Download NIN Marinos Vathis Intervju

BUSINESS LEADER
MARINOS VATHIS, CEO, VOJVODJANSKA BANKA
CHALLENGES IN THE FINANCIAL SECTOR
Market will
define number
of banks
S
ince 2008 banking system was
changed. It all started with the collapse
of the US investment bank Lehman
Brothers following the near-collapse of its
competitor Bear Stearns. The whole financial
system in the EU was deeply challenged,
however managed to avoid collapse of any
systematic bank.
We witnessed significant deposit outflows
from banks in many countries in Europe;
however central banks, regulators and
international financial institutions played
a key role and promptly acted to support
international banking groups to maintain
their footprint in all countries where they
have subsidiaries present. Yet, crisis left two
major legacies, deleveraging and high share
of non-performing loans. This changed
the agenda and mindset in banks with regulations and risk becoming the predominant
factors.
Efficiency is of crucial importance, since
in a market with slow rates of growth, we
have to put emphasis on cost reduction in
order to stay profitable and provide the
best possible products and services to
our clients. Innovation and technological
improvements are one of the key pillars
and only the banks who follow this path
will survive. In Serbia, to my opinion we
have four main challenges in the financial
sector: low growth, non-performing loans,
low interest rates and consolidation.
Economic activity in Serbia during 2015
recorded marginal growth, however the
most recent projection from the International
Monetary Fund for Serbia’s GDP growth for
2016 of 2.5% is highly encouraging. On the
other hand the non-performing loans ratio is
among the highest levels in the South East
and Central East Europe (excluding Ukraine).
Accordingly, banks became more careful
when approving lending facilities, which
slowed down the level rate of lending expansion. This lead to excess liquidity, which
further has two consequences: low interest
rates and a more flexible risk approach.
For example, Vojvodjanska Banka is not
Marinos Vathis: The most recent projection from the IMF for Serbia’s GDP growth for 2016 of 2.5
percent is highly encouraging
influenced with new developments, we have
a strict risk policy and a strong team that
analyses and understands the operations of
our diverse clients, so as to avoid problems
or not to encumber the client because of
the impossibility to repay the loan. As to the
interest rates environment, bear in mind that
the level of interest rates is not only under
the unilateral influence of banks; the interest
rates on loans affect a series of positive and
negative factors - external macroeconomic
and internal ones from the banking sector.
Positive factors include GDP growth, country
credit rating, decrease of the key interest
rate both by the NBS in Serbia and by the
ECB at the European market followed by the
additional cuts of EURIBOR and LIBOR at the
interbank market.
Low growth,
non-performing loans,
low interest rates and
consolidation are the
four main challenges
for Serbia’s financial
sector
On the other hand there are negative
factors that could influence interest rates
of being high or going high, such as high
level of public debt, current account deficit
and problem of NPLs. Thus, only in case of
having NPLs persistently high for a certain
period of time we could face a reversible
situation.
Regarding the consolidation in the sector,
with this size of a market one would expect
a smaller number of banks. However, history
has shown that a final number will eventually be determined by a self-adjustment of
a market itself, and the market will finally
determine should it have five, ten or 15
banks present.
The mere fact that banks exist for over
2,000 years shows us clearly how important
role they play. But banks have to adjust.
They need to understand how market
operates, to be in ability to control the
risk, to be in place to offer to clients and
to be financially strong to place customer
deposits. Banks have to have the strength
and structure which will guaranty that
clients’ money is safe. We are in a good
position to say that all these exist in the
banking sector in Serbia.