The latest measures of the NBS – tightening the conditions for the granting of loans – offended the government and the banks. Did you convince them in the validity of your moves?
We at the National bank don’t see the Decision for the preservation and the strengthening of the stability of the financial system as a decision to tighten the conditions for the granting of loans, because with it nothing changes for the reasonable and careful banks and debtors.
The decision that would “tighten”, as you say it, the conditions for the granting of loans would be suitable in the situation of preventing of a large credit expansion and the problems that could come out of it, but the fear of that in our country at this moment is not real.
Our decision is directed towards the preservation of quality and security if the placements of banks and the banking system in Serbia as a whole.
It doesn’t tighten the conditions of granting, it just complicates the risky granting and that should not only be the interest of the supervisor, or NBS, but also of the banks, their clients and all the tax payers. Because all of those tax payers, citizens, usually pay the price of the granting that is not responsible enough. This decision is well thought through and right, and within the international framework relatively mild. It serves as a prevention, because it prevents the risky borrowing of money, and also as a warning, because it sends a clear message to the banks and loan users that we have a period of stability ahead of us where it will be normal for the loans to be approved in dinars without the currency clause, and on long-terms.
I think that our decision shouldn’t have made anyone angry, but on the contrary, it should have caused an approval of all of those who understand problems with which the financial system of our country is facing and who expect measures that are in the long-term interest of the stability and the development of our country.
I especially think that this decision of the NBS is unsuitable for any reason for the banks, because it protects the quality of the balancing sheet of every bank which wpuld, by definition, have to be the interest of their stakeholders too.
Do you (also) think that the banks interests are too high compared to the objective possibilities of the economy and the citizens on one side, and the level of risk on the other?
I believethere is room for the lowering of the interests, but we need to have in mind that we first need to secure preconditions for that. I’ll name a few: low inflation, the credibility of the monetary and fiscal politics, fall of the credit rating of the country, the quality of the collateral and other guarantees, a healthy economic growth which opens new jobs and secures the gradual growth of the debtors’ incomes, caution in terms of the granting of loans and alike.
In this context the Decision on the measures for the preservation and strengthening of the financial system of NBS enables the growth of the security within the system and represents one of the parameters which create the preconditions for the fall of the interest rates. When you limit the amount of the loan to the value of the collateral, then, as by rule, will the monthly rate be lower because of the lower total debt and the potentially lower interest, because it is a given that a loan which is better secured by the value of the collateral has a lower interest rate.
Your estimate is that in the second part of the year the fall of the inflation will surely happen. Will that be a temporary or a permanent state?
I believe that in the next few months the inflation will be falling until it enters the corridor of the inflation goal, which was, just to remind you, in the year 2011 4,5 plus/minus 1,5 percent, i.e. from three to six percent. For 2012 the goal is the inflation of four plus/minus 1,5 percent, so from 2,5 to 5,5 percent.
I can say that the rate of the fall of the inflation is a little quicker than our central projection for this part of the year, and that we expect that in the third trimester the inflation will be zero percent.
Moreover, it is possible that in some months, looking at in an isolated way, the inflation could be even negative, i.e. there could be a deflation, which we had last time in December 2009.
Seen yearly, or comparing a month of this year with the same month of the year before, the inflation in April reached its maximum of 14,7 percent. In May it was 13,4 , and in Jun 12,7 percent and I expect that this trend will continue and strengthen until August.
If we look at last month alone, we had a decrease of 0,3 percent of consumer prices. This data confirms our expectation and actually talks of the quicker fall of the inflation compared to the central projection from out last Report on inflation.
Can you say how big will the inflation be until the end of Your term?
I think that the inflation will be in accordance with the agreement on the targeting of the inflation which was made between the NBS and the Government in 2008 , which defined the inflation goals for 2011 and 2012. So, I expect that the inflation in the next period will be on the level of low one digit amounts close to the levels of inflation in the Euro zone.