The control function of the National Bank of Serbia

• Main Author: Golubović Srđan
• Format: Article
• Language: English
• Published: Faculty of Law, Niš 2016-01-01
• Series: Zbornik Radova Pravnog Fakulteta u Nišu
• Subjects: supervision and control of the financial institutions; National Bank of Serbia; financial stability
• Online Access: http://scindeks-clanci.ceon.rs/data/pdf/0350-8501/2016/0350-85011674175G.pdf

The functioning of a modern economy cannot be conceived without activities of banks and non-banking financial institutions. As financial intermediaries, these institutions issue various financial instruments to mobilize and further allocate free financial funds in appropriate financial investments. By performing this function, financial institutions concurrently affect economic activity, economic structure, employment and macroeconomic stability. Due to their importance for economic relations in any country, most countries prescribe very strict requirements that must be fulfilled in order for an organization to perform financial intermediation activities. These conditions are most often related to the specific requirements regarding activities of financial institutions and their establishment, balance sheet, and requirements in terms of capital adequacy. An integral part of the financial sector regulation is definition of the prudential supervision framework (an effective system of supervision, precisely defined competences of the bodies involved in the supervision, their operational independence, transparency, proceedings for the control of solvency and legality of financial institutions' activities) and the implementation of corrective and coercive measures. The paper analyzes the control function of the National Bank of Serbia which, in addition to monitoring and controlling the banking sector, exercises the supervision and control of non-banking financial institutions. The analysis of this issue aims to highlight the importance of the financial institutions' control for curtailing the excessive risk-taking practices by financial institutions, minimizing of systemic risk, and strengthening and preserving the financial system stability.