Financial intermediation in the former Yugoslav Republic of Macedonia showed an upward trend in the period 2002-07, but has remained almost
fl at since. Measured by the share of total banking
system assets in GDP, fi nancial intermediation stood at about 66% in 2009, only slightly higher compared with 2007 (63.1%), while in 2002 it had stood at 38% (see Table 12).25 Compared with the EU countries, only Romania has a lower level of fi nancial intermediation.
Banks in the former Yugoslav Republic of Macedonia focus on traditional banking activities, with credit to the private sector playing a predominant role. The share in total assets of claims on the non-bank corporate sector and households increased steadily until 2008, reaching 66.7%, but declined in 2009 (to 59.3%). Claims on households increased at a faster pace, representing 40% of total claims to the private sector at the end of 2009. They also proved to be more resilient in the recent downturn. External assets represent only 10.2% of total assets and their share recorded a moderate increase in 2009 compared with 2008. The share of claims on domestic MFIs has experienced some volatility over recent years, but remained low at 8.7% in 2009. Lastly, claims on the general government sector have declined in the last couple of years.
According to the EBRD a score of “3” means that a country 24
has achieved substantial progress in developing the capacity for effective prudential supervision, including procedures for the resolution of bank insolvencies, and in establishing hardened budget constraints on banks by eliminating preferential access to concessionary refi nancing from the central bank.
Since 2009 banks have disclosed their fi nancial statements in 25
accordance with International Financial Reporting Standards (IFRS). This has prompted some changes to the composition and structure of the positions in this table.
Table 11 The former Yugoslav Republic of Macedonia: structure of the banking sector
2002 2003 2004 2005 2006 2007 2008 2009
EBRD index of banking sector reform 1) 2.7 2.7 2.7 2.7 2.7 2.7 3.0 3.0
Number of banks (foreign-owned) 20 (7) 21 (8) 21 (8) 20 (8) 19 (8) 19 (11) 18 (14) 18 (14) Number of banks per 100,000 inhabitants 1.04 0.92 0.83 0.77 0.83 0.94 0.89 0.89 Assets of private banks Percentage of total assets 98.0 98.2 98.1 98.4 98.4 98.6 98.8 98.6 Assets of foreign banks Percentage of total assets 44.0 47.0 47.3 51.3 53.2 85.9 93.1 93.3 Assets of the three largest banks Percentage of total assets 64.0 66.9 66.8 66.1 66.1 67.1 66.1 67.5 Herfi ndahl-Hirschmann index 2) 1,667 1,842 1,685 1,607 1,595 1,625 1,579 1,637
Sources: EBRD and NBRM.
1) Reform progress ranges from 1 (little progress beyond the establishment of a two-tier system) to 4+ (standards and performance norms of advanced industrial economies).
2) Sum of the squared asset shares of individual banks. The index ranges between 0 and 10,000. Below 1,000 it suggests a non-concentrated sector; above 1,800 it is highly concentrated.
Y U G O S L A V R E P U B L I C O F M A C E D O N I A
Table 12 The former Yugoslav Republic of Macedonia: asset structure of the banking sector 2002 2003 2004 2005 2006 2007 2008 2009
Commercial bank (net) assets Percentage of GDP 1) 38.2 41.7 44.5 49.4 56.4 63.1 62.9 66.0
Total domestic claims Percentage of total assets 56.4 57.1 59.1 63.2 67.5 73.7 80.8 72.6 Claims on domestic MFIs Percentage of total assets 6.3 9.0 7.6 11.1 10.7 13.9 10.0 8.7 Claims on domestic non-banks Percentage of total assets 50.1 48.1 51.4 52.1 56.8 59.9 70.8 63.9
of which: group impairment
(general provisions for credit risk) Percentage of total assets … … … -0.3
of which:
Claims on general government Percentage of total assets 8.6 6.0 5.9 5.0 7.4 5.6 3.8 4.8 Claims on domestic households and enterprises Percentage of total assets 41.5 42.1 45.5 47.1 49.4 53.9 66.7 59.3
of which:
Claims on domestic enterprises Percentage of total assets 35.6 33.7 33.5 32.7 32.6 33.4 40.6 35.4 Claims on domestic households Percentage of total assets 5.9 8.4 12.0 14.4 16.8 20.5 26.0 23.9 Money market fund shares Percentage of total assets
External assets Percentage of total assets 31.4 28.2 28.1 24.2 20.6 15.5 8.8 10.2 Claims on domestic households
Percentage of total claims
on households and enterprises 14.3 19.9 26.5 30.6 34.0 38.1 39.1 40.3 Loans-to-claims ratio for domestic nonbanks 79.8 81.8 86.1 86.8 85.1 88.2 92.6 91.6
of which:
Loans-to-claims ratio for general government 18.6 0.7 7.9 2.6 3.0 3.1 4.6 1.0 Loans-to-claims ratio for domestic households
and enterprises 92.4 93.2 96.3 95.8 97.4 97.6 98.0 99.0
Sources: NBRM and State Statistical Offi ce.
Note: Since 2009 banks have disclosed their fi nancial statements in accordance with IFRS, which has led to changes in the table’s composition and structure.
1) For 2009, estimated GDP has been used.
Table 13 The former Yugoslav Republic of Macedonia: liability structure of the banking sector 2002 2003 2004 2005 2006 2007 2008 2009
Deposits of MFIs Percentage of total liabilities 2.7 1.8 0.9 1.6 2.0 2.0 2.3 0.6 Deposits of domestic non-banks Percentage of total liabilities 57.8 64.0 67.1 66.8 68.2 70.0 70.4 71.5
of which:
Deposits of general government Percentage of total liabilities 2.8 2.1 1.4 1.2 1.0 0.6 0.9 0.5 Deposits of households and enterprises Percentage of total liabilities 55.1 61.8 65.6 65.5 67.2 69.4 69.5 71.1 Money market fund shares Percentage of total liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt securities issued Percentage of total liabilities 0.0 0.0 0.0 0.0 0.0 0.1 0.4 0.3 Capital and reserves Percentage of total liabilities 20.7 19.1 17.5 15.9 13.3 11.4 11.5 11.4 External liabilities Percentage of total liabilities 12.8 9.3 8.5 10.2 9.7 10.3 9.4 10.6
of which:
Parent entities non capital instruments (deposits, loans, subordinated and hybrid
capital instruments) … … … … 39.5 40.5 51.6 60.1
Remaining liabilities (provisions for off-balance sheet liabilities, subordinated and hybrid capital
instruments and other liabilities) Percentage of total liabilities 3.4 2.6 3.6 3.1 4.0 3.3 3.4 2.6 Remaining liabilities
(short-term borowings up to one year) Percentage of total liabilities 1.0 1.8 0.2 0.1 0.1 0.1 0.3 0.3 Remaining liabilities
(long-term borrowings over one year) Percentage of total liabilities 1.6 1.4 2.2 2.3 2.7 2.7 2.3 2.7
Memorandum items:
Domestic non-banks’ claim-to-deposit ratio 89.8 81.8 83.4 84.1 88.6 90.3 102.7 89.3 General government’s claim-to-deposit ratio 322.0 303.6 450.3 433.0 777.5 914.9 430.7 1,010.1 Households’ & Enterprises’ claim-to-deposit ratio 78.1 74.2 75.4 77.5 78.2 82.1 98.0 83.5 Source: NBRM.
The banking sector has a solid funding structure. Domestic non-bank deposits represented 71.1% of total liabilities at the end of December 2009, and capital and reserves 11.4% (see Table 13). External liabilities stood at 10.6% of total liabilities, almost unchanged since 2007. Non- equity instruments (e.g. deposits, subordinated and hybrid capital instruments, etc.) extended by parent banks represented 60% of external liabilities, up from 41% in 2007. Hence, the degree of dependence on external and, in particular, parent funding remains limited.