BNP’s subsidiary Findomestic was only recently sold to local Direktna Banka – which also acquired Serbia’s NKBM subsidiary and the Greek Piraeus Bank. OTP acquired NBG Group’s Vojvodjanska Banka and the local champion Societe Generale. The domestic AIK Banka swiped up the Greek Alpha Bank, while Telenor Banka ended up in the Czech PPF Fund’s lap. This trend has been followed by NPL transfers outside of the banking sector, leaving the NPL ratio at a slim 5.7%. Now, all eyes are on the privatization of the largest state-owned bank, Komercijalna Banka. The EBRD and IFC, like other significant shareholders of Komercijalna Banka, are willing to sell their respective participations. Potential buyers to look out for seem to be the Slovenian NLB, Raiffeisen Bank International AG, AIK, and the consortium of Direktna Banka and EuroBank. With EU banking groups – such as Banca Intesa, UniCredit, ProCredit, Addiko (post IPO), and Erste – and newcomers such as MiraBank (UAE) and Bank of China, the local banking market, whether consolidated to fully meet the needs of Serbian citizens or not, truly represents an exciting blend of different banking cultures.

Serbia’s central banking authority – the National Bank of Serbia (NBS) – still orchestrates the local banking market, retaining an instrumental role in all licensing procedures, supervising foreign exchange, balancing foreign currency oscillations, and steering the reference (base) rates (indeed, the key base rate has recently been decreased to a record low of 2.5%). The NBS also has a significant role in scrutinizing and regulating various fintech products in the banking and financial services industry, such as crowd-lending platforms and microfinancing.

Project finance is still critical, especially in real estate and energy/renewable financing. The local banks have been successful in securing their position in the residential, retail, and office space sectors, including several significant projects, such as the Belgrade Waterfront (EagleHills), Central Garden (ShikunBinui), and SkyLine (AFI) on the residential side; BW Galerija (EagleHills) and the AdaMall Shopping Centre (GTC) on the retail side; and the Business Garden (AFI) and Green Heart (GTC) in the office sector. Energy/renewable financing, especially windfarm financing, remains primarily reserved for IFIs (the IFC and EBRD), but we can also see an increased role for commercial banks, at least in certain participation schemes.

Financing in Serbia always had local law challenges, primarily originating from foreign exchange requirements, young and undeveloped registries for immovable ownership titles, mortgages and pledges, and inconsistent court practice. However, banks and investors, as well as their advisors, have managed to shape the Serbian legal landscape, so that it now provides a relatively high level of certainty. Professional associations are trying to relax foreign exchange restrictions fortified by the NBS. Title checks and collateral registries have become, to a large extent, reliable and efficient; the security agent concept is widely recognized in law, and private bailiffs have been introduced to relax the courts’ lack of capacities and should enable judiciaries to turn towards more sophisticated legal questions.

Recently, Serbia has been investing intensively in all areas of its infrastructure, including air traffic, railways, roads and highways, and ports and river transportation projects. This opened the floodgates to different forms of financings: traditional public procurements in which the government either finances a project from its own budget or through external financing (from, i.e., the EIB and World Bank Group); bilateral treaties-based funding in which the government directly awards the project to a contractor originating from the treaty country and where financing is secured by loans being disbursed directly to the contractor (primarily in connection with treaties concluded with China, Russia, UAE, and Turkey); and public-private partnerships, in which the private partner secures the funding. Two recent public-private partnerships of note, in terms of their complexity, importance, and magnitude, are the Nikola Tesla Airport concession (which went to France’s Vinci), and the Vinca waste management project in Belgrade (which went to Suez-Itochu).

Serbia is well-placed to benefit from even more opportunities in the banking and finance area in its journey toward EU accession. This is indeed a fairly bold statement, as we live in a strange world, with the deadline of October 31 still looming and the question of Greenland’s future an unexpected issue; but it appears that the prospects of the banking and finance market’s further development in Serbia are fairly strong.