ECONOMY

Serbia’s concern for dinar

BELGRADE (Reuters) – Serbia’s central bank said late on Thursday it had stepped up forex risk monitoring for banks to prevent them from speculating on the foreign exchange market and from building up too large hard currency positions. The move came after the country, facing growing budget needs, a delay in foreign funding and underperforming industries, cut its 2003 growth forecast to 3.5 percent from 5.0 percent a week after Prime Minister Zoran Djindjic was shot dead in Belgrade. According to a new set of rules for the foreign exchange market, a forex risk indicator is capped at 30 percent of banks’ capital, National Bank Vice Governor Radovan Jelasic told reporters on the sidelines of a bankers’ meeting. «This indicator by no means shows that a bank is doing badly or that it is insolvent or illiquid,» Jelasic said after an internal list of non-complying banks appeared on the central bank’s official website. Banks whose indicator exceeds 30 percent cannot trade on the market. Once the indicator returns to a safe zone, they remain banned from trading for the next five working days. «It only shows if a bank is trying to gamble too much on the market. We simply want to prevent any flight of dinars into hard currencies or equally any other currency arbitrage,» he said. The National Bank of Serbia said late in February that currency arbitrage activity on the interbank forex market had picked up substantially since the US dollar began to slide against the euro, draining some of the official reserves. It acted then by hiking charges on dollar sales and lowering fees for euro sales. The new rules also introduced limits for forward hard currency buying (up to 360 days), restricting the spread between the spot and forward dinar rate to a difference between the official discount rate, currently at 9.0 percent a year, and the interest on the foreign currency involved.