Mandatory reserves in RSD increased from 20% to 40% - referential interest rate kept at 17.75%

- The Monetary Board of the National Bank of Serbia (NBS) has decided today (December 8, 2008) to keep the referential interest rate at 17.75% and to increase mandatory reserves in RSD, which are kept by business banks in the central bank, from 20% to 40% - NBS announced.

According to the announcement, by changing the rate of Dinar foreign currency reserves, NBS is going to "return additional foreign currency liquidity to the banks and, at the same time, it will withdraw excess Dinars from the circulation in order to have positive influence on stability of prices".

The decision about the change in the previous rate of the calculated mandatory reserves in EUR that are kept in RSD was made following the examination of relevant trends in the global financial market and analysis of possible effects on local financial system.

According to the changes in the Decision about the banks' mandatory reserves in NBS, the basis for calculation of Dinar and foreign currency mandatory reserves, which comprise obligations based on deposits and loans received from abroad, as well as foreign currency subordinated obligations, is the average daily accounting balance of these Dinar and foreign currency obligations in September 2008.

That method of calculation of mandatory reserves will be applied, as people from NBS point out, starting from the calculation period December 18, 2008 - January 17, 2009, until the calculation period May 18, 2009 - June 17, 2009.

The new method of calculation of mandatory reserves will contribute to the fact that surplus liberated foreign currency liquidity will stay in the banking sector of Serbia instead of being used for repayment of banks' foreign debts or for reduction of deposits from abroad.

NBS has also made the decision, which will be put in effect on January 31st, 2009, to reduce the net open position of banks from current 20 to only 10%, in order for the banks to avoid risk from the exchange rate fluctuations.

Narodna banka Srbije Beograd

referential interest rate