At a high-profile event in Serbia’s capital Belgrade today, the European Bank for Reconstruction and Development (EBRD) and the Chamber of Commerce and Industry of Serbia (CCIS) discussed the stability of the corporate and financial sectors.
The conference under the title “Consensual Financial Restructuring (CFR) of Companies – A New Approach to NPL Resolution in Serbia” focused on a legal framework for voluntary financial restructuring. The event was attended by representatives of the government of Serbia, including the Minister of Economy Željko Sertić and the Minister of Finance Dušan Vujović, representatives of international financial institutions including the IMF and the World Bank Group, the diplomatic community and EBRD partner banks and local companies. The EBRD delegation was led by Matteo Patrone, the Bank’s Director for Serbia.
The CFR framework is an important tool for corporate debt restructuring, particularly for small and medium-sized enterprises, and for the restructuring of non-performing loans (NPLs) in general. It involves the appointment of a mediator to help the debtor and its banking creditors to reach an agreement on financial restructuring. The framework offers banks and debtors significant tax and financial incentives which makes it attractive for both sides.
Together with an international consortium of experts, the EBRD has been providing support to the CCIS since August 2013 for the implementation of the CFR through its Legal Transition Programme. During the conference, the EBRD presented the results of this work in the context of the government’s agenda for NPL resolution and sought to identify ways of tackling the issues in Serbia.
“The recent financial crisis has highlighted the importance of having the capacity, tools and effective legal frameworks for the resolution of non-performing loans if and when needed. High levels of non-performing loans raise concerns for growth, since they impair the ability of banks to resume lending and, perhaps more importantly, for companies to resume expansion and safeguard jobs. We believe that a holistic approach is needed whereby attention is directed towards repairing banks’ balance sheets and restructuring viable companies’ operations. Consensual restructuring may represent a very effective way of achieving this”, said Mr Patrone.
Catherine Bridge, Principal Counsel in the EBRD’s Legal Transition Team leading the CFR project commented: “Most new legislation, particularly of an innovative nature like the Consensual Financial Restructuring Law, needs support to operate effectively. Our overall objective has been to enable CFR to become an effective tool for financial restructuring in Serbia and complement existing court-driven pre-packaged and ordinary reorganisation procedures.”
The EBRD and the government of Serbia recently launched a joint initiative aimed at improving the investment climate with a focus on the resumption of credit growth including through the resolution of NPLs. In addition, under the Vienna II Initiative, the EBRD - alongside the IMF and the World Bank Group - is engaged in an intensive policy dialogue with the authorities to establish the conditions for attracting private capital instrumental to the resolution of NPLs.
Since the start of its operations in Serbia, the EBRD has invested more than €3.8 billion in over 180 projects. The Bank has invested in the financial, industry, commerce, agribusiness, energy and infrastructure sectors.