22 March 2007
Macedonian Banking System and Changes in Regulation
Center for Research and Policy Making, Skopje, Macedonia
Programme Director
Zhidas
Daskalovski
+389 705 33992
http://www.crpm.org.mk
Occasional Paper No. 11
After 15 years of monetary independence we are about to witness the entry of a well-known European commercial bank on the Macedonian market. With the acquisition of Ohridska Banka by Société Générale, CRPM believes that a certain era of mediocre banking practices applied by the Macedonian banks (as well as foreign banks with ‘Macedonian corporate culture’) is coming to an end. CRPM turns your attention to the draft Law on the Macedonian Banking System. This legal framework is expected to provide for further liberalisation of the financial market in the country, improvement of the legal and regulatory environment, and banking supervision. Reforms in all these areas can be considered as crucial to increase the efficiency and existing confidence in the local banking sector.
Yet within the draft legislation there are certain technical issues that can and should be improved. For example, the proposed concentration of power into a single person - the Governor of the National Bank - can be considered one of the biggest potential problems of the draft legislation. An additional problematic aspect of the draft law is the criteria for deciding who can be a shareholder or ‘person having special rights and responsibilities’ within the bank. These persons should under the proposed new law be of integrity i.e. honest, competent, and industrious (hard working). However, the decision about who fulfils such personal characteristics is left to the discretion of the Governor and thus prone to subjectivity. Despite some shortcomings the proposed reforms can be considered as a significant step forward in improving the Macedonian banking system.