20220127-IMF-Republic_of_North_Macedonia_Central_Bank_Transparency_Code_Review_128页_684kb

Summary of the Central Bank Transparency Code Review for the Republic of North Macedonia

Core Content

The National Bank of the Republic of North Macedonia (NBRNM) has been evaluated under the IMF Central Bank Transparency Code (CBT) as part of a review conducted by a virtual IMF mission in May-June 2021. The report, completed on January 18, 2022, highlights the NBRNM's efforts to enhance transparency in its governance, policies, operations, outcomes, and official relations.

The review was based on a desk analysis, self-assessment by the NBRNM, and discussions with key stakeholders. It aims to improve the NBRNM's transparency practices and support better accountability and policy effectiveness, without evaluating the quality or adequacy of its governance and actions.

Main Findings

A. Pillar I: Transparency in Governance

• The NBRNM has a well-defined legal framework that supports transparency, including the Law on Free Access to Public Character Information and the Law on Classified Information.
• Autonomy is well established, with the NBRNM operating independently in its decision-making processes.
• Decision-making and risk management are transparent, with information on key risks and governance arrangements being available.
• However, communication on the internal governance structure is limited. The website lacks detailed explanations of the responsibilities of committees and the decision-making bodies, making it difficult for the public to fully understand how the NBRNM operates.
• Confidentiality practices are not sufficiently disclosed, including the legal basis and impact on transparency.

B. Pillars II, III, and IV: Transparency in Policies, Operations, and Outcomes

• The monetary policy framework is well established, with clear objectives and regular policy decisions and analysis.
• FX administration and management are transparent, with the NBRNM providing timely and periodic disclosures.
• FX reserve management is also transparent, with clear reporting on the impact and financial results.
• Macroprudential policy is partially transparent, with the NBRNM disclosing policy decisions and the methodology used to implement capital buffers. However, it does not clearly map these instruments to systemic financial risks or explain how they mitigate them.
• The Financial Stability Committee (FSC) serves as a coordination body for macroprudential policy, but the Memorandum of Understanding (MoU) governing its role is not widely disclosed, limiting market awareness.
• Financial Soundness Indicators (FSIs) and Financial Stability Reports (FSRs) are disclosed on a quarterly basis, enhancing transparency.
• ELA framework is reasonably clear in differentiating between liquidity management tools and emergency measures.
• Microprudential supervision and consumer protection are not reviewed due to the existence of other international standards, and are marked as "Non-Applicable."

C. Emergency Liquidity Assistance (ELA)

• The NBRNM has introduced an ELA framework that differentiates between tools used for liquidity management and those used for emergency support.
• The framework is reasonably clear, but further clarification on its operational modalities and conditions would enhance transparency.

D. Pillar V: Transparency in Official Relations

• The NBRNM has sensible and satisfactory transparency practices in its relationships with government, domestic agencies, and foreign institutions.
• However, there is a need for more comprehensive disclosure of inter-agency cooperation mechanisms and agreements with counterparties, especially when those counterparties are willing to share such information.
• The MoU with the FSC is not fully disclosed, limiting market understanding of the FSC's role and objectives.

Key Recommendations

1. Enhance Public Accessibility:

   • The NBRNM should describe its legal framework, council, governor, and committees on its website in a clear and accessible manner.

2. Improve Risk Management Transparency:

   • A risk statement should be published, detailing key risks and the governance arrangements for managing them.

3. Clarify Audit Mechanisms:

   • Rules governing the internal audit function and its reporting structure should be clarified and published.
   • The external audit rotation policy should be disclosed, including selection criteria for external auditors.

4. Strengthen Institutional Communications:

   • The NBRNM should incorporate a comprehensive communications strategy into its transparency framework, aligned with the Law on Free Access to Public Character Information.

5. Enhance Financial Integrity Transparency:

   • The NBRNM should provide more information on its AML/CFT supervisory processes, results, and how they integrate into the broader supervisory framework.
   • Once internal controls are fully implemented, information on these activities should be disclosed.

6. Improve Confidentiality Framework Disclosure:

   • The NBRNM should clearly disclose the legal basis of its confidentiality policy, including the Law on Classified Information and the Data Protection Officer's role.

7. Strengthen Macroprudential Policy Transparency:

   • The NBRNM should explain its macroprudential policy objectives, rationale, and how policy instruments help mitigate systemic risks.
   • It should also clarify how these policies benefit the financial system and prevent crises.

8. Enhance Transparency on FX and Cross-Border Flows:

   • The internal processes for the adoption of by-laws related to foreign exchange should be disclosed to improve transparency.

9. Improve Disclosure of Official Relations:

   • The NBRNM should provide more detailed disclosure of its inter-agency cooperation mechanisms and agreements with counterparties.
   • The MoU with the FSC should be disclosed to improve market understanding of its role and objectives.

Additional Context

• The NBRNM has a long-standing commitment to transparency, which has contributed to public trust and policy effectiveness.
• The recent initiatives to improve transparency include enhanced communication and financial education programs, which have been supported by social media and traditional media.
• The new Law on Financial Stability is expected to further improve transparency practices, particularly in macroprudential policy.
• The financial sector in North Macedonia is bank-dominated, with banks holding over 80% of financial assets.
• The pandemic had a negative impact on the economy, but the NBRNM's monetary and regulatory measures have helped stabilize the financial system and maintain public trust.
• The NBRNM has been working towards EU accession, which has influenced its monetary policy strategy and governance reforms.