How Do I Get Paid (Methods of Payment)
Larger importers regularly receive goods under a short-term (about 3 months) supplier credit. Longer term financing may be sought for larger purchases but is difficult to obtain. The following instruments are used in Serbia for payments abroad: remittances, documentary collections, checks, and letters of credit. In 2007, U.S.-origin surety company, North American Sureties, opened an office in Serbia
Currently there are no credit rating agencies operating in Serbia.
How Does the Banking System Operate
During the 1990s, the banking sector was mismanaged. Prime banks were key to lending direct assistance to Milosevic, performing illegal transactions and transfers. By 2000, much of Serbia’s banking system was technically insolvent.
Today there are 35 commercial banks (down from 88 in early 2001) in Serbia, most of which are authorized for international banking operations. The banking sector has undergone considerable restructuring.
On November 11, 2005 the Serbian parliament adopted a new banking law, reaffirming the role of the National Bank of Serbia in supervising much of the financial sector. The Serbian Law on Banks provides the regulatory framework for the banking sector in the republic. The law determines the conditions and manner of establishment of a bank, supervision, and control of bank transactions, as well as the discontinuation of a bank. Supervisory authority is clearly vested to the central bank – National Bank of Serbia (NBS), to oversee the banking sector. USAID has provided active assistance to NBS to improve bank supervision and develop institutional capacity. The law requires that a buyer of more than 5% of a bank’s capital seek approval from the central bank and sets the required initial capital for a bank at EUR 10 million. The new law stipulated that banks are no longer to be run by a general manager but rather by a two-member executive board; introduced more responsibilities for auditors, and calls for setting up a risk management unit within every bank.
NBS is charged with: formulating monetary policy, credit control, managing foreign exchange transactions, bank supervision, and supervision of insurance companies and voluntary pension funds. The dinar is the legal tender in Serbia. NBS is independent from the government but reports to the Parliamentary. In early 2004, Radovan Jelasic was appointed Central Bank Governor for a five-year term.
The National Bank of Serbia is pursuing a strict monetary policy with the dual objectives of controlling inflation and stabilizing the exchange rate. The dinar has appreciated substantially over the past year; causing a number of complaints from exporters that the dinar is overvalued. The Bank’s policies over the past five years have resulted in renewed confidence in both the dinar and the banking system. NBS is expected to stay on the course on anti-inflationary policies. The NBS’s Monetary Board has gradually reduced the key policy rate from near 24% in 2006 to 10.75% in 2007. In 2007, yearly inflation was 10.1% but the Bank’s forecast is for this rate to drop to 6.0% in 2008.
According to banking legislation, foreign legal entities and private individuals may establish new banks or make investments in existing banks provided that the condition of reciprocity is met. However, in January 2008, Finance Minister Mirko Cvetkovic said that Serbia should not grant new greenfield licenses to foreign banks until the remaining state owned banks are privatized, warning that allowing foreign banks to enter the market in this way would make the remaining state run banks less attractive to potential buyers. Nevertheless, on February 3, 2008, NBS said it gave “preliminary approval” for Bank of Moscow to set up a Serbian subsidiary, adding that the bank has two months to apply for an operating license and to provide EUR 10 million in founding capital.
Nearly 90% of the banking sector is now foreign controlled, which has primarily occurred through the acquisitions of existing banks and through licenses. One or more foreign banks may, alone or with other banks, decide to establish a representative office in Serbia, provided that the condition of reciprocity is met, for the purpose of market research in banking and financing, or for the purpose of advertising, promotion and representation. A representative office does not have the status of a legal entity and is not allowed to engage in banking operations. The establisher guarantees all the obligations of the representative office. Permission to operate is granted to representative offices of foreign banks by NBS, which maintains the Register of Representative Offices of Foreign Banks and issues permits for their registration. Currently there are six representative offices operating in Serbia.
Out of the 35 banks in the Serbian market, 21 are foreign owned, 9 are domestic private banks, and the remaining 5 are majority owned by the state. Over the past three years, the total number of banks’ branch offices across Serbia has grown from 1,465 to 2,033. Foreign banks present in the market include: Societe Generale (France), Credit Agricole (France), Raiffeisen Bank (Austria), Erste Bank, HVB- (Italy-Austria-Germany), the National Bank of Greece, Pireus Bank, Laiki Bank, Alpha Bank (Greece), Hypo Alpe Adria (Austria), and Banca Intesa, (Italy). AKB "Euroaxis Banka" - Moskva, BNP Paribas - Paris, Deutsche Bank aktiengesellschaft - Frankfutrt, LHB Internationale Handelsbank a.g. - Frankfurt, West LB AG- Diseldorf, Commerzbank AG – Frankfurt are maintaining their representative offices in Serbia. The largest banking group in the world, U.S. Citibank, opened a representative office in Serbia in December of 2006.
Foreign-Exchange Controls
The dinar is the legal tender within the Republic of Serbia. The dinar floats, although the NBS manages the float to avoid excessive volatility. There are no legislative restrictions limiting the ability of a local company to pay for imported goods or services. Companies in Serbia are allowed to hold a foreign exchange account in one or more of the banks authorized for international banking operations. These accounts may be used to make or receive payments in foreign currency. Foreign exchange may not be purchased for speculative purposes. However, Forex purchases are permitted at any time to pay for imports, evidenced by presenting a contract or invoice. Repatriation of proceeds from exports should be made within 60 days from the day of export. Currently, there is no lack of foreign exchange in Serbia. At the end of 2007, the NBS’ foreign exchange reserves amounted to more than $10.5 billion, which is 12 times more than in 2001.
U.S. Banks and Local Correspondent Banks
Komercijalna Banka, a state-controlled bank, has the best correspondent relationship with U.S. banks (Citibank, JP Morgan/Chase, American Express, etc). In December 2006 U.S. Citibank has opened a representative office in Serbia and is mostly interested in corporate cross-border financing.
Project Financing
European Bank for Reconstruction & Development (EBRD)
The EBRD has initiated an active program in Serbia providing assistance in the road, rail, and civil aviation sectors. EBRD has also provided municipal loans to Belgrade as well as developed a working capital fund for companies soon to be privatized. EBRD assisted with the establishment of ProCredit Bank and maintains an equity position in Eksim banka, which was purchased by HVB. In March 2006, EBRD became a major shareholder in government owned Komercijalna Banka by purchasing a 25% share for EUR 70 million. Following this acquisition, in September the EBRD acquired 25% of Cacanska Banka.
Contact Information in Belgrade:
Resident Rep: Ms. Hildegard Gacek
Bulevar Zorana Djindjica 64A, 5th Floor
11070 Novi Beograd, Serbia
Tel: +381 11 212 0529;
Fax: +381 11 212 0534
Web site: www.ebrd.com
Overseas Private Investment Corporation (OPIC):
OPIC is semi-independent U.S. Government agency that promotes growth in developing countries by encouraging U.S. private investment. OPIC’s key programs are its loan guarantees, direct loans and political risk insurance. Serbia became eligible for OPIC programs in July 2001. OPIC also established the Southeast Europe Equity Investment Fund I and II that is managed by Bedminster Capital Management. This fund is capitalized at $150 million. The fund has done two contracts in Serbia.
Contact: OPIC
1100 New York Ave, N.W.
Washington, D.C. 20572
Tel: (202) 336-9700
Fax: (202) 408-5155
Web site: www.opic.gov
Trade & Development Agency (TDA):
TDA is an independent U.S. government agency, which promotes U.S. exports for major development projects. TDA funds feasibility studies, orientation visits, training programs, and other project planning services related to U.S. exports. Contracts funded by TDA grants must be awarded to U.S. companies. U.S. involvement in project planning helps position potential U.S. suppliers at the project implementation stage. TDA has been active in Serbia with projects in energy, transportation, airport, and telecommunications (IT) sectors.
Contact: Ms. Jamie Merriman
Country Manager, Europe & Eurasia
U.S. Trade & Development Agency
1000 Wilson Blvd, Suite 1600
Arlington, VA22209
Tel.: +1-703-875-4357
Fax: +1-703-875-4009
E-mail: jmerriman@ustda.gov
Web site: www.tda.gov
Web Resources
Export-Import Bank of the United States: http://www.exim.gov
Country Limitation Schedule: http://www.exim.gov/tools/country/country_limits.html
OPIC: http://www.opic.gov
Trade and Development Agency: http://www.tda.gov/
SBA's Office of International Trade: http://www.sba.gov/oit/
USDA Commodity Credit Corporation: http://www.fsa.usda.gov/ccc/default.htm
U.S. Agency for International Development: http://www.usaid.gov
National Bank of Serbia: www.nbs.yu
European Bank for Reconstruction and Development: http://www.ebrd.com/