The central bank of Serbia – National Bank of Serbia (“NBS”) is a public institution in charge of safeguarding the value and purchasing power of money. The core purpose of the NBS is to provide monetary and financial stability. Monetary stability means maintaining low, stable and predictable inflation rate and confidence in the value of the national currency – the Serbian dinar. Financial stability means ensuring a sound financial system in which banks and other financial institutions function well and responsibly safeguard money and other assets of their clients. By safeguarding the value of the national currency, the NBS contributes to the growth of citizens’ living standards. By managing money, the NBS works to strengthen and maintain public confidence in the dinar, thereby facilitating business decision-making and planning for business people and citizens. Gecić Law office already wrote about the importance of central banks’ policies in these trying times, and in connection with that, the NBS, as the Government’s banker, continues improving the financial environment in Serbia.
Authorized foreign currency exchange offices
In order for a resident business entity to engage in foreign exchange operations, it is necessary that it has the authorization of the NBS to perform these operations and enter into an agreement with one or several banks regulating their mutual relations in connection with performance of exchange operations. Therefore, in order to perform purchase or sale of effective foreign currency or redemption of foreign-denominated checks for natural persons – residents and non-residents – a business entity is obliged to conclude an agreement with a bank. However, the agreement does not produce a legal effect if the business entity does not obtain authorization, and therefore it is necessary to submit an application to obtain authorization from the NBS. In addition to agreement and authorization, a business entity must fulfill other conditions in order to start business operations and acquire the status of an authorized foreign exchange office. These conditions are prescribed by the Decision on the terms and manner of performing exchange operations (“Decision“).
Instruction to banks
In order to enable authorized exchange offices to work and fulfill obligations in accordance with the regulations on exchange operations during the state of emergency, the NBS on April 6, 2020 adopted an Instruction on the manner of banks’ temporary treatment in work with authorized exchanges (“Instruction“). The instruction applies to banks which concluded agreements with authorized exchange offices in connection with performance of exchange operations. The Instruction temporarily regulates operations of banks’ during the state of emergency caused by the Covid-19 pandemic in their work with authorized exchange offices with which banks concluded contracts governing their mutual relations. Thus several commitments were imposed on banks.
No unilateral termination
A bank cannot unilaterally terminate the agreement concluded with the authorized foreign exchange office only due to the circumstances relating to its modified business during the state of emergency (e.g. decrease in the scope of activity, temporary termination of work of certain business units).
Securing the minimum work process
A bank is obliged to provide the minimum of the working process, i.e. undertake all necessary activities to enable the authorized foreign exchange office to fulfill obligations prescribed by the Decision and in accordance with the agreement regulating their relationship. This applies especially to the sale of effective foreign money to the bank, cash payment in dinars to the current account with the bank, etc.
In order to perform these activities, a bank is obliged to organize work of at least one branch or its other organizational part/business unit on the territory of a municipality (i.e. city or urban municipality on the territory of the city of Belgrade) where one or more branches or other organizational parts/business units of the bank worked before the state of emergency was declared. This obligation applies to organizing business every working day, at least two hours in one day, at a time when there is no curfew on the territory of the Republic of Serbia, whereby those two hours cannot include the last hour before the beginning of the curfew, and in accordance with the Order of the Ministry of Internal Affairs regulating restriction and prohibition of movement of persons on the territory of the Republic of Serbia. Gecić Law office has repeatedly cited state measures affecting freedom of movement, and you can see more about the latest restrictions in our article “Not all human rights can be suspended during the state of emergency”. Working day, in terms of the Instruction, means every day except Sunday and state and religious holidays which were declared non-working days in the Republic of Serbia (non-working days in 2020 – see here).
Contact phone line
A bank is obliged to provide a contact phone line where an authorized exchange office can be contacted. Furthermore, a bank will publish phone numbers and information about working hours of its branches or other organizational parts/business units for performing operations with authorized foreign exchange offices on its website.
The Instruction came into force on April 6, 2020.
For more information, please contact us via covid19@geciclaw.com.
