The last NBS by-law was also a first step towards dynamic (countercyclical) provisioning that we want to develop more in the future. As we saw in September 2011, ESRB recommended to the regulatory authorities to consider applying additional capital requirements (within pillar 2 of Basel II standards) for banks not capitalized enough to cover the specific risks arising from excessive FX lending.
In line with that recommendation, we have provided a possibility for the NBS as a supervisor to set capital adequacy ratio (CAR) for a particular bank above the regulatory minimum (which is 12% in Serbia). In the period from 2007 to 2011, banking sector in Serbia experienced gradual deterioration in the quality of its credit portfolio.