrawn.
However analysts have warned that Serbia could be in for further pain as a result of Greece’s troubles. EBRD president Thomas Mirow also highlighted last week a “potential risk” in countries with a big Greek presence in the banking system, including Serbia, Bulgaria and Romania.
Alpha Bank Serbia, Eurobank EFG, Piraeus Bank and Vojvodanska Banka are Serbia’s four Greek majority-owned lenders. Their Greek parent banks all had their financial strength ratings downgraded to D from C- by rating agency Moody’s last week. Analysts as Deutsche Bank this week said it “would be unreasonable to expect the same level of commitment of Greek parent banks as before the crisis”.
Jelasic acknowledged that Serbia’s banking system was also prey to other potential setbacks, such as inflation now running at 4.7% and a wage and pension freeze. Foreign banks, which control about 70% of the banking system, are also set to cut back their exposure to Serbia by 20%, with the approval of the IMF. But Jelasic said this would allow “hot air” to come out of the system as parent banks were maintaining artificially high lending exposures as part of the Vienna Initiative.
Jelasic, who will leave office in mid-June, pointed to Serbia’s drawdown in March of only E180 million, or half of the IMF funds available for disbursement at the time, as a further sign of resilience. He said only half was drawn “because our macroeconomc adjustments were much bigger, as the current account deficit decreased from E6.1 billion in 2008 to E1.75 billion in 2009.”
Jelasic also criticized “neighbouring countries” for “borrowing like crazy” at what he described as very high rates, adding that Serbia was discussing with the IMF how to make its “total envelope of potential borrowing smaller.”
Talks with the IMF for the fourth revision to the stand-by arrangement signed last year begin next week and will begin next week.