Public Statement

On 15 October 2008, representatives of the insurance industry and fund industry in Serbia met with representatives of the Ministry of Finance and the National Bank of Serbia in the Ministry of Finance premises.

The objective of the meeting was to identify in direct discussion the potential short-term and/or long-term influences of the global financial crisis on the financial sector in Serbia, and to agree on potential measures that competent governmental institutions may undertake in order to neutralize any damage.

The current situation in the two financial areas was overviewed in a very constructive dialogue. It was agreed it would be necessary to maximally protect and preserve confidence in the banking sector as the generator of general trust in all financial actors, and also that the insurance industry in Serbia was not directly jeopardized by the global financial crisis. Certain phenomena like hesitating or postponing the decision to buy new life insurance policies have been noticed over the past few days, but there have been no withdrawal of funds related with the existing ones. It was noted that the crisis would reflect on the functioning of the fund industry, primarily in a lower number of foreign investors coming to Serbia. Furthermore, it was concluded that the pension funds have not suffered any damage due to the global financial crisis, while the biggest current problem of the fund industry was liquidity.

On 15 October 2008, representatives of the insurance industry and fund industry in Serbia met with representatives of the Ministry of Finance and the National Bank of Serbia in the Ministry of Finance premises.

The objective of the meeting was to identify in direct discussion the potential short-term and/or long-term influences of the global financial crisis on the financial sector in Serbia, and to agree on potential measures that competent governmental institutions may undertake in order to neutralize any damage.

The current situation in the two financial areas was overviewed in a very constructive dialogue. It was agreed it would be necessary to maximally protect and preserve confidence in the banking sector as the generator of general trust in all financial actors, and also that the insurance industry in Serbia was not directly jeopardized by the global financial crisis. Certain phenomena like hesitating or postponing the decision to buy new life insurance policies have been noticed over the past few days, but there have been no withdrawal of funds related with the existing ones. It was noted that the crisis would reflect on the functioning of the fund industry, primarily in a lower number of foreign investors coming to Serbia. Furthermore, it was concluded that the pension funds have not suffered any damage due to the global financial crisis, while the biggest current problem of the fund industry was liquidity.

Many proposals were put forward with regard to measures that the competent institutions may take in order to neutralize the problems identified. It was highlighted that the global financial crisis should be seen as a force majeure with all the consequences that this treatment entails in the area of taxation. The participants underlined that priority measures need to be adopted that would give results in the short-run, primarily in order to maintain the trust in the fund industry and preserve its liquidity.

Furthermore, the participants stressed that a special Intervention Fund (similar to the one in Croatia), worth some EUR10 million, needs to be formed in order to enhance the trust of unitholders that their stakes will not be threatened by lack of liquidity of investment funds. A special Guarantee Fund also should be established to guarantee stakes that the unitholders have placed into investment funds for a longer period of time, 3 or 5 years for instance. Legislation needs to be liberalized to a certain degree in order to increase liquidity by loosening constraints related with investing activities of investment funds. Tax incentives should be introduced to boost pension insurance and purchase of life insurance policies. Fluctuation band on the stock exchange should be tightened from the current +/- 20% to +/- 10% for shares on the continuous market and to +/- 5% for shares listed on the A Listing of the stock exchange.

Steps that need to be taken swiftly by representatives of the insurance industry and the fund industry were agreed at the meeting. Their suggestions will be submitted to the Ministry of Finance in order to streamline them and put them under consideration of the relevant institutions.

It was also agreed that permanent communication between the Association of Insurers and a Workgroup needs to be maintained. The Workgroup will be formed by representatives of the fund industry with the Ministry of Finance and the NBS in order to monitor developments in the domestic insurance industry and fund industry and to identify in a timely manner potential problems, as well as measures that the competent institutions may undertake in order to neutralize them.