## 1mkdea2022001 ## Source details **Canonical URL:** [1mkdea2022001](https://www.imf.org/-/media/files/publications/cr/2022/english/1mkdea2022001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1mkdea2022001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1mkdea2022001.pdf.json) --- ### Overview and context - The National Bank of the Republic of North Macedonia (NBRNM) implements advanced transparency practices anchored in law and designated as a strategic objective. - The NBRNM’s consistent track record has cultivated high public trust and support. - Public engagement has increased through enhanced communications (including social media) and expanded educational and outreach programs. - Mission review period: "The mission took place during May 19–June 4, 2021, and initiatives implemented after the review date have not been considered." ### Macroeconomic and institutional background (key figures) - GDP growth was 3.2 percent in 2019. - Output declined by 4.5 percent in 2020. - NBRNM international reserves projected to stay around 110 percent of the Fund’s Assessing Reserve Adequacy (ARA) by end of 2021. - Inflation is expected to return to 2 percent on an annual basis. - Fiscal response: authorities requested a purchase under the Rapid Financing Instrument (RFI) in April 2020. - Financial sector: banks hold over 80 percent of financial sector assets. ### Monetary policy transparency and framework - Objectives and framework: - Primary objective: achieve and maintain price stability (Law on the NBRNM, Article 6 (1)). - De jure exchange rate arrangement: floating; de facto classified as a stabilized arrangement — operational framework targets the denar exchange rate against the euro. - Monetary strategy: long-standing nominal exchange rate targeting to prepare for EU accession and joining the ESCB. - Disclosure practices: - Policy decisions (key policy rate) issued by press releases the day following Committee for Operational Monetary Policy meetings. - Extensive data and information published timely, including daily liquidity factors, flows and stock of instruments, and daily disclosed amount of liquidity banks can obtain based on accepted collateral. - Monthly "Recent Macroeconomic Indicators—Review of the Current Situation" and May/November macroeconomic forecasts with comparisons to previous forecasts. - Gaps and recommendations: - The process by which decisions are taken is not fully disclosed: Committee for Operational Monetary Policy role, composition, and modus operandi are not published. - Recommendation: Give a stronger institutional foundation to the Committee for Operational Monetary Policy by disclosing its role, composition, and structure. ### Financial stability, macroprudential policy, and Emergency Liquidity Assistance (ELA) - Mandate and instruments: - NBRNM uses an array of macroprudential instruments focused mainly on capital buffers: systemic risk capital buffer, countercyclical capital buffer, systemically important banks buffer, capital conservation buffer, leverage ratio limit, household sector capital requirements, forward-looking loan loss provisioning, liquidity coverage ratio (differentiated by currency), and differentiated reserve requirements by currency and deposit term. - Financial Stability Committee (FSC) established (reconstituted April 2020); decision powers remain with NBRNM and other supervisory agencies. - Risk assessment and stress testing disclosures: - Quarterly sensitivity analysis and annual macro stress tests for the banking sector are disclosed, including methods and underlying data. - Financial Soundness Indicators (FSIs) published quarterly. - Financial Stability Report (FSR) discusses new and emerging vulnerabilities (including COVID-19 related assessments). - Gaps and recommendations: - Explanations do not map macroprudential instruments to systemic financial risks or explain how decisions mitigate these risks. - Recommendation: Enhance transparency of macroprudential objectives, expected benefits and rationale; map how instruments address specific risks and explain transmission channels. - ELA: - ELA framework is disclosed (scope, objectives, rules, procedures) and differentiates ELA from standard system-wide liquidity management. - ELA has never been activated to date; disclosure of bilateral ELA would occur after risks pass and confidentiality constraints are met. ### Governance, internal organization, and communications - Legal framework and governance disclosures: - Legal structure, mandate, and autonomy are disclosed (Law on the NBRNM available on website www.nbrm.mk) but not explained in an easily accessible manner for the public. - NBRNM Council composition: Governor, three Deputy Governors and five non-executive members; Governor appointed by Parliament on proposal of the President; Deputy Governors appointed by Parliament on proposal of the Governor; non-executive members appointed by Parliament on proposal of the Government. - Term length for Governor, Deputy Governors and non-executive members: seven-year term that may be renewed. - Cooling-off restriction for former Council members: one year immediately following the end of their term of office. - Organizational and committee transparency: - Organizational chart and some Rulebooks available on the website; Rules of Procedure classified for internal use and not published. - Audit Committee (AC) charter is published; annual activity report of the AC is not publicly disclosed. - Recommendation: Publish composition, role, responsibilities and reporting lines of all committees; publish Rules of Procedure and Audit Committee annual activity report. - Communications and public affairs: - Press releases doubled from 160 in 2016 to 300 in 2020. - Social media introduced in 2016 (Facebook, Twitter, YouTube; Instagram from 2019); over 400 posts in 2020 and 20,000 followers. - Workshops for journalists expanded from annual to quarterly in 2020; public appearances of management increased. - Website available in Macedonian, Albanian and English; recommendation to ensure same content in all languages, in non-technical language, timely and simultaneously. - Recommendation: Develop and disclose an institutional communication strategy and overhaul website for accessibility and ease of understanding. ### Financial integrity and AML/CFT - Supervisory role and disclosures: - NBRNM designated AML/CFT supervisor for banks, savings houses, exchange offices and providers of fast money transfer (Law on Money Laundering Prevention referenced). - Decisions and Instructions for managing ML/TF risks published; Decision on Methodology for managing ML/TF risk and Instructions for assessing sectoral ML/TF risks available on website in Macedonian and English. - Internal AML/CFT control policy adopted March 2021; envisages three lines of defense but is an internal act and not publicly available. - AML/CFT officer position vacant; full implementation intended January 2022 upon designation of the AML/CFT officer. - Gaps and recommendations: - Public information on AML/CFT supervisory activities, resources, and outcomes is limited or absent (especially for non-bank financial institutions). - Recommendation: Publish a clear description of AML/CFT supervisory processes, staffing and resources, results of supervisory activities, and how AML/CFT supervision fits into broader supervisory framework; once internal controls are fully implemented, disclose outcomes (planned disclosures: internal controls beginning of 2022; outcomes available in Annual Report 2023). ### Confidentiality, audit, and risk management - Confidentiality framework: - Anchored in Law on the NBRNM (Article 74) and Law on Classified Information; internal decisions define "professional secret" and "for internal use" categories. - Decision on the access and the manner of using non-public information published in Official Gazette but not linked on website; Law on Classified Information not published on NBRNM website. - Recommendation: Proactively publish Law on Classified Information and related decisions, and explain Data Protection Officer functions. - Audit and internal controls: - Financial statements prepared under IFRS and audited in accordance with ISA; external auditors rotated every five years (Law references). - External auditor selection criteria not explicit; recommendation to disclose external audit rotation policy and selection criteria. - Internal Audit Department established by Law (Articles 63–64); Internal Audit Rulebook exists but is published on intranet only. - Recommendation: Publish Internal Audit charter and clarify functional reporting lines of Chief Internal Auditor to Council and AC; consider publishing conformance with international internal audit standards. - Risk management: - Financial risk disclosures (foreign reserves) detailed in Annual Report and FY 2020 Financial Statements (Note 3). - Operational risk disclosures limited; Operational Risk Management Policy and Guidelines internal and not published. - Recommendation: Disclose a risk statement (high-level overview of key risks mapped to mandate) and publish overview of operational risk framework, governance and committee charters; consider a dedicated risk management section on website and a separate chapter in the Annual Report. ### Cross-border flows, foreign exchange administration, and reserves management - Legal and operational framework: - Law on Foreign Exchange Operations regulates current and capital transactions; NBRNM empowered to adopt by-laws, decisions and instructions (published in Official Gazette and on website). - NBRNM sets nominal denar exchange rate against the euro; exchange rate determination based on end-of-day average of market-maker bid-ask quotes published daily. - Market-makers operate under a disclosed uniform market-maker contract and transact via an electronic trading platform. - FX interventions and reporting: - Historical data on FX interventions disclosed in Monthly Latest Macroeconomic Indicators, Quarterly Report, Annual Report; daily volume turnover posted online. - Recommendation: Monthly disclosure of whether specific instruments were bought or sold and the categories of counterparties used in specific FX interventions would enhance transparency. - Reserves management: - Foreign Reserves and Investment Policy describes portfolio composition, eligible asset classes, risks and monitoring procedures; Foreign Reserves Management and Investment Guidelines are internal and not publicly disclosed. - Annual Report and FY 2020 Financial Statements contain descriptions of decisions and results; recommendation to publish a dedicated Report on Foreign Reserves with more ex-post analysis and selection of benchmarks. - Coverage and procedures: - By-laws and Decisions on FX operations, licensing, reporting requirements and supervisory attributions are posted on the website; consolidated versions of by-laws are not consistently maintained. - Recommendation: Publish consolidated by-laws, user-friendly licensing guidance and Q&As, and clarify procedures for adoption of by-laws and how SAA requirements are addressed. ### Official relations, inter-agency cooperation, and accountability - Inter-agency arrangements: - Multi-agency Financial Stability Committee (FSC) combines NBRNM, Ministry of Finance, Securities and Exchange Commission, Insurance Supervision Agency, Agency for Supervision of Fully Funded Pension Insurance, and Deposit Insurance Fund. - Bilateral and multi-agency MoUs exist for cooperation and information exchange but are generally not published; press releases typically announce such agreements. - Recommendation: Disclose MoUs and cooperation agreements where counterparties agree; publish content of MoUs establishing FSC, members’ roles and mechanisms of cooperation to improve public understanding. - Accountability to Parliament and public reporting: - NBRNM Council and each member "shall be accountable to the Parliament of the Republic of Macedonia for the achievement and maintenance of price stability" (Article 40). - Article 62 requires NBRNM to inform Parliament at least twice a year on monetary policy and its achievements. - Financial statements prepared under IFRS and audited under ISA; financial statements issued within four months after December-end each financial year. - Regular publications: Strategic Plan, Annual Report, Quarterly Report, Monthly "Recent Macroeconomic Indicators" and press releases; assessments rated "Comprehensive" for disclosure of progress toward monetary policy objectives and operations reporting. ### Key recommendations (A. Key Recommendations and mission roadmap) - Legal framework and public explanations: - 1. Describe on website the NBRNM’s legal framework and roles/functions of Council, Governor and committees in an easily accessible manner. - Risk management and audit: - 2. Disclose a risk statement with (i) a high-level overview of key risks mapped to mandate; (ii) process, governance arrangements and strategy for management of financial and non-financial risks. - 3. Clarify rules and publish the Internal Audit charter and reporting structure; disclose external audit rotation policy and selection criteria. - Communications and transparency policy: - 4. Anchor transparency policy in existing legislation (e.g., Law on Free Access to Public Character Information) and incorporate a communications strategy into the transparency framework; overhaul website and disclosure practices. - Financial integrity: - 5. Enhance transparency of AML/CFT supervisory processes, practices, results and integration within the broader supervisory framework; once internal controls are implemented, disclose activities and outcomes (planned internal controls disclosure beginning 2022; outcomes in Annual Report 2023). - Confidentiality and legal certainty: - 6. Strengthen dissemination and disclosure of confidentiality framework (Law on Classified Information, Data Protection Officer functions). - Monetary policy committee: - 7. Give stronger institutional foundation to the Committee for Operational Monetary Policy by disclosing its role, composition and structure; publish Rules of Procedure (planned for July). - Macroprudential policy communication: - 8. Explain macroprudential objectives and rationale, mapping instruments to risks and expected benefits to promote public understanding; adopt Law on Financial Stability (expected by end of 2021) to clarify mandate. - Cross-border flows and FX: - Disclose internal processes for adoption of by-laws, reference SAA requirements on website, and improve disclosure of supervisory outcomes and sanctions for FX-related violations. - Official relations: - Improve disclosure of inter-agency mechanisms, publish MoUs where permitted, and expand International Relations section on the website. - Implementation roadmap categories referenced by mission: (i) "Immediate implementation": gather and publish existing information on website; (ii) "Implementation in short-term period": perform analyses and adopt new disclosures. *Source: EXECUTIVE SUMMARY (1mkdea2022001).* ### EXECUTIVE SUMMARY ___________________________________________________________________________ 4 ### 1mkdea2022001 - EXECUTIVE SUMMARY ### Overview and context - The National Bank of the Republic of North Macedonia (NBRNM) is implementing advanced transparency practices. - The long-standing commitment to transparency is anchored in the law and designated by the NBRNM as a strategic objective to fulfill its mandate. - The policy has earned the NBRNM noteworthy trust from stakeholders and has paid significant dividends in anchoring autonomy and ensuring policy effectiveness. - The NBRNM’s consistent track record with regard to macroeconomic outcomes has helped cultivate a high level of public trust and support. - The NBRNM has responded to public demand for deeper engagement through enhanced communication, including reliance on social media tools in addition to other communication tools. - The NBRNM has introduced several initiatives to deepen educational and outreach programs and improved communications with main stakeholders. ### Monetary policy transparency and framework - The NBRNM has a comprehensive transparency framework for its core monetary policy mandate. - A long-standing monetary strategy of targeting the denar nominal exchange rate, in preparation for European Union (EU) accession and joining the European System of Central Banks (ESCB), has provided a transparent background for policy actions aimed at delivering the primary price stability mandate. - The transparency framework for monetary policy covers policy decisions, supporting analysis, monetary and foreign exchange operations, and related reporting. - Transparency is high in terms of timeliness, periodicity, and disclosure. - Recommendation (related): Giving a stronger institutional foundation to the Committee for Operational Monetary Policy by disclosing its role, composition, and structure would contribute to enhancing the transparency of policy decisions and strengthen monetary policy effectiveness. ### Financial stability, macroprudential policy, and ELA - The NBRNM has made strides to enhance the transparency of its financial stability policy; further improvement is expected with the new Law on Financial Stability. - A well-defined legal mandate for financial stability has been utilized to introduce an array of macroprudential policy instruments, most focused on strengthening capital buffers. - The NBRNM discloses decisions taken and the methodology and indicators used for implementation of these buffers. - Gaps identified: - Explanations do not map macroprudential policy instruments to systemic financial risks. - Explanations do not elucidate how policy decisions can help mitigate these risks. - The Memorandum of Understanding (MoU) establishing the Financial Stability Committee (FSC) has not been widely disclosed, so market participants are not fully aware of the FSC’s role and objectives. - The NBRNM has disclosed an Emergency Liquidity Assistance (ELA) framework that differentiates between ELA tools and those used for system-wide liquidity management. - Assessments of risks to financial stability are periodically and timely disclosed: - Results of quarterly sensitivity analysis and annual macro stress tests for the banking sector, and the methods and underlying data used, are disclosed. - Financial Soundness Indicators (FSIs) are disclosed on a quarterly basis. - The Financial Stability Report (FSR) discusses new and emerging vulnerabilities. ### Governance, internal organization, and communications - The public’s understanding of the internal governance framework set in the Law of the NBRNM could be enhanced through additional explanations on the website. - Press releases following meetings of some internal advisory committees do not provide easily understandable information on how responsibilities are cascaded into actions and operations. - Fuller disclosure of the composition, role, and responsibilities of all committees, and their interactions with decision-making bodies, would enhance transparency. - Publication of activity reports produced by some committees would further enhance transparency. - Responsibilities of the NBRNM’s decision-making bodies could be explained on the website in a more easily understandable manner. - Clarity is needed on the anti-corruption framework (national policies and measures, NBRNM Law, and Code of Ethics) to resolve disparities in applicable provisions. - Ongoing actions to revamp institutional affairs (public affairs) and communications would benefit from a transparency policy anchored in existing legislation (e.g., Law on Free Access to Public Character Information) and full incorporation in the transparency framework of a corresponding communications strategy. ### Financial integrity and AML/CFT - The NBRNM plays an important role in preserving financial integrity, but publicly available information on its activities and practices in this area is limited. - The NBRNM discloses general information about its AML/CFT supervisory function and powers, but such information is notably absent from documents describing its broader supervision of the financial sector. - Available materials do not provide a comprehensive picture of the NBRNM’s activities or processes in AML/CFT. - Transparency would be greatly enhanced by providing more detailed information on AML/CFT supervisory processes and practices, results of such activities, and how AML/CFT supervision fits into the broader supervisory framework. - The NBRNM performs AML/CFT controls to mitigate potential money laundering and terrorism financing risks arising from its own operations, but its internal control system is newly developed and not yet fully implemented. Although the policy has been adopted by the NBRNM Council with delayed application, no information on related activities is yet available. - Recommendation (related): The NBRNM should enhance transparency of its financial integrity functions by providing more information on AML/CFT supervisory processes and practices, results, and integration into the broader supervisory framework; once internal controls are fully implemented, information on these activities and outcomes should be disclosed. ### Confidentiality, audit, and risk management - Significant strengthening of dissemination and disclosure of the confidentiality framework (Law on Classified Information, Data Protection Officer) already implemented would enhance transparency and legal certainty. - Transparency of the risk management function would benefit from disclosure of a risk statement (e.g., separate chapter on risk management in the annual report, dedicated section on the website) explicitly providing: - (i) a high-level overview of key risks clearly mapped to the NBRNM’s mandate; and - (ii) the process, governance arrangements, and strategy for management of financial and non-financial risks across the bank. - Transparency of audit mechanisms would benefit from: - (i) clarifying the rules and publishing the charter governing the internal audit function and its reporting structure; and - (ii) disclosing the external audit rotation policy, including criteria for the selection of external auditors. ### Key recommendations (A. Key Recommendations) - 1. While well disclosed in the Law on the NBRNM, the NBRNM’s legal framework, as well as the roles and functioning of the NBRNM Council, the Governor, and the various committees that have been established would all benefit from a description on the website that is easily accessible and understandable for the public. - 2. Transparency of the risk management function would benefit from disclosure of a risk statement (e.g., separate chapter on risk management in the annual report, dedicated section on the website) explicitly providing: (i) a high-level overview of key risks clearly mapped to the NBRNM’s mandate; and (ii) the process, governance arrangements, and strategy for management of financial and non-financial risks across the bank. - 3. Transparency of audit mechanisms would benefit from: (i) clarifying the rules and publishing the charter governing the internal audit function and its reporting structure; and (ii) disclosing the external audit rotation policy, including criteria for the selection of external auditors. - 4. Ongoing actions to revamp the system of institutional affairs (public affairs) and communications would benefit from a transparency policy anchored in existing and implemented legislation (e.g., Law on Free Access to Public Character Information) and full incorporation in the transparency framework of a corresponding communications strategy. - 5. The NBRNM should enhance the transparency of its financial integrity functions by providing more information on its AML/CFT supervisory processes and practices, the results of such activities, and the manner in which AML/CFT supervision fits into the broader supervisory framework. In addition, once AML/CFT internal controls are fully implemented, information on these activities, including outcomes, also should be disclosed. - 6. Significant strengthening of the dissemination and disclosure of the confidentiality framework (Law on Classified Information, Data Protection Officer) already implemented would enhance transparency and legal certainty. - 7. Giving a stronger institutional foundation to the Committee for Operational Monetary Policy by disclosing its role, composition, and structure would contribute to enhancing the transparency of policy decisions. In turn, that would strengthen monetary policy effectiveness. - 8. The NBRNM should enhance the transparency of macroprudential policy objectives, as well as the expected benefits and rationale behind policy decisions. It should explain to the public what macroprudential policy aims at, emphasizing that it seeks to prevent financial crises, in particular those of systemic nature. The NBRNM should also explain how policy decisions can help mitigate these risks, mapping how policy instruments address specific risks. By enhancing transparency, the NBRNM could promote a better public understanding of macroprudential policy, which market participants claim today to be unclear. *Source: EXECUTIVE SUMMARY (1mkdea2022001).* ### 9. Transparency of the actions related to cross-border flows and foreign exchange ### 9. Transparency of the actions related to cross-border flows and foreign exchange ### Scope and objective - At NBRNM’s request, the mission conducted a Central Bank Transparency Code (CBT) review for the National Bank of Republic of North Macedonia (NBRNM). - This review was the second to be conducted under the CBT pilot program. - The scope covers all CBT principles, excluding those related to functions not performed by the NBRNM (i.e., consumer protection), which will be denoted as “Non-Applicable” in the detailed review section. - Functions performed by the NBRNM like micro-prudential supervision (banking or insurance), securities regulation, or financial market infrastructures responsibilities will not be reviewed and will be denoted as “Non-Applicable” given the existence of other established international standards. - The review is intended to allow the NBRNM to evaluate its transparency practices by highlighting strengths and areas for improvement; it does not assess the quality or adequacy of governance and actions. - The review maps NBRNM’s transparency choices against CBT best practices covering transparency in: (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. ### Approach and methodology - The mission’s review approach consisted of: - a desk review by the MCM mission team; - a comprehensive NBRNM self-review; and - in-depth discussions with NBRNM staff and key stakeholders. - The desk review is based on information disclosed by the NBRNM on its website and other media, in English or in Macedonian. Macedonian documents or webpages were translated where necessary. - The review was conducted principle-by-principle considering dimensions of transparency including: (i) timeliness; (ii) periodicity; and (iii) quality of disclosure (accessibility and ease of understanding). - The review took into account views expressed by stakeholders and recognized the role of the legal framework (Law on Free Access to Public Character Information; Law on Classified Information) in shaping transparency choices. - The NBRNM should clearly disclose the relevant laws and regulations, and how they may have significant impact on its transparency practices. ### Background and context - Economic performance and outlook: - GDP growth was 3.2 percent in 2019. - Output declined by 4.5 percent in 2020. - A rebound appears underway; the GDP growth outlook for 2021 seems strong but may be slowed by a sluggish vaccine rollout, tightened COVID-19 related restrictions, and a gradual recovery in remittances. - Pressures on the exchange rate have eased and the NBRNM’s international reserves are projected to stay around 110 percent of the Fund’s Assessing Reserve Adequacy (ARA) by the end of 2021. - Inflation is expected to return to 2 percent on an annual basis. - Fiscal and financing context: - A deterioration in the fiscal position and relatively poor external financing opportunities led the authorities to request a purchase under the Rapid Financing Instrument (RFI) in April 2020. - Financial sector and institutional context: - The financial sector is bank-dominated and highly integrated in the global financial system; banks hold over 80 percent of financial sector assets. - Before the COVID-19 pandemic, the banking sector was well capitalized and liquid, with NPLs at relatively low levels. - The NBRNM implemented measures during the pandemic including cutting its policy rate, reducing the supply of NBRNM bills available to banks, revising credit risk regulation to encourage loan restructurings, relaxing loan classification standards for NPLs, reducing the base for the reserve requirement by the amount of new loans to affected sectors, extending the deadline for banks to submit their first Internal Liquidity Assessment report, and temporarily restricting dividend payments. - The NBRNM participates in determination of the exchange rate regime and supervises implementation of regulations that govern foreign currency operations. - Institutional reforms and EU accession: - Governance and institutional reform progress contributed to the EU agreeing to start accession negotiations with North Macedonia in March 2020. - The NBRNM was made an autonomous public institution with a mandate focusing on price stability and exchange rate stability (targeting the denar exchange rate against the German mark since October 1995 and against the Euro starting in 2002). ### Communication and transparency initiatives (selected) - The NBRNM displays a public commitment to transparency and has increased communication tools including publications, press releases, reporting mechanisms, a website, and social media. - Transparency efforts and communications developments include: - Doubling press releases from 160 in 2016 to 300 in 2020. - Launching workshops for journalists, increasing event frequency in 2020 from once a year to quarterly workshops. - Increasing public appearances of NBRNM management to improve media communication. - Introducing social media channels beginning in 2016 (Facebook, Twitter, YouTube; Instagram from 2019), reaching over 400 posts in 2020 and 20,000 followers. - Recognition for data quality and comprehensiveness when the Republic of North Macedonia became a member in SDDS plus standard by the end of 2018. - Creation of a modern statistical web portal NBStat by 2019. - Since 2019, emphasis on financial education and financial literacy including a “Financial Literacy Survey” and educational material for younger audiences. - Establishing an “Innovation Gateway” communication channel for digitalization and financial innovation. ### Official relations and inter-agency arrangements - In conjunction with public financial agencies and the Ministry of Finance, the NBRNM has established bilateral or multi-agency arrangements to strengthen cooperation and information exchange. - A multi-agency arrangement aims to improve articulation of financial stability policies, macroprudential measures, and systemic risk monitoring. - The newly created Financial Stability Committee combines: the NBRNM, the Ministry of Finance, the Securities and Exchange Commission, the Insurance Supervision Agency, the Agency for Supervision of Fully Funded Pension Insurance, and the Deposit Insurance Fund. - Transparency of official relations would benefit from more comprehensive disclosure of inter-agency mechanisms involving cooperation and the exchange of information, and the publication of agreements when the counterpart is agreeable to it. ### Main findings — Pillar I. Transparency in Governance - Legal framework and mandate: - The legal structure, legal nature, mandate, and autonomy are well disclosed. The Constitution and the Law on the NBRNM clarify the legal structure and are accessible on the NBRNM website. - Recommendation: enhance disclosure by explaining in an easily accessible manner on the website the legal framework applicable to the NBRNM and the rationale behind it. - Organizational and governance disclosures: - The NBRNM discloses its organizational structure and the functions of the Council; the Law contains a clear description of composition and functioning of the Council and interaction with the Governor. - Shortcomings: - The website does not contain a description of the responsibilities of the Governor and of the NBRNM Council in an easily accessible manner. - Information on the committees of the NBRNM is lacking both in the Law and on the website. - Functions disclosure: - The NBRNM clearly discloses its objectives, but the description of functions in the Law and on the website is not comprehensive. - The macro-prudential function is neither listed in the Law nor easily accessible on the website. - Risk management disclosure: - Disclosures on risk management could be enhanced, particularly regarding risk governance and developments in operational risk. - Current disclosures emphasize financial risks as part of foreign reserves management; information about operational risk is very limited. - The disclosures lack an institutional view on the bank’s risk management framework and governance arrangements, and do not reflect recent developments following IMF technical assistance. - Recommendation: consider disclosing a risk statement (e.g., separate chapter on risk management in the annual report, dedicated website section) providing: - (i) a high-level overview of the key risks clearly mapped to its mandate; - (ii) the process, governance arrangements, and strategy for management of financial and non-financial risks across the bank. - Oversight and audit disclosures: - Disclosure of oversight arrangements is well developed though website descriptions could be enhanced. - The Law establishes the Council as an independent oversight body. An Audit Committee exists, but it is not regulated in the Law. - The Charter of the Audit Committee is available on the website. - Recommendation: disclose clearly and accessibly the Audit Committee’s role, responsibilities, reporting lines, and composition. - The Law specifies reporting to Parliament and Government and the scope of audits by the State Audit Office; the NBRNM publishes complete financial statements prepared and audited in compliance with international standards. - Recommendations for audit transparency: - (i) clarify rules governing the internal audit function and its reporting structure; - (ii) disclose external audit rotation policy, including criteria for selection of external auditors. - Human capital and personnel transparency: - Consideration should be given to increase transparency on governance and the management of human capital. - The NBRNM relies on internal policies for employment, performance management, professional development, promotion, and remuneration, but disclosures are limited primarily due to legal confidentiality restrictions. - In line with the Strategic Plan 20-22 priorities, information about leadership, succession planning, diversity and inclusion could be provided. - Recommendation: disclose applicable policies for attracting, promoting and retaining employees; the NBRNM is working on expanding the employment section on the website to provide more information about careers, key values, and opportunities for professional and career development. *Source: 1mkdea2022001 - 9. Transparency of the actions related to cross-border flows and foreign exchange* ### 20. The NBRNM discloses some information on anti-corruption policies and measures but ### 20. The NBRNM discloses some information on anti-corruption policies and measures but ### Anti-corruption framework and Code of Ethics - Governing instruments cited: "2019 Law on Prevention of Corruption", "2010 Law of National Bank", and "NBRNM’s 2011 Code of Ethics". - Finding: Disparities in the language of these governing documents generate confusion and ambiguity in the applicability of national anti-corruption policies and measures. - Recommendation: Legal provisions (and provisions in the Code of Ethics) should be harmonized to avoid conflict. - Finding: The Law of the National Bank and the Code of Ethics are readily available on the National Bank’s website, but no references to the Law on Prevention of Corruption are made in any of the National Bank documents. - Recommendation: References to the Law on Prevention of Corruption should be drawn in National Bank documents to ensure visibility into all applicable legal provisions and to avoid uncertainty as to applicability of the national framework. - Finding: NBRNM Code of Ethics (2011) requires staff to act "with integrity, impartiality, professionalism", avoid conflicts of interest, and prohibits receiving gifts, benefits, or other remuneration. - Finding: According to NBRNM Law, NBRNM Council members are required to disclose significant financial interests. - Finding: The Code of Conduct was prepared in 2011 and is available on the NBRNM’s website in Macedonian; a new Code of Conduct is currently being developed and is intended to be published in both Macedonian and English. - Recommendation: Discrepancies with the Law on Prevention of Corruption should be resolved in the new Code or, at minimum, explained. - Footnote finding: "In August 2021, the NBRNM Council adopted Policy on Prevention of Occurrence of Corruption. With this policy published on NBRNM’s website, the NBRNM demonstrates its commitment to prevent of corruption and to undertake activities for prevention and reduction of the risk of corruption." ### Communications and confidentiality - Finding: NBRNM implements a comprehensive set of tools for communication and has an expansive calendar of public relations events, but lacks a structured communications policy and strategy to effectively convey messages to the general public. - Recommendation: Develop a strategy and policy on communications based on the general strategic plan to enhance engagement with targeted stakeholders and the general public. - Finding: Website is available in Macedonian, Albanian and English; it is the most commonly used tool by the public. - Recommendation: Increase accessibility and ease of understanding by having the same content in Macedonian, Albanian and English in non-technical language, and in a timely and simultaneous manner. - Recommendation: Enhance website search by allocating press releases not only by date but also by specific topics. - Recommendation: Continue expanding educational outreach for journalists, students and citizens and actively promote messages through mass and social media and other modern tools. - Confidentiality framework: - Finding: The Law on Classified Information, the NBRNM Law (Article 74), and correspondent by-laws establish confidentiality and specify NBRNM functions considered confidential with different degrees and when the NBRNM is allowed to share such information. - Recommendation: Proactively disseminate (including publication on the website) the NBRNM confidentiality system (legislation) and its means of implementation (Data Protection Officer) to enhance legal certainty and transparency. - Finding: Continue practice of dissemination and disclosure of agreements with international counterparts that have made public their relationship or where there is interest to make it public. ### Monetary policy transparency - Finding: NBRNM discloses objectives and policy framework supporting monetary policy and explains that maintaining exchange rate stability is the intermediate target for achieving a low level of inflation. - Finding: Results of monetary policy decisions (in particular the key policy rate) are issued by press releases the day following Committee for Operational Monetary Policy meetings; extensive data and information are published on a timely basis. - Gap: The process by which decisions are taken is not disclosed; the NBRNM does not publish information about the Committee for Operational Monetary Policy, including role, composition, and how it operates. - Accountability practices: - Finding: NBRNM sends a report to the Parliament (including financial statements) explaining monetary policy decisions to fulfill the objective of preserving price stability. - Finding: NBRNM disseminates reports annually, quarterly, and monthly; Governor and high-ranking officials make public appearances to explain conduct of monetary policy and main risks. - Finding: In May and November, NBRNM publishes short- and medium-term macroeconomic forecasts and their likely effect on future monetary policy, including comparisons with previous forecasts. - Finding: A more structured analysis is prepared in the "Recent Macroeconomic Indicators, Review of the Current Situation", published monthly. - Operational framework disclosure: - Finding: Operational targets, objectives, and tools are explained on the website and in NBRNM’s Decisions governing monetary policy instruments (discretionary open market operations, standing facilities, policy rate, and reserve requirements). - Finding: Historical (including daily) data on liquidity factors, flows and stock of instruments, and level of fulfilment of reserve requirements are available. - Finding: Amount of liquidity banks can obtain based on accepted collateral is disclosed daily on an electronic repo system. - Finding: Categories of monetary policy counterparties and access criteria are defined and disclosed in NBRNM’s decisions. - Recommendation: Develop a comprehensive counterparty framework and publicly disclose composition, function and responsibilities of the Operational Monetary Policy Committee. ### Foreign exchange regime and reserves management - FX regime: - Finding: Monetary policy regime targets the denar exchange rate against the euro; operational framework and FX interventions within a narrow fluctuation band determined by the Committee for Operational Monetary Policy are explained. - Finding: Frequent FX interventions occur and counterparties transact via an electronic trading platform and comply with a disclosed uniform market-maker contract. - FX intervention transparency: - Finding: Periodic publications (Monthly Latest Macroeconomic Indicators, Quarterly Report, Annual Report) provide historical data on FX interventions; daily data on volume turnover on the domestic FX market is provided online. - Recommendation: Monthly disclosure of whether specific instruments were bought or sold by the NBRNM would enhance transparency. - Cross-border flows and FX administration: - Finding: NBRNM discloses objectives, framework, and decisions; separate website sections on foreign exchange regulations exist. - Finding: NBRNM assumes a dual role: supervisor of compliance with main regulations and formulator of by-laws that complement existing laws. - Gap: Requirements of the Stabilization and Association Agreement (SAA) are not disclosed by the NBRNM; references to the SAA could enhance transparency. - Recommendation: Disclose procedures followed for preparation of relevant NBRNM decisions and provide additional information on supervisory activity. - Reserves management: - Finding: Foreign Reserves and Investment Policy contains information on portfolio composition, eligible asset classes, risks considered and monitoring procedures. - Finding: Annual Report contains descriptions of decisions and results. - Recommendation: Publish a dedicated report on Foreign Reserves to provide more disclosure on practices, decisions, supporting analysis, ex-post impact analysis, and reasons for actions taken; disclose more information on selection of benchmarks. ### Financial stability and macroprudential policies - Public engagement: - Finding: NBRNM has taken actions to respond to public interest for deeper engagement on financial stability; consistent track record has cultivated public trust. - Finding: Enhanced use of social media has improved targeted communication and should be continued. - Risk assessment and stress testing: - Finding: NBRNM discloses quarterly sensitive analysis stress test results and annual macro stress tests, including methods and underlying data. - Finding: NBRNM publishes quarterly FSIs and other financial stability indicators; annual Financial Stability Report discusses new and emerging vulnerabilities. - Recommendation: Disclosure of ongoing bottom-up stress test results and their supervisory uses will enhance transparency; disclose whether and how aggregate stress test results may affect policy decisions and other supervisory aspects. - Macroprudential policy framework: - Finding: NBRNM does not have an explicit mandate for macroprudential policy, but the Law on the NBRNM and the Banking Law empower it to safeguard financial system stability and undertake measures. - Finding: NBRNM has introduced a wide range of macroprudential instruments; changes to parameters of macroprudential instruments are publicly disclosed. - Gap: Decision-making processes leading to macroprudential action are known for capital buffers but not for other instruments. - Gap: NBRNM does not disclose how it maps macroprudential instruments to systemic financial risks, nor explain how decisions mitigate these risks; public lacks clear understanding of macroprudential objectives and rationales. ### Emergency Liquidity Assistance (ELA) - Finding: ELA framework is disclosed on the website, covering scope, objectives, rules, and procedures, and differentiating ELA from standard system-wide monetary operations. - Finding: ELA has never been activated to date; confidentiality considerations have limited opportunities to exercise discretion publicly. ### Financial integrity (AML/CFT) - Finding: NBRNM discloses general information on AML/CFT supervisory powers and processes; the Law on Money Laundering Prevention is referenced in the Law of the NBRNM. - Gap: NBRNM’s AML/CFT role is not mentioned in all documents describing supervisory function and approach. - Gap: NBRNM discloses only general information on AML/CFT supervisory activities for banks and no information on AML/CFT supervision of certain non-bank financial institutions (designated in the Law on Money Laundering Prevention). - Gap: NBRNM does not release information on human and technical resources allocated to AML/CFT supervision, nor on outcomes of such supervision. - Finding: The Law on Money Laundering Prevention is available on the NBRNM’s website in Macedonian. - Recommendation: Publish more information on AML/CFT supervisory activities and practices and how they fit into the broader supervision framework. - Internal controls: - Finding: In March 2021, the National Bank adopted a policy to address ML/TF risks in its operations and activities; the policy is not yet fully implemented. - Finding: The policy (including information on dedicated staff and functions, and internal AML/CFT control activities) is an internal act and not publicly available. - Gap: Given not all internal controls are in effect, no information is available on outcomes or oversight of such controls. ### Official relations and cooperation agreements - Finding: Room for improvement in disclosure of NBRNM’s interactions with government and domestic public financial agencies; MoUs and other cooperation/exchange of information actions could be disclosed in more detail. - Recommendation: Disclose texts of cooperation agreements, Memorandums of Understanding (MoUs), or other arrangements with foreign agencies where permitted; disclose interactions with international organizations and other central banks when counterparties allow publication to explain importance and benefits of these relations. ### Detailed review and methodology - Review period: "The mission took place during May 19–June 4, 2021, and initiatives implemented after the review date have not been considered." - Scope: Review maps NBRNM transparency practices across a range of best practices; does not assign ratings under the CBT. - Context considered: NBRNM’s legal mandate and policy context, sophistication and complexity of North Macedonia’s financial system, and prevailing legal framework (freedom of information, confidentiality, active transparency). - Stakeholder engagement: Review team met with members of Parliament; NBRNM Council, management and staff; Minister of Finance and Ministry staff; Deposit Insurance Fund; Agency for supervision of fully funded pension insurance; Insurance Supervision Agency; Securities and Exchange Commission; local and foreign financial institutions; banking association; academics; media; Chamber of Commerce; Delegation of the European Union. - Materials reviewed: NBRNM provided a comprehensive self-review of the CBT, detailed responses to additional questionnaires, and access to relevant public documents. *Source: IMF staff review (mission May 19–June 4, 2021).* ### 43. Reaching conclusions based on the CBT review of the NBRNM required judgments by ### 1mkdea2022001 - 43. Reaching conclusions based on the CBT review of the NBRNM required judgments by ### Review process and cooperation - The review adhered to a common, agreed methodology to provide the NBRNM with an internationally consistent benchmark for its transparency practices. - The team appreciated the very high quality of cooperation received from the NBRNM, including provision of self-review, documentation, technical support, and facilitation of the mission meetings schedule. *Findings and overall judgment* - Central banks and domestic circumstances differ across countries; nevertheless, a common methodology was applied to reach conclusions. - Transparency assessments and recommendations are based on the review team’s judgments. *Acknowledgement* - The team extends its warm thanks to the staff of the NBRNM for excellent cooperation. ### Pillar I — Central Bank Governance: Principle 1.1 Legal Structure - Description: - The NBRNM discloses its legal framework to the public. The Law on the National Bank (unofficial consolidated version) is available on the website of the NBRNM. - All decisions and instructions that have a general application are published in the Official Gazette and on the website of the National Bank, www.nbrm.mk. - The Law on the National Bank clarifies transitional arrangements limited in time and contains a Chapter of provisions that shall only apply as of the date of accession of the Republic of North Macedonia to the European Union, respectively the date of the introduction of the Euro as the currency of the Republic of North Macedonia. While legally clear, this is not explained to the public on the NBRNM’s website in an easily understandable manner. - The NBRNM website contains links to the Banking Law, the Law on Foreign Exchange Operations, the Law on Payment Operations, the Law on the Macedonian Bank for Development Promotion and the Law on Providing Fast Money Transfer Services. - Other relevant laws are not listed and/or not explained on the website; examples include: - The Law on Money Laundering Prevention and other Criminal Proceeds and Financing of Terrorism (relevant for the NBRNM’s supervisory powers on AML/CFT), - The Law on the Prevention of Corruption and Conflicts of Interest (applicable to National Bank Council members), - The Law on Public Procurement (applicable inter alia to the selection of the NBRNM’s external auditors). - The Law on the National Bank provides that insofar as it does not regulate its organization and operation, provisions of other laws that do regulate such matters shall apply; the Law shall not be amended or superseded by other laws. The website does not explain the NBRNM’s legal framework in an easily understandable manner. - Legal nature: Notes to the Financial Statements clarify that the capital of the National Bank is owned by the Republic of North Macedonia and can be neither transferred nor be subject to any encumbrance. The NBRNM website does not explain the legal nature in an easily understandable manner. - Legal protection: The Law clarifies immunity from attachment and extent of liability for damages, but judicial review and the NBRNM’s ability to impose misdemeanor sanctions on third parties are not explained in an easily accessible manner. - Review Core / Expanded: - Website contains link to the Law on the National Bank, discussion of main functions, and link to decisions/instructions with general application. - Interaction and overlap between relevant laws (e.g., Law on Administrative Servants and Council authority over employment terms) is not explained clearly; draft amendments to the Law on Administrative Servants are being prepared to clarify this. - Dependence of applicability of certain provisions on EU accession / Euro introduction is not explained on the website in an easily understandable manner. - Comments / Recommendations: - Transparency could be enhanced by explaining on the NBRNM website the legal framework, legal nature and legal protection of the NBRNM in an easily understandable manner for the public. - The website could provide a dedicated section explaining the dependence of certain provisions on accession to the European Union and the introduction of the Euro. ### Pillar I — Central Bank Governance: Principle 1.2 Mandate - Description: - Objectives: - NBRNM’s objectives are specified in the Law on the NBRNM and disclosed on its website. - Primacy of the price stability objective and hierarchy with other objectives are clarified: "without prejudice to price stability, the contribution to the maintenance of a stable, competitive and market-based financial system and the support to the Government’s general economic policies without jeopardizing the achievement of primary objective and in conformity with the principle of open market economy and free competition." - The NBRNM’s degree of autonomy does not vary with respect to its different objectives. - Functions: - Law and website disclose NBRNM functions; monetary policy design, objectives, interest rate policy, monetary transmission mechanism, and monetary policy instruments are explained on the website. - Missing from the website: - The function of the NBRNM as the AML/CFT supervisor for the banking sector. - The design and conduct of the exchange rate policy. - Macro-prudential policy (conducted pursuant to the objective to contribute to the maintenance of a stable, competitive and market-based financial system). - The NBRNM publishes its Strategic Plan, annual Plans of Activities, and Reports on implementation on its website. - Powers: - The Law lists public and private law powers and prohibitions; prohibited activities are clearly stated. - Review Expanded: - Financial stability objective wording ("contribution to the maintenance of a stable, competitive and market-based financial system") might not be easily understandable to the public. - Macroprudential policy role and powers are not easily accessible on the website. - Comments / Recommendations: - Enhance transparency by providing a comprehensive list and description of all NBRNM functions on the website. - Clarify the NBRNM’s financial stability objective and especially its functions and powers regarding macro-prudential policy. - Disclose the existing MoU for financial stability more comprehensively on the website. ### Pillar I — Central Bank Governance: Principle 1.3 Autonomy - Principle 1.3.1 Institutional/Operational Autonomy - Description: - The Constitution provides that the NBRNM is autonomous. The Law stipulates that the NBRNM shall be autonomous and accountable in the pursuit of its objectives and performance of its tasks. - The NBRNM, Council members and staff shall not seek or take instructions from any government authorities, municipal bodies, bodies of the City of Skopje and any other legal entities and/or natural persons. The Law adds that autonomy shall be respected at all times and no person or entity shall seek to influence Council members or staff or interfere in NBRNM activities. - The website explains autonomy under the heading of monetary policy design. - Third parties may attend Council meetings only upon invitation. - The NBRNM has concluded various MoUs with governmental agencies and ministries for exchange of information and cooperation; these MoUs are not disclosed on the website. - Review Comprehensive: - Constitution and Law clearly stipulate autonomy and accountability. - Explicit limitation on audits by the State Audit Office contributes to institutional autonomy. - Website description focuses on price stability and monetary policy, which could give the mistaken impression that autonomy applies only to monetary policy. - Comments / Recommendations: - Explain on the website that the NBRNM is autonomous and accountable in pursuit of all its objectives and tasks as provided in the Law. - Disclose MoUs on cooperation and exchange of information with governmental agencies and ministries on the website. - Principle 1.3.2 Functional Autonomy - Description: - The Law stipulates that decisions of the NBRNM Council shall not be approved, revoked, annulled or amended by any government authorities, municipal bodies, bodies of the City of Skopje and any other legal entities and/or natural persons. - Review Expanded: - The Law clearly regulates functional autonomy. - Interaction between the Law on Administrative Servants (defining certain NBRNM employees as administrative officers) and the Council’s mandate to adopt general terms and conditions of employment for its staff remains unclear. - Comments: - (No specific additional comments beyond noting the ambiguity with the Law on Administrative Servants.) - Principle 1.3.3 Personal Autonomy - Description: - Eligibility and disqualification criteria for Governor, Deputy Governors and non-executive members are in the Law. They are appointed for a seven-year term that may be renewed. - Appointment procedure: - Governor appointed by the Parliament on a proposal of the President of the Republic of North Macedonia. - Vice Governors appointed by the Parliament on a proposal of the Governor. - Non-executive members appointed by the Parliament on a proposal of the Government of the Republic of North Macedonia. - Termination of office occurs: (i) after expiry of term; (ii) death; (iii) resignation; or (iv) dismissal. Dismissal grounds and procedure are detailed in the Law. - Parliament shall dismiss, depending on whether the decision concerns the Governor or a non-executive member, on the recommendation of either the NBRNM Council, the Governor, or the President of the Republic of Macedonia (and as appropriate after consultation). - The Law prevents former Council members from serving in a professional capacity in a bank or other financial institution in the Republic of Macedonia during a period of one year immediately following the end of their term of office. - The website lists the articles in the Law that apply to appointment, termination, resignation and dismissal. - Notes to Financial Statements contain information on remuneration of key management. - Review Expanded: - Provisions (including double veto procedures for appointment and dismissal) serve to ensure transparency of these decisions. - Website merely lists articles and does not make these provisions easily accessible or understandable to the general public. - Comments / Recommendations: - Enhance transparency by including on the website an explanation in general terms of rules governing appointment, election, termination of term, resignation and dismissal of Council members. - Principle 1.3.4 Financial Autonomy - Description: - Financial autonomy enshrined in the Law: - Article 3: NBRNM shall be a legal entity having administrative, financial and management independence. - Provisions regarding financial resources, capital, general and special reserves, profit calculation and distribution mechanism, and recapitalization are stipulated in Articles 12-16. The Law adds that the capital cannot be encumbered or reduced, and includes strict rules on monetary financing (Article 44). - The NBRNM prepares its own annual budget-financial plan, adopted by the banks’ Council prior to the commencement of the financial year and communicated to Parliament for information (Articles ...). ### Key statistics and numeric/legal references preserved exactly - Term length for Governor, Deputy Governors and non-executive members: seven-year term that may be renewed. - Cooling-off restriction for former Council members: one year immediately following the end of their term of office. - Legal references preserved as stated: Article 3; Articles 12-16; Article 44. - Website referenced exactly: www.nbrm.mk. *Italic: Summary based on the CBT Detailed Review of the Central Bank of the Republic of North Macedonia as presented in the source content.* ### 47.14 and 66). ### 1mkdea2022001 - 47.14 and 66) ### Financial autonomy and disclosures - General terms of employment, including allowances and benefits for the staff of the NBRNM are determined by the NBRNM Council (Article 47.13), as specified by the Law and Labor Relations Law (with some staff being subject to Law on Administrative Servants). - Financial statements are prepared in accordance with International Financial Reporting Standards (Article 60) and issued within four months after the December-end of each financial year. - The NBRNM prepares a three-year strategic plan that includes a projected balance sheet, plan of operational costs, and planned investments; the strategic plan is adopted by the Council and forms the basis of an annual plan of activities and is published on the bank’s website (Plan of the NBRNM 2020-2022). - Review findings: - Arrangements on financial autonomy are well regulated in the Law and detailed in disclosure notes of the audited financial statements. - The rationale for financial autonomy is not explicitly communicated. - Clarity is lacking regarding implications of the Labor Relations Law and Law on Administrative Servants for the NBRNM’s budget and determination of employment salaries and benefits by the Council. - Comments / recommended transparency enhancements: - Provide an explicit positioning and description of financial autonomy under the “transparency” section on the website explaining the rationale behind different legal-framework elements. - Include a general description of the relation and interaction between the NBRNM Law and other relevant laws (Labor Relations Law and Law on Administrative Servants). ### Decision-making arrangement (Principle 1.4) - Legal framework and roles: - The NBRNM Council is the governing body (members: Governor, three Deputy Governors and five non-executive members). - The Governor is Chairperson of the NBRNM Council and serves as chief executive in charge of day-to-day operations; Deputy Governors assist the Governor. - The Governor may delegate powers within rules adopted by the NBRNM Council to other Council members or staff with special authorizations. - Members of the NBRNM Council have a fiduciary obligation to act solely in the interest of the objectives and tasks of the NBRNM. - Organizational structure and disclosure: - The NBRNM discloses a detailed Organizational Chart on its website identifying reporting lines and names of responsible managers (Governor, Deputy Governors, Secretary General and General Director). - The NBRNM Council has adopted a Rulebook on Organization and Rulebook on Systematization; these are available on the website. - Committees and oversight: - The Law empowers the Council to appoint one or more committees but is silent on establishment of an Audit Committee (AC) and other committees such as the monetary policy committee. - The website lists an Audit Committee (AC) Charter defining objectives, responsibilities, method of reporting, and interaction with the Internal Audit Department. - A misdemeanor commission is established by the Law to launch misdemeanor procedures and impose defined sanctions; procedural safeguards are included. - The Law establishes an Internal Audit Department as a special organizational unit directly accountable to the Governor; the Council appoints the Chief Internal Auditor on proposal of the Governor, with term of appointment five years and defined eligibility and removal situations. - Operations and governance procedures: - The Law defines meetings and proceedings of the NBRNM Council (quorum, voting rules and signature of minutes); more detailed Rules of Procedure are classified for internal use only. - The Law defines standards of good governance (impartiality, objective/rational decision-making, fair and non-discriminatory execution). - Review findings: - Law contains clear allocation of responsibilities to Council, Governor and Deputy Governors; website is silent on the role of the Governor and refers readers to Article 47 in the Law for the Council’s role. - Rules of Procedure are not published (classified for internal use) though voting rules and meeting frequency are disclosed in the Law. - The AC Charter is published, but the Law is silent on AC establishment and other committees are not mentioned on the website. - Comments / recommended transparency enhancements: - Include a public description of the roles of the Governor and NBRNM Council on the website. - Explicitly include establishment of an AC in the Law and publish information on other committees (responsibilities and composition). - Publish the Rules of Procedure of the NBRNM Council to enhance transparency. ### Risk management (Principle 1.5; 1.5.1 Risk Exposure; 1.5.2 Risk Framework) - General disclosure approach: - The NBRNM distinguishes between financial and non-financial (operational) risks. - Detailed financial risk disclosures focus on foreign reserves management; operational risk disclosures are limited and high-level. - Financial risk disclosures: - The Foreign Reserves Management and Investment Policy (published on the NBRNM website) provides guidance on credit risk and exposure limits, specified risk tolerance with respect to market risks, exposure limits and deviation parameters. - Annual Report (Chapter VI. Foreign Reserves Management and Investment) discloses investment policy objectives, high-level information on risk exposures, collateralization of lending activities, limits utilized in investment operations, and performance measurement; it assesses and quantifies exposure of foreign exchange reserves relative to the risk budget. - FY 2020 Financial Statements (Note 3. Financial Risk Management) contains detailed information on levels and development of exposures to principal financial risks, including structure of portfolios, eligible counterparties and bond issuers, permissible limits, mitigations, benchmarks, quantified exposures and references to quantification methods/concepts. - Market risk is monitored by measuring (adjusting) portfolio duration, risk budget and currency allocations, and tracking the Value-at-Risk (VaR). Credit risk strategies include collateralization and quantitative limits and credit rating scale. - Operational risk disclosures: - Annual Report (Chapter XII and XI) contains very brief references to operational risk management, business continuity, information system security and data protection, and that “an in-depth assessment of the National Bank exposure to operational risks was performed.” - Strategic Plan 2020-2022 references operational risk activities under Strategic Goal 10 (improve internal control regarding risks and raise employee awareness). - Strategic Plan 2022-2024 sets a separate strategic objective for risks to strengthen risk management, establish an integrated risk management framework, and strengthen internal risk control and effective risk management across operations. - The 2019 Annual Report states the NBRNM established a “Strategy and Prevention Office” responsible for operational risk management, business continuity, and information security. - Operational Risk Management Policy (adopted by the Council in 2015) and Guidelines for Implementation (adopted by the Governor in 2018) exist; the policy and guidelines set operational risk tolerance and provide governance structure, methodology and working procedures but are internal (not published). - The operational risk function is supported by an Operational Risk Committee, a Chief Risk Officer position, and a dedicated unit for Strategy and Operational Risk; these arrangements are not publicly disclosed in detail. - The NBRNM received Fund Technical Assistance on operational risk management in 2020 and is enhancing its operational risk framework in line with IMF recommendations. - Review findings: - Financial risk exposures related to foreign reserves and open market operations are clearly disclosed. - Information on non-financial (operational) risk exposure is limited and lacks a separate risk statement mapping key risks to the NBRNM mandate. - Institutional risk governance arrangements and how responsibilities cascade among decision-making bodies are not clear to external stakeholders. - Operational Risk Management Policy and Guidelines, and description of Operational Risk Committee role/responsibilities are not published. - Comments / recommended disclosures to strengthen risk management transparency: - Include a high-level overview of key risks clearly mapped to the NBRNM mandate. - Publish a general risk statement (a separate chapter on risk management) outlining the Bank’s stance on risks, including operational risks, and the role of the risk management function. - Consider a dedicated risk management section on the website and a corresponding section in the annual report providing overview of risk policy objectives and risk governance across the bank. - Publish the Operational Risk Management Policy (or an overview if parts are confidential) including high-level objectives, scope, and methodology/process for continuous identification, evaluation and mitigation of risks. - Disclose charters/regulations that define roles and responsibilities of committees such as the Investment Committee and Operational Risk Committee. ### Accountability framework (Principle 1.6; 1.6.1 Arrangements) - Legal and reporting framework: - Accountability arrangements including external and internal audits, accounting practices and policies, financial statements, appointment of the Chief Internal Auditor, and state audits are regulated under Part IX. Financial statements and audit in the Law on the NBRNM. - Independently audited financial statements: - Articles 60 and 61 of the Law require financial statements prepared under IFRS and, within four months after the end of each financial year, submitted to the Minister of Finance, Parliament, President, and Prime Minister after approval by the Council, signed by the Governor and certified by the external auditor. - Audited financial statements are published in the Official Gazette and on the NBRNM website (Financial Statements FY 2020). - Within ten working days after the end of each calendar month, the NBRNM prepares and publishes a balance sheet as of the end of that month and submits it to the Minister of Finance (Monthly Statement of NBRNM Financial Position). - Article 62 requires the Annual Report to be prepared within four months after the fiscal year end, issued on a timely manner, translated into English, and published on the NBRNM’s website (Annual Report 2019). Annual report and financial statements are published separately though printed annual report includes financial statements. - Article 65 stipulates that financial statements shall be audited at least once a year in conformity with International Standards on Auditing (ISA) by independent external auditors of good repute with recognized international experience in auditing financial institutions. - External auditor selection and rotation: - External auditors are appointed by the NBRNM Council based on procedures in the Law on Public Procurements and shall be rotated every five years. - Although not explicitly disclosed, mission was informed that selection criteria include: external auditor is internationally recognized, and audit team is sufficiently staffed including a quality assurance partner with experience in central banks audits. *Source: 1mkdea2022001 - 47.14 and 66).* ### References to ISA and IFRS are also explicitly stated in the audit opinion, and ### 1mkdea2022001 - References to ISA and IFRS are also explicitly stated in the audit opinion, and ### Independently Audited Financial Statements - Legal framework contains provisions for an external audit according to ISA, and provisions on preparation of annual financial statements in compliance with IFRS; these references are explicit in the audited financial statements (Note 2. A—Basis of preparation of financial statements). - Provisions are clear on publication of audited annual financial statements, monthly financial statements, and annual report, including deadline and that the annual financial statements are published separately. - The Law on the NBRNM provides for the appointment of an independent audit firm of international repute (rotated every five years) according to procurement rules; criteria for selecting external auditors are not explicit. - The complete set of independently audited financial statements is published on the website. - The NBRNM annual financial statements are prepared in accordance with IFRS and accompanied by an external audit opinion; audits are conducted in accordance with ISA. - The full set of audited financial statements is incorporated in the hard copies of the annual report. - FY 2020 financial statements (see Note 2) include substantive disclosures on changes in the environment and measures to mitigate the impact of the COVID-19 pandemic. - Comment / Recommendation: - The NBRNM could disclose its external audit rotation policy that includes criteria for the selection of external auditors. ### Internal Audit - The Law on the NBRNM clearly establishes roles and duties of an internal audit function (Article 63) and stipulates appointment and dismissal terms and eligibility criteria for the head of the internal audit function (Article 64); eligibility criteria are set forth in Article 50 of the Law. - The Internal Audit Rulebook (akin to a charter) exists but is disclosed on the intranet site only and is not published. - While the Law is explicit about Internal Audit being accountable to the Governor, functional reporting to the AC of the Council is not clearly established in the Law. - The Internal Audit charter (Article 58) provides for functional reporting to the Council and the AC, but the charter is not published and the functional reporting line to the Council (and to the AC) is not explicitly established in the AC charter. - The 2020 published NBRNM annual report (chapter IX. Internal Audit) contains a basic description of the internal audit function’s role, disclosures on activities performed during the year, number of revisions performed, level of recommendations issued, and how much of these have been fulfilled. - The annual report description does not contain conformance of Internal Audit activities with its charter, nor clarifies rules governing independence and reporting structure, or conformance with international standards. - The last external quality assessment (2012) concluded that Internal Audit is in conformance with the international standards (published in AR for 2012). - Comments / Recommendations: - The functional reporting line of the Chief Internal Auditor to the Council (and the AC) should be made explicit in the AC charter. - The NBRNM should publish the Internal Audit charter. - The NBRNM should consider publishing that its internal audit function “generally complies with international standards for the professional practice of internal auditing” based on the recent external quality review. ### Audit Committee (AC) - The Law on the NBRNM empowers the NBRNM Council to appoint one or more committees and define their tasks and activities (Article 47), but is silent on the establishment of an AC. - The NBRNM website, under The NBRNM Council, discloses members of the AC and its charter. According to the charter (Article 3), the AC’s primary objective is to assist the NBRNM Council in its oversight covering audit, financial reporting, internal control and compliance processes. - Article 11 of the AC charter establishes a reporting mechanism with requirements: - The AC shall submit an annual report to the NBRNM Council regarding its activities, problems and recommendations. - The AC shall ensure permanent communication between the internal audit, the external audit and the NBRNM Council members. - The AC shall control the reports adopted by the NBRNM, which are within the AC's responsibilities. - The annual activity report of the AC is not publicly disclosed. - The AC’s composition and charter are disclosed on the NBRNM’s website; responsibilities are clearly set out in the charter. - The annual report discloses that the work of the IAD is overseen by the AC and that the AC met regularly, but does not provide details on number of meetings or high-level overview of activities. - Comments / Recommendations: - For further transparency on the AC’s roles and responsibilities, it is advisable to publish the AC annual activity report. - The NBRNM should consider including a high-level description of the AC activities, including the number of meetings and major issues, in the annual report. ### Tools and Disclosure Practices (Principle 1.6.2 and 1.6.3) - Principle 1.6.2. Tools: - Independently Audited Financial Statements: central bank discloses auditing and accounting standards and compliance frameworks and gives the public sufficient information to assess and understand financial performance, use of resources, and transactions with the government and other stakeholders. - Internal Audit: central bank provides the public with information regarding its internal audit function, discloses its framework and compliance with the framework, and the scope of its responsibilities. - Audit Committee: It is clear whether an internal oversight body that reports to the Board exists, and which of the activities are published. - Principle 1.6.3. Anti-corruption Measures and Internal Code of Conduct: - Domestic anti-corruption legislation and measures apply to decision-makers, staff, and agents of the central bank. The central bank discloses its internal Code of Conduct with additional requirements specific to central bank management and staff. ### Anti-corruption Measures and Internal Code of Conduct — Legal Framework - The 2019 Law on Prevention of Corruption and Conflicts of Interest is the specialized anti-corruption law applicable to legal entities conducting activities related to the public interest, including National Bank Council members (as appointed officials). - Liability for corruption offences is regulated by the Law on Preventing Corruption, the Criminal Code, and other applicable laws. - The 2010 Law of the National Bank contains provisions relating to corruption and conflicts of interest: - Article 70 requires National Bank staff avoid situations that would give rise to conflicts of interest and precludes them from receiving any gifts, benefits, or remuneration of any kind. - Article 70 requires National Bank Council members to disclose significant financial interests. - Breaches of the National Bank Law constitute grounds for disciplinary measures. - The Law of the National Bank is available on the National Bank’s website in Macedonian and English and relevant portions of the Law. - The National Bank issued a Code of Ethics (2011) applicable to the National Council and employees, prescribing principles of conduct, prohibitions, provisions on avoiding conflicts of interest, and disclosure of significant financial interests. - Work on a new Code of Ethics is underway; the newer version is planned to be published in both Macedonian and English on the National Bank’s website. - Review Core observation: - The National Bank’s legal framework (Law of National Bank and Code of Ethics) clearly applies to decision-makers and staff. - Although national anti-corruption legislation and measures are reported to apply to National Bank decision-makers (Council members), this is not explicitly stated in publicly available materials produced or published by the National Bank. *Source: IMF staff assessment excerpt from the NBRNM review.* ### references to the Law on Prevention on Corruption are referenced in the Law of ### 1mkdea2022001 - references to the Law on Prevention on Corruption are referenced in the Law of ### Legal framework, conflicts of interest, and anti-corruption alignment - Findings: - Disparities exist in the language of governing documents (Law on Prevention of Corruption, Law of the National Bank, and the Code of Ethics), causing confusion and ambiguity as to the applicability of the Law on Prevention of Corruption. - Article 2 of the Law of the National Bank states that it shall supersede any other law. - Conflict of interest definition in the Law of the National Bank: arises “where members of the National Bank Council or staff have private or personal interests, which may influence or may influence the objective performance of their duties. Private or personal interests of members of the National Bank Council or staff mean any potential advantage for themselves, their families, their other relatives up to the second degree” (similar language is included in the Code of Ethics). - Law on Prevention of Corruption provides more detailed language and also precludes staff from being “guided by personal, family, religious, political party’s and ethnic interests, pressures and promises from the superiors or another person.” - Disclosure of financial interests: the Law of the National Bank and the Code of Ethics require disclosure of “significant financial interests”, which potentially contradicts the Law on Prevention of Corruption requiring public officials (including National Bank Council members) to submit a declaration of assets and interests, including a “detailed inventory of real estate, movables with a value exceeding the amount of twenty average net salaries in the previous three-month period, securities, receivables and debts, as well as other property in his/her possession, or ownership of the members of his/her family, stating the basis for acquiring the declared property” as well as a statement of interests (e.g., membership on boards). - Sanctions: Non-compliance with the Code of Ethics is sanctioned according to the Labor Law, the Law on the National Bank and the Labor Agreement of the National Bank; sanctions under the Law on Prevention of Corruption are not referenced. - Breach of Article 70(2) of the Law of the National Bank (on receiving benefits or gifts) may constitute grounds for disciplinary measures, including dismissal. Certain high-level officials may be liable for a misdemeanor if they fail to provide a written statement where they did not recuse themselves in presence of a conflict of interest. No sanctions appear to exist for violations of other provisions of Article 70. - Recommendations: - Rectify disparities between the Law on Prevention of Corruption and the Law of the NBRNM and the Code of Ethics by harmonizing older provisions in the Law of the NBRNM with the newer, more detailed provisions in the Law on Prevention of Corruption. - The NBRNM should clearly/explicitly refer to the Law on Prevention of Corruption as part of its governing legal framework. - The Law of the NBRNM and the Code of Ethics should reference the Law on Prevention of Corruption both generally (as a source of articulated principles) and specifically (in mention of applicable sanctions); this could be achieved through an instrument of the NBRNM. - Sanctions should be clearly stipulated for all breaches of the Code of Ethics and the Law of the NBRNM (specifically, Article 70) by NBRNM staff and decision-makers. ### Principle 1.6.4 — Human Capital Management: governance and disclosure of HR policies - Findings: - The NBRNM indicated policies and practices on management of human capital (employment policy, performance management, professional development, promotion, remuneration) are subject to legal restrictions concerning transparency and are considered internal processes regulated under confidentiality. - Internal regulations include: - Rulebook of the NBRNM’s Organization (defines internal organization, departments, units, tasks). - Rulebook for the Systematization of work positions (job classification, work categories, job descriptions, educational degree). - Code of Conduct (Ethics), a By-Law adopted by the NBRNM Council and published on the website (in Macedonian). The Code is enshrined in the Law on the NBRNM (Article 47.8). - Transparency requirements on human resources are met when legal obligations exist: - Recruitment: process of employment follows Article 22.1 of the Labor Relations Law and Article 6 and 7 of the Collective Agreement of the NBRNM. - Organization: Article 10 of the Law on Free Access to Public Information — website includes organizational chart with Departments, managers (directors), list of all employees’ working positions, official e-mail addresses and official/business phone contacts; section also contains reference to the Code of Ethics (in Macedonian). - Article 5 of the Law on the NBRNM: “...Council members and staff shall not seek or take instructions...” and “no person or entity shall seek to influence Council members or staff...” — indicative of independence and non-political recruitment. - Article 58 explicit about nondiscriminatory recruitment: “when recruiting staff, the National Bank shall apply nondiscriminatory personnel policies, by ethnic, religious or other grounds.” - Labor Relations Law (Article 6) prohibits discrimination; Article 250 allows internships; internship announcement usually published once a year in May (cancelled for 2020 due to COVID-19). - 2020 Annual Report (Chapter X. Human Resources Management) states the NBRNM “... is an institution that constantly cares and invests in its employees...” and contains statistics on employees (current vs. previous period), gender, age, qualification structure, training and professional developments, professional education/training, and performance management system. - 2020-2022 Strategic Plan (Strategic Objective 10) emphasizes advancing strategic planning through employee motivation and performance monitoring and evaluation; prioritizes development of modern and competent human capital and improvement of corporate governance and values. - Public disclosure gaps: no explicit references to diversity and inclusion; no explicit references provided on leadership and succession planning or program; NBRNM does not publicly disclose applicable policies for attracting, promoting and retaining employees. - NBRNM working on expanding employment section on the website to provide more information about careers, key values and opportunities for professional and career development. - Recommendations: - Disclose further information on diversity and inclusion, as well as high-level rules/statements on recruitment, promotion, and retention of staff. - Communicate quantitative measures/indicators tying human resources to the NBRNM’s strategic plan. ### Principle 1.7 — Communication: organizational arrangements, strategy, channels, and tools - Principle 1.7.1 Arrangement — responsibility and structure - Findings: - Obligation to communicate anchored in primary legislation: articles 35, 36, 37, 61, 62, 69, 74 of the Law on the NBRNM (published on website). The Law on Free Access to Public Character Information is also applicable to the NBRNM (not published on the website in English). - Communication is within remit of the Governor's Office; no specific unit or department explicitly mentioned for Communications, International Relations or Institutional Affairs. - Duties regarding communication available in the Rulebook on the Organization of the NBRNM (Governor’s Office duties and activities disclosed on the website in Macedonian; list of communication activities disclosed on p. 13-14). - Communication process: active involvement of all organizational units; final versions approved by strategic managers or Governor; for each important event NBRNM publishes press release; non-executive members of the NBRNM Council are notified in advance. - No published communication policy, principles or guidelines; Strategic Plan mentions “Further improvement of corporate governance, transparency and social responsibility of the institution.” - New statistical portal “NB Stat” increases availability/flexibility of published statistical data. - Recommendations: - Determine and disclose an institutional communication strategy encompassing institutional affairs, public relations, and means and methods of communication for mass media. - Make organigram and communication tasks more accessible on the website. - Principle 1.7.2 Strategy/Tools — objectives, audiences, channels, and tools - Findings: - No published objectives or general strategy on communications accessible on website; tasks are established in the Rulebook. - Target audiences and initiatives: - Journalists: preparing list of regular briefings (quarterly statistical data, quarterly reports) and increasing press conferences; list expected finalized by end of 2021. - Financial education: multiple projects to improve public knowledge of financial services (disclosed on website, annual activities report, strategic plan 2020). - Fintech sector: platform “Innovation Gateway” since end of 2019. - Interested stakeholders: communications sent via e-mail to stakeholders who previously expressed interest (civil society organizations, Macedonian Banking Association). - Two traditional press conferences to present macroeconomic forecasts; separate presentations for target groups (e.g., diplomatic corps, companies). - Channels for information requests: - General questions: info@nbrm.mk; responses normally within 14 days unless more analysis required. - Free access to information procedure accessible on website (Macedonian) under “Public relations”; contact details of secretary of the Bank and manager of the Legal Affairs Department disclosed; form for requests provided; complaints can be submitted to the Agency for Protection of the Right to Free Access to Public Information; complaint form and fee/cost disclosed on web site. - Statistics inquiries: contact.statistika@nbrm.mk. - Media inquiries: NBmedia@nbrm.mk; answered same or next working day except when additional analysis is needed. - Tools: announcements/press releases, statements, interviews, addresses, publications (reports), press conferences, briefings, social media (Facebook, Instagram, Twitter), proactive sending to media via “Viber”. - Publications calendar: Annual Reports, Financial Statements, Monetary Policy Reports, quarterly reports, Financial Stability Reports, NBRNM Strategic Reports. - Monetary policy meeting decisions communicated through published statements; agendas of NBRNM Council sessions available in Macedonian; dates of Operational Monetary Committee meetings available on website; auction-day press releases posted the day after meetings. - Evaluation: Plan of Activities 2020 includes project for “Conducting satisfaction surveys for data reports and users.” - Recommendations: - Reinforce and further define institutional communication objectives and disclose an institutional communication strategy. - Improve website navigation (e.g., “Transparency” tab) and interlink measures, publications, events, press releases, and briefings; maintain information in official languages and increase use of simplified, accessible language and visual aids (videos, infographics). - Consider tailored surveys and focus groups to measure communication efficacy. ### Principle 1.8 — Confidentiality and classification of information - Findings: - Confidentiality anchored in legislation: Law on the NBRNM (Article 74) and the Law on Classified Information (not published by NBRNM on its website). - NBRNM implements legislation through “decisions” and “internal regulations.” The “Decision on the access and the manner of using non-public information of the National Bank of the Republic of North Macedonia” is published in the Official Gazette but not linked on the NBRNM website. - Article 74: no persons who serve or have served as NBRNM Council members or staff shall, except when necessary, permit access to, disclose or publicize nonpublic information obtained in performance of tasks, or use such information for personal gain. - Law on Classified Information (Article 7): information subject to classification includes “economic and financial matters of importance for the Republic of North Macedonia.” Four classification levels: Top Secret, Secret, Confidential, and Restricted. - NBRNM Rulebook adds two internal levels: - "Professional secret": not classified nor public, disclosure may affect operations/interests of NBRNM and violate legally protected interests (personal data, bank-submitted data, supervisory data). - "For internal use": not classified, not professional secret, not public, used within internal operations. - Decision provisions when submitting classified/professional secret/internal use information to external user: - Item 3: access provided only to the external user to whom it is submitted. - Item 4: external user must not disclose, publish, use for personal gain, or allow unauthorized access. - Item 6: external user obliged to apply protection measures. - Item 7: enabling unauthorized access is a violation; persons granting unauthorized access liable per legal regulations. - NBRNM discloses public information list on website in Macedonian only. - Data Protection Officers responsibilities include information security, protection of personal data, security of classified information, business continuity; they report to the Governor and the NBRNM Council. - Strategy and Prevention Office and Data Protection Officers appear on the NBRNM website but not in the organigram. - Declassification system established by Article 54 of the Law on Classified Information. - Recommendations: - Proactively disclose on the NBRNM website the Law on Classified Information and the “Decision on the access and the manner of using non-public information of the National Bank of the Republic of Northern Macedonia” as part of the NBRNM’s legal framework. - Explain to the public that classification follows the Law on the NBRNM, the Law on Classified Information, and internal bylaws; when classification is expanded, explain the reasoning. - Provide an explanation of the Data Protection Officer unit’s functions for better public understanding. ### Pillar II — Monetary policy: objectives, framework, decisions, and supporting analysis - Principle 2.1.1 Objectives and framework - Findings: - Primary objective: achieve and maintain price stability (Law on the NBRNM, Article 6 (1)). - Instruments: open market and credit operations, reserve requirements; other instruments may be introduced with a two-thirds majority approval of the NBRNM Council members. - Monetary policy regime: exchange rate targeting — the denar against the euro used as intermediate target to anchor inflation expectations. - De jure exchange rate arrangement is floating; IMF AREAER classifies the de facto exchange rate as a stabilized arrangement. - Article 33 of the Law on Foreign Exchange Operations: exchange rate freely determined on basis of supply and demand. Article 34 authorizes NBRNM participation in foreign exchange market to achieve policy goals. - AREAER: NBRNM maintains a stable exchange rate within a narrow fluctuation band of bid-ask exchange rates determined by the Committee for Operational Monetary Policy. - Monetary policy framework is articulated on NBRNM website under Design of Monetary Policy; NBRNM interest rate role in managing systemic liquidity and influencing lending/deposit rates described. - Monetary policy retains some autonomy due to imperfect capital mobility and limited international financial integration in the short run. - Review: NBRNM discloses objectives, framework, and instruments through website documents (Strategic Plan, Annual Report, Quarterly Report, Monthly Report, press releases). - Principle 2.1.2 Policy decisions: timing and decision process - Findings: - NBRNM announces, explains, and disseminates policy rate decision one day after monthly meeting of the Committee for Operational Monetary Policy. - Governor is the sole decisionmaker; Committee for Operational Monetary Policy has an advisory role. It meets on pre-announced dates specified for the calendar year. - Press release lays out considerations underpinning the decision: recent inflation and economic activity developments, reserves evolution, credit and deposits performance, systemic liquidity trends, international environment, macroeconomic expectations and short-term upside/downside risks. - NBRNM publishes press releases whenever the Government Council adopts decisions on other policy instruments. - Review: NBRNM discloses policy decisions (key policy rate) with press release day after meeting; however, the process by which decisions are taken is not fully disclosed — Committee role, composition, and modality of working not published. - Recommendation: - Consider giving the Committee for Operational Monetary Policy stronger institutional foundation and disclose its role, composition, and structure to enhance transparency of policy deliberations. - Principle 2.1.3 Supporting analysis - Findings: - Monthly press release after Committee meeting is key document. - Recent Macroeconomic Indicators—Review of the Current Situation is published monthly (except May and November) and expands Quarterly Report analysis. - Macroeconomic Projections and Risks appear in spring and autumn Quarterly Report (May and November) addressing forecasts and effects on monetary policy stance and comparisons with previous forecasts. - Review: NBRNM discloses relevant economic information and supporting analysis on a regular and timely basis; content is technical and could be made more accessible to a wider audience to improve understanding and policy anticipation. ### Principle 2.2 — Cross-border financial flows and foreign exchange administration - Principle 2.2.1 Objectives and framework - Findings: - NBRNM contributes to maintenance of a stable, competitive and market-based financial system (Article 6 Law on the NBRNM). - Law on Foreign Exchange Operations (approved 2001) is available on NBRNM web-page; it regulates current and capital transactions, payments and transfers, FX supervision and control. - Law empowers NBRNM to regulate aspects of FX operations (e.g., Art.4, 14, 16, 20 , 21, 23, 24, 26, 27, 29, 31, 36, 37, 40, 42) and assigns other attributions (e.g., 36-a, 42, 45). - NBRNM does not delegate functions in implementing policy decisions to other entities. - Under Article 46 of the Law on the NBRNM, the NBRNM Council formulates and supervises policy implementation and operations. - Articles 68 and 69: NBRNM adopts by-laws and acts; acts with general application adopted as Decisions and published in the Official Gazette; NBRNM publishes decisions and instructions on its web-page. - North Macedonia must meet Stabilization and Association Agreement (SAA) requirements (entered into force April 2004) for EU accession; Articles 58 to 67 require measures permitting creation of conditions for further application of EU rules on free movement of capital. - Review: NBRNM legal and institutional frameworks for FX administration disclosed; delegation not practiced; alignment with EU-related obligations noted. *Source: 1mkdea2022001 - references to the Law on Prevention on Corruption are referenced in the Law of (PDF chapter/section).* ### References to the SAA are included in the IMF’s Annual Report on Exchange ### References to the SAA are included in the IMF’s Annual Report on Exchange ### Transparency and Legal / Institutional Framework - Findings: - Objectives, legal and institutional frameworks are clearly defined and disclosed in the Law on the National Bank Law, Law on Foreign Exchange Operations, Law On Providing Fast Money Transfer Services, and disclosed on the NBRNM webpage. - Decisions and manuals related to FX operations are posted on the NBRNM website. - Comments / Recommendations: - Transparency can be enhanced with the disclosure of the strategy to achieve the NBRNM’s policy objectives that includes an explicit reference to the SAA on the NBRNM’s website, as is currently done in the IMF’s AREAER. - Disclosure of the process currently adopted for the preparation and adoption of any relevant NBRNM Decisions would enhance transparency. ### Policy Decisions, Process, and Supporting Analysis - Findings: - Article 37 of the Law on Foreign Exchange Operations allows the NBRNM to introduce protective measures in case of a threat of distortion in the balance of payments and of destabilization of the financial system caused by a substantial outflow of capital. - Article 43 entrusts implementation and supervision roles to the NBRNM; Article 45 covers supervision of authorized banks, savings houses and exchange offices. - By-laws required under the Law on foreign exchange operations and Law on providing fast money transfer services are adopted by the NBRNM Council, published in the Official Gazette and disclosed on the NBRNM website. - The NBRNM adopts and implements internal procedures (not publicly disclosed) for preparation and adoption of by-laws/decisions; by-laws are subject to prior discussion with other institutions and private sector representatives and communicated via Q&As for important by-laws. - Press releases are used to announce measures (example: measures during the Greek Crisis, June 2015), but supporting analysis is not always provided in press releases. - Comments / Recommendations: - Transparency can be enhanced with the disclosure of detailed considerations (economic and other conditions and analysis) that result in a policy decision. ### Foreign Exchange Management: Objectives, Framework, and Operations - Findings: - Final objective: preserving price stability as set forth in the Law of the NBRNM. - Monetary policy regime: exchange rate-targeting regime enshrined in the Strategic Plan of the National Bank of the Republic of North Macedonia for the period 2020–2022. - The NBRNM sets the nominal denar exchange rate against the euro since January 2002 (during 1995 to 2002, the denar exchange rate was expressed against the German mark). - Exchange rate determination: end-of-day average of daily bid-ask quotes for euros among market makers in the interbank foreign exchange market; published daily on the NBRNM website. - Under Article 33 of the Law on Foreign Exchange Operations the denar exchange rate is freely determined by supply and demand; Article 34 empowers the NBRNM to intervene to preserve exchange rate stability. - Foreign exchange policy decisions are taken by the Committee for Operational Monetary Policy. - The NBRNM introduced market makers to reduce its market presence; market-maker contract provisions are uniform and posted on the NBRNM website; list of market-maker banks is published. - Disclosure and Reporting: - Annual Report and Quarterly Report include data on turnover, market trends, liquidity, central bank interventions, stock and adequacy of foreign reserves, and the amount, rationale and direction of FX interventions. - Comments / Recommendations: - Public disclosure of the composition, function and responsibilities of the Operational Monetary Policy Committee would enhance transparency. - Inclusion in communications of which categories of counterparties were used in specific FX interventions (e.g., exclusively market makers or also other banks) would improve transparency. ### Foreign Exchange Reserve Management: Objectives, Governance, and Reporting - Findings: - The Foreign Reserves and Investment Policy (pursuant to Law on the NBRNM Articles 7 and 24) sets institutional framework, governance and division of responsibilities. - Article 3 of the Foreign Reserves and Investment Policy defines broad objectives: safety of foreign reserves, liquidity to ensure availability of adequate funds for timely payment of liabilities and profitability. - Sections V, VI, and VII set parameters for control of credit risk and exposure limits, market risks and risk tolerance parameters and operational risk. - Roles assigned: NBRNM Council; Governor (including adoption of Decision establishing an Investment Committee); Internal Audit Department; Financial Market Operations Department; Payment Systems Department. - Financial statements include a section on financial risk management (credit risk, market risk, liquidity risk). - Annual Report provides overview of investment strategy, objectives, operative models; FY 2020 Financial Statements Note 3 contains detailed information on exposures, eligible counterparties and bond issuers, permissible limits, mitigations, benchmarks, and quantified exposures. - Monthly bulletin and Quarterly Report refer to reserve adequacy indicators and maintenance of appropriate levels throughout forecasted period. - Limitations and Practices: - Foreign Reserves Management and Investment Guidelines and Investment Committee procedure rules are internal and not publicly disclosed; Investment Committee decisions are disclosed only internally. - The NBRNM treats composition and allocation of assets as proprietary information and does not disclose certain benchmarks; Annual Reports disclose composition, currency composition, modified duration, credit exposure, and performance in absolute terms and relative to undisclosed benchmarks. - The Annual Report lacks systematic ex-post analysis linking strategic decisions to outcomes; no ex-post evaluations of impact and risk assessment at defined frequency. - Comments / Recommendations: - A dedicated Report on International Reserves could provide more detailed descriptions including objectives of each policy decision, governance, risk exposure (credit and market), investment benchmarks, and clarity on how adequacy and liquidity of reserves are determined. - Consider disclosure of Investment Committee deliberations with a defined lag, with due consideration for market sensitivities. - Annual Report could reference prevailing operational mechanisms and identify when last changes were made. - Set up a systemic ex-post evaluation of investment impact and risk assessments. ### Macroprudential Policy: Framework, Instruments, Communication - Findings: - NBRNM objective (subordinate to price stability) to contribute to maintenance of a stable, competitive, market-based financial system (Law on the NBRNM Article 6 (2)); Banking Law implicitly empowers NBRNM to undertake macroprudential measures. - Macropudential instruments in use include capital buffers (systemic risk capital buffer, countercyclical capital buffer, systemically important banks buffer, capital conservation buffer), leverage ratio, household sector capital requirements, forward-looking loan loss provisioning requirement, liquidity coverage ratio (differentiation by currency), and differentiated reserve requirements by currency and by deposit term. - Macroprudential strategy is laid out in the Strategic Plan for 2020-2022. New legislation expected soon to define NBRNM’s macroprudential role explicitly and to be executed in cooperation with other supervisory authorities. - Financial Stability Committee (FSC) established in 2009 (reconstituted April 2020) serves as coordination body; FSC does not have decision powers—decision powers rest with NBRNM and other supervisory agencies. - Capital buffers methodologies: Decision on Methodology for identifying systemically important banks is published and list of identified systemically important banks is published annually; Decision on Methodology for Determining the Rate of the Countercyclical Capital Buffer is available and specifies timeline for announcement and application when higher than zero; systemic risk capital buffer methodology in final stage to be published when final. - Disclosure and Analytics: - Financial soundness indicators published quarterly on the website for deposit takers and other sectors; Financial Stability Report prepared once a year assesses risks across institutions and markets. - Analysis does not map macroprudential instruments to systemic financial risks, does not identify transmission channels, and does not explain how policy decisions mitigate specific risks. - Comments / Recommendations: - Draft legislation expected to clarify institutional support for macroprudential policy. - NBRNM could design an integral macroprudential policy strategy explaining objectives, decision-making process, rationale and expected transmission channels for instruments; incorporate into the Financial Stability Report and other documents to improve public understanding and acceptance. ### Emergency Liquidity Assistance (ELA) and Resolution - Findings: - Article 22 of the Law on the NBRNM sets option to extend emergency liquidity assistance; NBRNM may act as lender of last resort for banks in exceptional circumstances. - Credits of last resort: periods not exceeding 90 calendar days that may be renewed for a maximum 90 days, on basis of a program specifying required measures by the bank. - Conditions for ELA: (i) bank solvent in NBRNM’s opinion; (ii) credit approved for liquidity improvement; (iii) adequate collateral provided. NBRNM Council determines categories and value of collateral. - Decision on credit of last resort and List of margin ratios on instruments used as collateral are available on the website. - Review: - NBRNM differentiates ELA framework from system-wide liquidity management; documents clarify institutional eligibility, conditionality, supervisory intrusion, and associated financial parameters. - Comments: - None specified beyond existing disclosures. ### AML/CFT Supervision and Internal Controls - Findings: - NBRNM designated AML/CFT supervisor for banks, savings houses, exchange offices and providers of fast money transfer under the Law on Money Laundering Prevention and Other Criminal Proceeds and Financing Terrorism; Article 7 of the Law of the NBRNM stipulates NBRNM shall supervise application of regulations governing “anti-money laundering systems.” - NBRNM published guidances: Decision on Methodology for managing ML/TF risk and Instructions for assessing sectoral ML/TF risks (available on NBRNM website in Macedonian and English). - Internal AML/CFT control policy adopted March 2021: Policy of the NBRNM of the Republic of North Macedonia on managing risk related to money laundering and financing of terrorism; envisages three lines of defense: - First level: transactional level within Payment Systems Department (customer due diligence, SWIFT sanctions screening, ongoing transaction and customer monitoring). - Second level: Office for Strategy and Prevention (legal opinion for flagged transactions). - Third level: Internal Audit Department. - AML/CFT officer position is vacant; full implementation intended January 2022 upon designation of the AML/CFT officer. - Review and Recommendations: - NBRNM discloses overview of AML/CFT supervisory policies and powers; Law on Money Laundering Prevention is available on NBRNM website in Macedonian. - Recommendation: publish the Law on Money Laundering Prevention in English on the NBRNM website and expeditiously fill the AML/CFT officer position for full execution of internal control policy. ### Monetary Policy Operations and Instruments - Findings: - Main objective, framework and instrument types set out in the Law on the NBRNM and in the three-year Strategic plan. - Monetary policy operational framework, key objective, operational target and instruments are disclosed on the website; operational target articulated in context of targeting the denar exchange rate against the euro. - Types of instruments disclosed and detailed in Decisions: Central Bank Bills, Auctions of repo transactions, Outright Reserve transactions, Deposit Facility, Marginal lending facility, Intraday credit, Reserve Requirements — Decisions explain maturity, interest rate, auctioning method, collateral and haircuts, and are updated when amended. - Collateral framework defined in Decision on determining instruments used as collateral; List of securities for conducting monetary operations defines margin ratios; daily purchase prices for accepted collateral published on NBRNM electronic system. - Reserve requirement ratio changes are communicated immediately after decision via Decision amendments and a dedicated website window. - Counterparty access: Decisions for each instrument include provisions on access rights (banks and branches of foreign banks); NBRNM lacks a comprehensive counterparty framework but plans development (included in Plan of Activities for 2021). - NBRNM disclosed EU accession-related capacity strengthening efforts and Twinning Project information on the website. - Review: - Disclosure of instruments, operational target, and articulation with exchange rate-targeting regime is comprehensive. - Comments: - Development of a comprehensive counterparty framework would further enhance transparency. ### Cross-Border Flows, FX Administration, Licensing and Coverage - Findings: - Law on Foreign Exchange Operations regulates current and capital transactions and execution in payments/transfers among residents and nonresidents; contains licensing for FX offices (Article 36), reporting requirements (e.g., Article 14, 16), supervisory attributions (Section 9), penalty provisions (Section 10), and empowers NBRNM to carry out international payment operations for the Republic (Article 26). - Law on providing fast money transfer services provides licensing/approval (Article 9), reporting requirements (Article 24), supervisory attributions (Section VII), and penalties (Section VIII). - Article 68 of Law on NBRNM: acts of general application adopted as Decisions; NBRNM may issue Instructions and nonbinding Circulars. - By-laws/Decisions are posted on the NBRNM website in a timely manner; consolidated versions of Laws are published but by-laws do not follow the consolidated practice. - The regulatory framework clearly discloses types of activities, persons and transactions under NBRNM supervision; licensing and approval procedures, reporting requirements, monitoring and enforcement instruments and sanctions are available on the website. - Specific licensing provisions: Banking Law Articles 16–21 (Governor issues bank licenses); Law on providing fast money transfer services Articles 6–9 (Governor issues license/approval); Decision on currency exchange operations Items 3–8 (Governor issues license to currency exchange operators). - Authorized participants must regularly submit reports on residents’ investments in securities abroad and modifications. - IMF AREAER chapter for North Macedonia includes a summary description of the regulatory framework and NBRNM’s implementation. - Comments / Recommendations: - Disclosure of consolidated versions of by-laws incorporating amendments, and brief descriptions of objectives and scope, would enhance transparency. - A user-friendly website section explaining licensing/approval requirements and documents to be submitted, and Q&As explaining procedures and sanctions, would improve public accessibility. ### FX Operations Instruments, Counterparties, and Reserve Management Instruments - Findings: - Decision on the manner and the terms for buying and selling foreign currency defines instruments, participants, transaction types (spot, forward, FX swaps), means of communication, settlement, and eligibility criteria for market-makers. - Article 15 of that Decision stipulates the National Bank shall buy and sell foreign currency and foreign currency cash with banks and government authorities. - NBRNM has intervened within a narrow fluctuation band of bid-ask exchange rates determined by the Committee for Operational Monetary Policy. - Quarterly and Annual Reports disclose size and direction of FX interventions (Quarterly Report in Balance of Payments section, Financial Account subsection). - Foreign Reserves and Investment Policy and Law on the NBRNM define eligible asset classes; Foreign Reserves Management and Investment Guidelines are internal and not publicly disclosed. - Annual Reports disclose composition, currency allocation, interest rate exposure (value-at-risk), performance and tactical/active positions; benchmarks are not disclosed. - Comments / Recommendations: - Consider disclosing investment benchmarks and more detail on guidelines while managing market sensitivity. - Public disclosure of sanctions for non-compliance with FX regulatory framework and inclusion of actual counterparties used in FX interventions would enhance transparency. *REPUBLIC OF NORTH MACEDONIA — INTERNATIONAL MONETARY FUND* ### references to methods/concepts used for quantification. ### references to methods/concepts used for quantification. ### Reserve assets, instruments, and risk disclosure - Findings: - "The NBRNM discloses broad criteria on selection of reserve assets, instruments, and limited risk disclosures." - "The disclosure of the composition of eligible reserve assets and instruments and risk disclosures by asset class is considered by the NBRNM disclosure of proprietary information, which is only internally discussed." - "The level of disclosure that the NBRNM provides is its choice and reflects the level of transparency it intends to pursue." - The CBT Review "is not aimed at dictating a level of transparency" and "provides a range of practices of how the CBT principles could be implemented" and "are also not intended to be a tool for transparency ranking of central banks." - Comments / Recommendations: - "Disclosure could be enhanced if the NBRNM communicates its stakeholders of its choice of not disclosing what it considers proprietary information and its own reasons for this choice." - "Alternatively, disclosure could be enhanced with the inclusion of more detailed information on the composition of eligible assets and instruments for each portfolio." ### Coverage: selection of eligible market counterparties and service providers (Principle 3.4.2) - Description: - "The Foreign Reserves and Investment Policy specifies in broad term the credit risk, the exposure limits and risk tolerance parameters." - "According to Article 8 of the Foreign Reserves and Investment Policy the lists of eligible countries, issuers and counterparties, as well as quantitative limits of exposure are specified in the Foreign Reserves Management and Investment Guidelines." - "The Foreign Reserves Management and Investment Guidelines provide methodologies for selecting eligible counterparties. It is classified as an internal document and its content is not publicly disclosed." - Review: - "The Foreign Reserves and Investment Policy discloses broad criteria to select eligible counterparties and service providers (e.g., dealers, custodians) and eligible issuers." - "The NBRNM does not disclose rules and procedures for selection of counterparties, custodians, and service providers." - Comments / Recommendations: - "Disclosure could be enhanced if the NBRNM communicates its stakeholders of its choice of not disclosing the rules and procedures for the selection of counterparties, custodians and service providers and its own reasons for this choice." - "Alternatively, the central bank could disclose rules and procedures for selection of markets in which it operates, counterparties, custodians, and service providers." ### Assessment: reserve adequacy and liquidity parameters (Principle 3.4.3) - Description: - "The Monetary Policy and Research Department in the Recent Macroeconomic Indicators Report discloses information on the reserve adequacy on a monthly basis." - "Macroeconomic forecasts and risks Quarterly Report provides information on the stock, shifts and adequacy of foreign reserves." - "Statements of the Committee for Operational Monetary Policy contain an assessment on the adequacy of the foreign exchange reserves." - "The Financial Market Operations Department ... through the Investment Committee provides reports to the NBRNM Council on the management and investment of foreign reserves on a quarterly basis and these reports are shared with the Ministry of Finance." - "On an annual basis, the Annual Report contains data on the stock of official reserve assets, transactions, foreign exchange and market revaluations and other changes in volume." - "The Annual Report also discloses a chart on the adequacy of foreign reserves by different methodologies (Greenspan–Guidotti rule, adequate level of GFR IMF rule of thumb, and months of imports)." - Review: - "The annual report contains a general assessment of reserve adequacy, liquidity, and limited risk exposure specific to reserve management operations." - Comments / Recommendations: - "The NBRNM could consider disclosing information on annual liquidity stress tests." - "It could also consider publishing a reserve adequacy assessment in the Annual Report Section on Foreign Reserves and a risk statement outlining the financial, operational, and other risks arising from its operations with a defined time lag." ### Financial stability assessments and stress testing (Principle 3.5 and sub-principles) - Financial Stability Assessments (3.5.1): - Description: - "NBRNM prepares and makes publicly available Quarterly Reports on the risks in the banking system and an annual Financial Stability Report (FSR)." - "The results of sensitivity analysis stress tests are published in the Quarterly Reports on the risks in the banking system. The methodology for sensitivity analysis is explained in each report." - "A Macro stress test is prepared once a year and is published in the annual FSR. The methodology, (methods and assumptions) for the macro stress test is also published (latest in the FSR for 2015, Annex 1 and in following FSRs there is reference to 2015 FSR)." - "In the course of 2020 NBRNM made several simulations on the effects of the COVID-19 measures on loans (alteration of loan conditions) for internal use." - "According to the Law on the NBRNM, Article 38 (2), the NBRNM publishes the annual FSR on its website." - "The NBRNM quarterly publishes Financial Soundness indicators (FSI) that are prepared according to the new IMF Guide from 2019, as well as the main financial stability indicators of the banking system." - Review: - "The NBRNM publishes at pre-set intervals (quarterly for sensitivity stress tests, annual for macro stress tests) information on its assessment of financial sector vulnerabilities, and it has published the methods and underlying data used for such assessments. The NBRNM also publishes on a quarterly basis FSIs and other financial stability indicators of the banking system." - "The Annual FSR includes a discussion on new and emerging vulnerabilities in the Financial Sector, including most recently (i.e., 2020 FSR) with regard to developments related to the COVID-19 crisis." - Comments: none provided. - Macroprudential Stress Testing Methods (3.5.2): - Description: - "The methodology and assumptions for the sensitivity analysis are explained in each Quarterly Report on the risks in the banking system." - "The methodology, method and assumptions for the macro stress test are also published (latest in the FSR for 2015, Annex 1 and in following FSRs there is reference to 2015 FSR)." - "The methodology for a bottom-up stress test exercise with all banks currently under way clearly determined and communicated to the banks, in written form and also discussed on a meeting." - Review: - "The NBRNM discloses the types of stress tests it undertakes; the results of stress testing analysis on an aggregated basis, as well as the stress testing methodology." - Comments / Recommendation: - "Once it is completed, the use of the results of the bottom-up stress test exercise for supervisory purposes, and their publication in aggregate form will enhance further transparency." - Stress Testing Coverage (3.5.3): - Description: - "The coverage of the stress testing exercise is described in the methodology note presented in the above-mentioned Annex 1 of the 2015 FSR, and it has not changed." - "The Quarterly Report on the risks of in the banking system indicates that stress tests are made on the overall banking sector excluding a state-owned specific purpose bank." - "The list of the banks is disclosed on the NBRNM website, and the name of the state-owned specific purpose bank is public knowledge." - "Aggregate results of the stress tests are publicly disclosed, while bank by bank results are disclosed anonymously, or in a descriptive form in the Quarterly Report on the risks in the banking system and in the annual FSR." - Review: - "The number and names of the financial institutions covered by the stress test exercise is publicly known." - Central Bank Use of Stress Test Results (3.5.4): - Description: - "The methodology note discusses the main purpose of the stress test exercise. For now, the stress test results are used only for analytical purposes, in particular for the Quarterly Report on the risks in the banking system and in the Annual FSR." - Review: - "The main purpose of the stress test exercise is publicly explained." - Comments / Recommendation: - "Disclosure of whether and how aggregate stress tests results may affect policy decisions as well as other aspects of the NBRNM dealing with financial institutions would enhance transparency." ### Macroprudential policy implementation (Principle 3.6) - Instruments (3.6.1): - Description / Findings: - "The NBRNM has introduced an array of macroprudential instruments in the last years. They include broad-based capital tools, such as capital buffers (systemic risk capital buffer, countercyclical capital buffer, systemically important banks buffer, and capital conservation buffer), a limit on the leverage ratio, household sector capital requirements, and a forward-looking loan loss provisioning requirement." - "The NBRNM has put in place a liquidity coverage ratio—including a differentiation by currency." - "Reserve requirements are used as a monetary policy tool to control banks’ systemic liquidity, the NBRNM also applies differentiated ratios by currency (domestic and foreign) and by deposit term, with the view of fostering long-term savings in domestic currency." - Review: - "The NBRNM discloses the design and the methodology of calculations for the systemic risk capital buffer, the countercyclical capital buffer, the systemically important banks buffer, and the capital conservation buffer set forth in the Banking Law, Article 65." - "The other macroprudential instruments, on banks’ liquidity, on maturity mismatches, the limits on foreign exchange positions and reserve requirements are explained and disclosed via by-laws and regulations." - "However, the NBRNM does not have a macroprudential strategy that informs and explains about the use of macroprudential instruments and their objectives. It does not map macroprudential instruments with the corresponding systemic financial risks and does not explain how macroprudential policy decisions can help mitigate these risks." - Comment / Recommendation: - "Because macroprudential policy is a new economic policy in North Macedonia—and elsewhere—that is of countercyclical nature, it is important to design and develop a communication strategy explaining to the public at large the scope and benefits of macroprudential policy, emphasizing that it aims at preventing systemic financial crisis." - Enforcement (3.6.2): - Description: - "Based on the provisions set forth in the Banking Law, the NBRNM enjoys hard powers in the sense that it has direct control over macroprudential instruments and the calibration of their parameters." - "The law also defines penalties for financial institutions that do not comply with prudential regulation, in general, including macroprudential regulation." - Review: - "According to its law, the NBRNM discloses the enforcement mechanisms and responsibilities for all entities and financial instruments subject to macroprudential constraints. Furthermore, it discloses which agencies enforce macroprudential regulations and discloses both incentive mechanisms and penalties." ### Emergency Liquidity Assistance (Principle 3.8) - Description: - "As described in principle 2.7 the NBRNM has transparent ELA framework and a good understanding of communication/transparency issues related to potential future ELA operations." - "So far, ELA has never been requested. As a result, the NBRNM has never provided ELA." - Review: - "The NBRNM’s ELA framework is centered in bilateral liquidity support. In this case, information about the provision of support is disclosed only after the financial stability risk has passed, and no longer violates confidentiality requirements agreed on prior to entering the support agreement with the requesting institution." - "The NBRNM clearly differentiates its liquidity support from standard operations, with information regarding the maturity and financial parameters considered." ### AML/CFT supervision and internal controls (Principle 3.11) - Description: - "The NBRNM conducts AML/CFT supervision as a part of its overall prudential supervision; as such, there is no dedicated department for AML/CFT supervision." - "NBRNM’s risk-based supervision is also detailed in its Supervisory Policy Manual and its Decision on Consolidated Supervision, although neither mention its AML/CFT supervisory role or functions." - "The NBRNM Policy on ML/TF risk management describes the positions with dedicated AML/CFT control functions: the transactional units within the Payment Systems Department as the first line of defense; the AML/CFT officer (the 'Authorized Person') as the second line of defense; and the Department for Internal Audit as the third line of defense." - "The functions and tasks of the respective positions and departments, as well as the requisite skills and expertise of the AML/CFT officer, are laid out in detail in the policy on ML/TF risk management document, which is an internal act and not available on the NBRNM’s website." - Review: - "The NBRNM discloses general information on its approach to off-site and on-site AML/CFT supervision of banks. However, aside from the number of banks undergoing AML/CFT inspection each year, the NBRNM does not disclose any detailed information on its AML/CFT supervisory activities in its own materials, nor does it disclose information on the human and technical resources allocated to these activities." - "No information on the AML/CFT supervision of non-banks under the NBRNM’s AML/CFT purview is available." - "A detailed description of the NBRNM’s AML/CFT supervisory processes and approach, including on IT systems, staffing and resources, and training and capacity, is included in the public version of the 2019 National Money Laundering and Terrorism Financing Risk Assessment (NRA), a joint product of inter-governmental and private sector working groups. While the disclosure of the aforementioned information in the NRA is certainly a good practice, the NRA is not updated on a yearly basis nor is it referenced by the NBRNM’s documents or available on the NBRNM’s website." - "The NBRNM discloses general information on its internal AML/CFT control activities, as well as information on the human and technical resources allocated to internal AML/CFT controls." - Comments / Recommendations: - AML/CFT Supervision: - "The NBRNM could provide more detailed information on its AML/CFT supervisory processes in its own published materials, notably, by describing its AML/CFT function in documents and materials on its supervision more broadly (e.g., in the Supervisory Policy Manual and its Decision on Consolidated Supervision)." - "More information also could be provided on AML/CFT activities (e.g., development of guidance materials, events and trainings)." - "The NBRNM should also disclose information on its AML/CFT supervision of non-bank financial institutions as designated in the Law on Prevention of Corruption." - "The NBRNM should also disclose information in its own sources on the human and technical resources allocated to these activities, namely by describing how the AML/CFT supervisory function fits into the larger supervisory approach/plan." - AML/CFT Internal Controls: - "The NBRNM could consider including name and contact of the position of the AML/CFT officer in its publicly available organization chart on its website." ### Other principles noted as Not Applicable - "Principle 3.7. Microprudential Supervision: Not Applicable" - "Principle 3.9. Resolution: Not Applicable" - "Principle 3.10. Financial Market Infrastructures: Not Applicable" - "Principle 3.12. Consumer Protection: Not Applicable" *International Monetary Fund — Republic of North Macedonia review text as provided in source PDF.* ### 40. It entails that the NBRNM Council and each of its members is accountable to ### 1mkdea2022001 - 40. It entails that the NBRNM Council and each of its members is accountable to ### Accountability to Parliament and Public - The NBRNM Council and each of its members "shall be accountable to the Parliament of the Republic of Macedonia for the achievement and maintenance of price stability and for performance the tasks of the NBRNM stipulated by this Law" (Article 40). - Article 62 requires that the NBRNM "informs at least twice a year to the Parliament on its monetary policy, its achievements, and on its vision about the real economy." - "The Governor of the NBRNM may, at the request of the Parliament, or on his own initiative, periodically appear in Parliament or its committees to report on monetary policy and financial system issues, and the state of the economy." - The NBRNM disseminates multiple documents—"the three-year Strategic Plan, the Annual Report, the Quarterly Report, the monthly Recent Macroeconomic Indicators: Review of the Current Situation, as well as press releases and public presentations"—that explain the conduct and challenges of monetary policy; these documents "mostly target a specialized audience." - The Law requires the NBRNM to prepare financial statements for each fiscal year, "which are shared with the executive branch and the Parliament within the four months that follow the end of the fiscal year, and are widely disseminated to the public, including on the NBRNM website." - Financial statements "are legally required to observe International Standards on Auditing (Article 65 of the Law on the NBRNM)." - "The NBRNM Council must appoint independent external auditors to exercise an audit of the financial statements." Parliament, "in response to a proposal of the Minister of Finance, ... with reasonable cause, can also request external auditors to assess the NBRNM financial statements. Such external audit report must be sent to the Parliament." ### Reviews and Recommendations on Accountability - Review observation: "These periodic exchanges take place in practice." - Comment: "The NBRNM could finalize the review of the accountability provision in the Law on the NBRNM vis-à-vis Parliament or its specialized committees." - Comment: "Strengthened accountability procedures could enhance transparency because it would raise awareness about the timing of the NBRNM reporting to the Parliament to discharge its policy responsibilities." - Comment: "In addition to appearing before the Parliament, the NBRNM could also submit a report including, its financial statements with the seal of external auditors." ### Disclosure of Progress Toward Monetary Policy Objectives (Principle 4.1.2) - The NBRNM issues "press releases following the regular policy meeting every month." - In May and November, the NBRNM "publishes its short- and medium-term macroeconomic forecasts and its effect on monetary policy, including comparisons with the previous forecasts." - The NBRNM publishes "Recent Macroeconomic Indicators, Review of the Current Situation" on a monthly basis. - Review conclusion: "The NBRNM discloses progress toward achieving price stability or explains how monetary policy keeps inflation at bay... The outcome of these projections and its implications for monetary policy are publicly discussed." - Assessment: Review rated "Comprehensive." ### Disclosure of Operations and Operational Targets (Principle 4.1.3) - The NBRNM uses "the nominal exchange rate denar/euro as intermediate target to preserve price stability and calibrate its foreign exchange interventions and open market operations as its main policy instruments." - On a daily basis, the NBRNM "publishes on its website the level of the exchange rate of the Denar against the Euro." - The "size and direction of the foreign exchange interventions are published in the Quarterly Report," which includes a Box on the Real Effective Exchange Rate (NEER and REER). - "The interest rates on the money market are published on a daily basis on the website." - Detailed data on volumes, interest rates, and maturities of monetary operations "are published on the website immediately after the operations take place," with the exception that "data on the usage of intraday credit and marginal lending facility ... are published daily only in the data of the Liquidity of the banking system (table and excel history)." - "The daily liquidity tables ... contain data on aggregated bank balances at the NBRNM, reserve requirement in MKD (including the overall level of fulfillment of required reserves), and the contribution of each monetary instruments and of the autonomous factors (with the separate contribution of currency in circulation) to the overall liquidity position of the banking system. Historical data on those items goes back to January 1, 2010." - The NBRNM "publishes monthly Press releases following meetings of the Operational Monetary Policy Committee, in which information on liquidity development in the banking system and related NBRNM monetary operations is discussed." - Review conclusion: "The NBRNM posts in its website in an organized and timely fashion the volumes and interest rates of its open market operations... The policy rate and the nominal exchange rate denar/euro are also posted in the NBRNM website." - Comment: "A public disclosure of the composition, function and responsibilities of the Operational Monetary Policy Committee would enhance further transparency of the governance structure and responsibilities of its governing bodies." - Assessment: Review rated "Comprehensive." ### Cross-Border Financial Flows and FX Administration (Principles 4.2.x) - The Law (Article 40) establishes accountability to Parliament for "the achievement and maintenance of price stability and for performance the tasks of the NBRNM stipulated by this Law." - The Governor "may, at the request of the Parliament of the Republic of North Macedonia, or on his own initiative, periodically speak in the Parliament or its committees, concerning monetary policy and financial system issues and the state of the economy." - The NBRNM "may submit opinions to the Parliament ... concerning any draft laws related to the objectives and tasks of the NBRNM." - The NBRNM's Annual Reports contain information regarding supervision on cross-border financial flows and foreign exchange administration; example: "item 9.2. of the NBRNM Annual Report for 2019 contains detailed overview on the on-site compliance examinations on banks, savings houses and non-banking financial institutions." - Review conclusion: "The NBRNM discloses, through the reference to the Law on the NBRNM, the general accountability to the Parliament for its policy." Assessment: Review rated "Core." - Comment: "A more comprehensive analysis of the results of the NBRNM regulatory activity with respect to the policy as well as the results achieved by the supervision would enable a better understanding of the NBRNM objectives and the NBRBNM performance." ### Disclosure of Results and Supervisory Activities (Principles 4.2.2 & 4.2.3) - The NBRNM's Annual Reports "provides general information on the compliance supervision (examination) performed in banks, saving houses, non-banks financial institutions and licensed exchange offices and the general outcomes of those controls." - The NBRNM "discloses in its Annual Report the results of its supervisory activities as part of the actions taken to achieve the policy objectives and their results. However, it does not disclose in a clear manner specific information on sanctions imposed for the non-compliance with of FX law and regulations." - Comment: "A more comprehensive analysis of the results achieved by the supervision on the compliance of FX regulations and information on the sanctions imposed for the violation of the Law on Foreign Exchange Operations and regulations on aggregate basis would enhance transparency." - The NBRNM maintains on its website: - An updated version of the Law on Foreign Exchange Operations with amendments footnoted with Official Gazette references. - Dedicated section on regulations including Decisions and Manuals on foreign exchange operations. - Updated lists of licensed banks, savings houses, currency exchange operators and fast money transfer providers and their subagents. - "A full list of issued licenses with data on the date of issuing the license, number of license for every location and detailed data on the locations for performing exchange operations ... and full list of revoked licenses with data on the date of issuing and date of revoking the license for FX bureaus are also published in the NBRNM website." - For every revoked license "the NBRNM has public announcement in at least one newspaper." - Annual Report, Chapter IX—Supervision and Inspection, includes statistics on supervisory activity. Example for 2019: - "12 regular examinations (on-site risk-based supervision) in 10 banks" - "compliance examinations in eight banks, two savings houses, one money transfer sub-agent, and 210 examinations of licensed exchange offices." - The NBRNM "keeps internal statistics regarding the number of supervisory controls and misdemeanors (not disclosed)." - Disclosure gap: "it does not disclose in a clear manner specific information on violations of FX law and regulations as well as the sanctions imposed for the non-compliance with FX Law and by-laws." - Review assessments: "Core." ### Foreign Exchange Management and Interventions (Principles 4.3.x) - The Operational Monetary Policy Committee is responsible for "setting the bid-ask exchange rate that anchors the NBRNM’s FX interventions." - The NBRNM "publishes monthly Press releases following meetings of the Operational Monetary Policy Committee, in which there are information on the volume of FX interventions." - The Annual Report "contains detailed overview on the foreign exchange market developments and the NBRNM's Interventions." - The NBRNM’s Decision on the manner and the terms for buying and selling foreign currency "govern the participation of the NBRNM on the foreign exchange market and the dissemination of information on foreign exchange market developments." - Review conclusion: "Responsibility of the Operational Monetary Policy Committee in setting the bid-ask exchange rate anchoring the NBRNM’s FX interventions is disclosed." Assessment: Review rated "Comprehensive." - Comment: "A public disclosure of the composition, function and responsibilities of the Operational Monetary Policy Committee would enhance further transparency of the NBRNM’s decision-making structures." - The NBRNM's December 2018 "Strategy for Denarization of the Republic of Macedonia" (jointly prepared by the NBRNM and the Government) provides context for FX policy in a medium-term perspective. - The NBRNM’s Quarterly Reports and Annual Report "include a discussion on the evolution of the real and nominal effective exchange rates... provide information on developments in the foreign exchange market (turnover), on the NBRNM's FX Interventions, on annual growth of demand and supply, volume of bank transactions with clients, etc." - Review conclusion: "The NBRNM’s Quarterly Report and Annual Report provide comprehensive information on the rationale for its FX interventions, as well as supporting data on their magnitude in response to market developments." Assessment: Review rated "Comprehensive." - Comment: "The current strategy of targeting the denar exchange rate against the euro, and the related setting of a bid-ask exchange rate anchoring the NBRNM’s FX interventions, set a rule which limits discretion in the NBRNM’s FX interventions." - Operations reporting: NBRNM provides FX intervention information in monthly press releases, monthly Latest Macroeconomic Indicators, Quarterly Report, and Annual Report; "On an annual basis, as an integral part of Annual Report, an overview of the activities on the foreign exchange market. On a daily basis, data on volume turnover are provided on the NBRNM’s website." - Comment: "Monthly disclosure of whether specific instruments were bought or sold would enhance transparency." - Review assessment: "Expanded." ### Foreign Exchange Reserve Management (Principles 4.4.x) - The "Foreign Reserves and Investment Policy sets out the institutional framework for the effective management of the foreign exchange reserves. It also provides the governance structure, the division of responsibilities of the foreign reserves management process and management reporting." - "Any changes to the general principles of internal governance and policy decisions about foreign exchange reserves management will be implemented by appropriate changes in the Foreign Reserves and Investment Policy. All amendments to the Policy are adopted by the Council of the NBRNM and are made public through regular press statements. All changes ... are also published in the Annual report." - "The evaluation of the strategic and tactical asset allocation actions and changes in the investment framework are always presented in the Annual Reports." - Review conclusion: "The Foreign Reserves and Investment Policy discloses the NBRNM’s framework, the responsibilities of its governing bodies with respect to reserve management. Evaluations of policy actions taken are presented in the Annual Report." Assessment: Review rated "Expanded." - Comment: "Evaluations of policy actions could be presented in a more frequent basis as well as the corrective actions taken during the year." ### Reporting on Reserve Levels, Templates, and Financial Results (Principles 4.4.2 & 4.4.3) - The NBRNM "publishes data as per reserve data template abiding to the Special Data Dissemination Standard (SDDS). The template data on international reserves are disseminated and published in timely manner on IMF's IRFCL website." - "Currently available information on International Reserves and Foreign Currency Liquidity of the Republic of North Macedonia on IMF’s website is as of March 2021." - Review conclusion: "The central bank publishes outcomes as per reserve data template and the SDDS. The data categories include: the official reserves and other foreign currency assets, predetermined short-term drains on reserve assets, and contingent short-term net drains on reserve assets, according to a pre-defined schedule." Assessment: Review rated "Comprehensive." - FY 2020 Financial Statements "provide information on the amount, composition and profit/loss." - Note 3. "Financial Risk Management" in FY 2020 Financial Statements contains "detailed information on the level of and development in the NBRNM’s exposures to the principal financial risks," and includes "information on eligible counterparties and bond issuers, permissible limits, mitigations, benchmarks, as well as quantified exposures." *Italic: Source — 1mkdea2022001 - 40. It entails that the NBRNM Council and each of its members is accountable to (PDF chapter/section).* ### references to methods/concepts used for quantification. ### 1mkdea2022001 - references to methods/concepts used for quantification ### Disclosures on International Reserves and Portfolio Management - The NBRNM "clearly discloses information on the amount, composition, profit/loss and risks arising from its international reserves." - The FY 2020 Financial Statements include "comprehensive disclosures on financial risks, including market, credit, and liquidity risks." - The Annual Report includes information on "benchmark structure of the diverse portfolios and portfolio performance." ### Macroprudential Policy (Principle 4.5 and subprinciples) - Principle 4.5 overview: - The central bank discloses outcomes and evaluations of its macroprudential policy actions and its accountability for such actions. - Principle 4.5.1 Governance Actions: - Description: - The NBRNM discharges accountability responsibilities to the Parliament; reports contributing to "maintain a stable, competitive, and market-based financial system" (Law of the NBRNM, Article 40). - Within the first four months after the end of the fiscal year, the NBRNM submits to the Parliament and the Minister of Finance "one or more reports, approved by the NBRNM Council," addressing the state of the economy and an outlook for the coming year, including the condition of the banking system (Article 62, (2)). - The NBRNM publishes a financial stability report once a year. - Review: Core — accountability embedded in broad duties discharged to Parliament and Minister of Finance; publication of the financial stability report supports accountability to market participants and the public. - Comments: - In absence of an explicit macroprudential policy mandate, accountability is embedded in broader duties. - If new legislation defines a clear macroprudential objective, NBRNM periodic reports could map policy instruments to the systemic risks they aim to mitigate across time and cross-section. - Principle 4.5.2 Policies (ex post evaluations): - Description: - NBRNM analyzes trends and financial soundness indicators in the annual Financial Stability Report and monthly Recent Macroeconomic Indicators—Review of the Current Situation. - Review: Core — "The NBRNM does not conduct ex post evaluations about the impact and the achievements of its macroprudential policies." - Comments: (none in source beyond the finding) ### Emergency Liquidity Assistance (Principle 4.7) - Description: - As discussed in principle 3.8, the NBRNM "has never provided ELA." - For bilateral liquidity support, information is disclosed only after the financial stability risk has passed, which has not happened. - During the last 15 years the NBRNM did not receive any ELA request. - Existence of a transparent ELA framework (principle 2.7), plus detailed liquidity tables and financial statements, indicate the NBRNM ELA Framework "will allow for appropriate disclosure of the provision of liquidity, terms and conditions." - Review: Expanded — could not verify appropriateness of disclosure until provision materializes. - Comments: A comprehensive assessment would require verification once ELA provision materializes. ### AML/CFT Supervision and Internal Controls (Principle 4.10) - AML/CFT Supervision: - The NBRNM "provides highly detailed information on the outcomes of its supervision in its Annual Reports;" however this is limited to prudential supervision and "does not contain any mention of outcomes of AML/CFT supervision." - Information on results of AML/CFT supervision is included in the public version of the NRA and the annual reports on the website of the financial intelligence office (FIO) (https://ufr.gov.mk/), but this information is not available (or linked) on the NBRNM’s website. - AML/CFT Internal Controls: - "The NBRNM has not yet fully implemented its policy on ML/TF risk management; as such, outcomes are not yet available." - Review: Not Implemented — NBRNM does not disclose outcomes of its supervisory processes in its own materials; no information on AML/CFT supervision of non-banks under NBRNM purview; policy on AML/CFT internal controls not yet implemented. - Recommendations / Comments: - Once ML/TF risk management policy is fully implemented, NBRNM should disclose information on activities and related outcomes. - NBRNM should provide an overview and analysis of outcomes of AML/CFT supervision, including main trends, deficiencies, and statistics on supervisory outcomes (e.g., number of supervised entities sanctioned). - These disclosures should be primarily produced by the NBRNM and include outcomes of AML/CFT supervision over non-banks. ### Central Bank Official Relations (Pillar V) — Relationship with Government (Principle 5.1 and subprinciples) - Institutional Relationship (Principle 5.1.1): - Legal basis: Law on the NBRNM Article 43 regulates cooperation with Government; closer cooperation envisaged with Ministry of Finance on monetary and fiscal policy issues. - Reporting: Article 15 requires Council decision on allocation of distributable earnings published in the Official Gazette; Articles 61 (2), 62 (2) require submission of certified annual financial statements and a report on the state of the economy to Minister of Finance, President, and Prime Minister; Article 65 (4) allows Minister of Finance, through Parliament, to request an external audit on reasonable cause. - Memorandums and Agreements for cooperation exist but "are not publicly disclosed"; press releases about cooperation are published regularly. - Review: Expanded — clear legal framework and reporting measures, but MoU terms and conditions not disclosed. - Comment: Publishing MoUs and clearer public explanations of the relationship could enhance transparency. - Financial Transactions with Government (Principle 5.1.2): - Legal basis: Article 41 establishes NBRNM tasks to perform banking activities for Government, act as fiscal adviser, receive foreign borrowings, settle external claims and liabilities, act as fiscal agent, accept deposits from Government and public agencies; NBRNM "may pay interest on the deposits at rates not exceeding the market interest rates." - Operating framework references include Law on the NBRNM and multiple laws on Payment Operations and Foreign Exchange Operations (multiple Official Gazette references listed). - Fiscal Agency Role: - Fiscal agent functions explained on NBRNM website only in Macedonian. - Agreement for fiscal agent (not publicly disclosed). - Rulebook on government securities issuance available on website only in Macedonian; English version links to Regulations on Government Securities and Rules for Trade and Settlement on Over-the-counter Markets. - Other transactions: - Terms for opening accounts, tariffs, and interest calculations are prescribed in named Decisions and Agreements (available only in Macedonian). - Participation of Ministry of Finance and Health Insurance Fund in MIPS (RTGS) regulated by Operating Rules; many MIPS operational documents and fees are published on website. - Loans and Credit Arrangements: - Article 44 prohibits credit to government or public authorities, with exception of intra-day credit to secure payment system functioning; public banks (state owned) are exempted. - NBRNM may purchase government securities only in the secondary market. - Review: Comprehensive — NBRNM publicly discloses in detail policies, terms and conditions governing financial transactions with Government including fiscal agent role, management of current account and deposits. - Instruments and Outcomes (Principles 5.1.3 and 5.1.4): - Instruments: - NBRNM regularly publishes data on Government securities auctions and OTC market; historical excel data on auctions; links to regulations on NBRNM’s role in government securities market. - Cross-border payment procedures described in Decisions and Manuals (available only in Macedonian). - Domestic payments performed electronically via MIPS (RTGS), with Operating Rules and message standards published on website. - Review: Comprehensive — instruments used are disclosed in detail. - Outcomes: - NBRNM discloses statements to the Ministry of Finance concerning balances and spending on foreign exchange accounts for Government and government bodies. - For domestic payment operations, NBRNM provides daily detailed statements for executed operations in MIPS. - Annual Independent Auditor’s Report on Financial Statements reports on outcome of financial transactions for Government; report submitted to Parliament and Executive and published on NBRNM website. - Review: Expanded — overall disclosure is present; publishing MoUs with other public agencies would enhance transparency for verifying outcomes. - Comment: Disclosure of MoUs would enhance transparency. ### Relationships with Domestic Financial Agencies (Principle 5.2 and subprinciples) - Legal and institutional framework: - Article 6 paragraph 2 empowers NBRNM to contribute to a stable, competitive and market-based financial system; Article 8 declares banking system stability a public interest; Article 38 empowers NBRNM to collect relevant data and prepare periodical publications on financial system stability. - Article 34 allows cooperation and confidential information exchange with other regulatory and supervisory authorities; NBRNM has signed bilateral MoUs that are not publicly disclosed. - Relationship with Deposit Insurance Fund determined by legislation and publicly disclosed. - Review: Core — cooperation established in law, but detailed terms of bilateral/interagency agreements are not disclosed. - Comment: Publishing bilateral and multiagency agreements (with counterpart agreement) would improve transparency and clarify allocation of responsibilities. - Policies, instruments, and outcomes (Principle 5.2.2): - Practice: NBRNM formalizes bilateral relationships via MoUs; establishment/signing disclosed by press releases but MoU contents not publicly disclosed. - Financial Stability Committee (FSC) established via interagency MoU; FSC created and announced via press release; MoU content not disclosed. - After each FSC meeting, press releases are published on NBRNM website (and other members’ sites). - Review: Core — practice of announcing MoUs via press release is positive, but instruments to operationalize agreements and outcomes are not explained or regularly disclosed. - Recommendations (Comments): - Disclosure of instruments used in interactions with domestic financial agencies, especially for information sharing and cooperation. - Disclosure of regular reports on interactions between NBRNM and domestic financial agencies. - Macroprudential role and interagency arrangements (Principle 5.2.3 and 5.2.4): - NBRNM legal basis for macroprudential contribution reiterated (Articles 6(2), 8, 38). - Financial Stability Committee composition: Finance Minister; President of the Securities and Exchange Commission; President of the Council of Experts of the Insurance Supervision Agency; President of the Council of Experts of Fully Funded Pension Insurance; Director of the Deposit Insurance. - FSC has two Subcommittees: Subcommittee on Monitoring Systemic Risks and Proposing Macroprudential Measures; Subcommittee on Preparation for Financial Crisis Management. - Press Release extract (April 4, 2020): "In order to achieve the objectives, give recommendations and take appropriate actions, the Committee will coordinately monitor all financial system analyses and regulations that may have an impact on financial stability... efforts will be made to strengthen the macroprudential framework by improving regulations, simultaneously following the recommendations of the Financial Sector Assessment Program of the International Monetary Fund and the World Bank, conducted in 2017 and 2018." - Review: Core — NBRNM should disclose content of MoU establishing FSC, members’ roles, nature and mechanism of cooperation. - Comment: Disclosure of general MoU for the FSC could improve public understanding and awareness of macroprudential coordination benefits. - Financial stability arrangements (5.2.4): - NBRNM prepares periodical publications related to financial system stability; FSC discloses findings via statements and press releases. - NBRNM has signed bilateral agreements regarding data sharing, liquidity support, and inter-agency cooperation; content communicated by press release only. - Review: Core — recommended to publish general MoUs reinforcing data sharing and cooperation, including liquidity support where possible and with counterparty acceptance. ### Relations with Foreign Agencies (Principle 5.3) - Legal basis: - Article 7(12) tasks NBRNM "to participate in international institutions and organizations concerning matters that are within its field of competence." - Article 79: "The National Bank shall cooperate and exchange information with the European Central Bank and other institutions and bodies of the European Union." - Practices and disclosures: - Activities with international institutions, central banks, and EU-funded projects are disclosed through regular announcements, website posts and social media; cooperation agreements are not disclosed fully but actions are publicized in accordance with concluded protocols/MoUs. - Example: Outcomes of an EU-funded Twinning Project disclosed in Newsletters on the website. - Financial operations: - Article 24: NBRNM "shall conduct transactions in foreign assets and manage all foreign reserves consistent with international best practices ... upholding safety, liquidity and profitability principles." - Article 24 lists eligible types of foreign assets and instruments (claims, interbank deposits, claims on international financial institutions, equity holdings in international financial institutions, special drawing rights held in the account of the Republic of Macedonia in the International Monetary Fund). - Foreign Reserves Management and Investment Policy (Article 7) specifies eligible countries, issuers and counterparties in classified Foreign Reserves Management and Investment Guidelines (not publicly available). - NBRNM has a repo line arrangement with ECB for euro liquidity provision to North Macedonia’s financial institutions (in the presence of market dysfunctions due to the COVID-19 shock); press releases on the repo-line with ECB are available on the NBRNM website. - Financial transactions with international organizations and foreign central banks are published annually in audited financial statements (e.g., NBRNM Financial statements for 2020, notes: 16, 17, 18, 19, 20, 38, and 39). - Review: Expanded — clear legal framework; NBRNM discloses agreements in press releases and website but not detailed contents. - Comments: NBRNM could reinforce transparency by publishing detailed contents of agreements when counterpart consents; consider a dedicated website section to report international arrangements, objectives and outcomes. ### Other Relations and Restrictions (Principle 5.4) - Article 72 of the Law on the NBRNM: NBRNM is not allowed to own any share of any corporation, including shares of any financial institution. - Review: Not applicable. ### Authorities’ Response and Implementation Roadmap - Authorities’ response summary: - The Council of NBRNM "expresses gratitude to the IMF" for the pilot review of the Central Bank Transparency Code (CBTC). - Mission period: meetings held between 19 May and 2 June (virtual). - Mission findings cited: "The NBRNM is implementing advanced transparency practices." and "This policy has earned the National Bank noteworthy trust..." - Mission highlighted strengths: legal structure, disclosure of monetary policy objectives and operational framework, transparency on FX interventions, disclosure on cross-border flows and foreign exchange administration. - NBRNM commitments: - Consider Mission suggestions to improve transparency for FX reserve management decisions and supporting analysis. - Include a link/reference to the SAA on the National Bank’s website. - Enhance transparency on AML/CFT supervisory practices as internal controls and mandates evolve. - Once Law on Financial Stability is adopted and macroprudential mandate clarified, align transparency to CBT standards. - Improve disclosure of interactions with government and public financial agencies, including MoUs and cooperation details. - The Mission provided "ten Key Recommendations on the five pillars of the CBTC" with a roadmap in Annex A classified into: - (i) "Immediate implementation": gather and order existing information and publish through the website. - (ii) "Implementation in short-term period": perform analyses for suggested improvements. - NBRNM will develop a structured policy and strategy on communication and undertake a website overhaul "in order to increase accessibility and ease the understanding of information on the website." - Table 3 referenced: "Council of the National Bank of the Republic of North Macedonia: Proposed Actions" with columns "Recommendation", "Immediate Implementation", "Implementation in Short-term Period." *Source: 1mkdea2022001 - references to methods/concepts used for quantification (excerpt).* ### 1. The NBRNM’s legal ### 1. The NBRNM’s legal ### Legal framework and governance roles - Translate and publish on the National Bank website the legal framework applicable to the National Bank that is not currently available on the National Bank website, under the menu item “Regulation” (“Laws”). - Provide translation of the legal framework relevant to the National Bank’s operations and publish these documents at the National Bank website by end of 2021. - Summarize roles and functions of the Governor, the National Bank Council, and various National Bank committees in a manner more understandable to the public; publish under “About National Bank” (“Governor”, “National Bank Council” and a new menu item “Committees”). - Actions to implement: - Analyze information on functions of other central banks’ governance structures (Governor and National Bank Council) available on their official websites; prepare and publish a short explanation of their functions. - Prepare a short explanation on the functions of various National Bank committees and publish this information. ### Risk management transparency - Publicly disclose relevant information related to the risk management function; this is envisaged in the Strategic Plan of the National Bank for 2022-2024. - Provide a high-level overview of key risks clearly mapped to the National Bank’s mandate. - Create a special section on the website dedicated to risk management, including: - Overview of Operational Risk Management with high-level objectives and scope of the policy. - Methodology for continuous identification, evaluation, and mitigation of risks. - Description of risk governance arrangements and information on regulations that define roles and responsibilities of committees such as Investment Committee and Operational Risk Management Committee. - Set up a Statement for acceptable level of risk exposure (i.e., Risk Appetite Statement) to frame acceptable levels of risk for the National Bank. - Disclose a general risk statement as a separate chapter in the Annual Report on risk management, outlining the Bank’s stance on risks, including operational risks, the role of the risk management function, and an overview of risk management policy objectives and risk governance across the bank. ### Audit mechanisms (internal and external) - Clarify rules and publish the charter governing the internal audit function and its reporting structure. - Set up a separate section on the website housing Internal Audit (IA) information and the IA Charter by end of third quarter of 2021. - Clarify the rules governing the internal audit function and its reporting structure in the Annual Report for 2021. - Disclose the external audit rotation policy, including criteria for selection of external auditors. - An internally developed external audit rotation policy is expected to be adopted by the National Bank Council by end of third quarter of 2021. ### Communications, public affairs, and website redesign - Develop a communication strategy based on the general strategic plan to enhance engagement with targeted stakeholders and the general public. - Implement an in-depth revision of the website design and accessible information to make data, information, legal framework and other information easily accessible. - Revision to focus on increasing financial education content about the functioning and working of the NBRNM. ### AML/CFT supervisory transparency - Publish a short and easily understandable description of the National Bank’s AML/CFT supervisory processes and approach (or a dedicated Q&As section under “Supervision”/SREP). - Provide a link to the 2019 National Money Laundering and Terrorism Financing Risk Assessment (NRA) on the webpage and include a more comprehensive analysis of the supervisory function in the Annual Report. - Planned disclosures: - Disclose information on AML/CFT internal controls at the beginning of 2022. - Information on outcomes of the internal AML/CFT controls will be available in the Annual Report 2023. ### Confidentiality framework and data protection - Publish confidentiality regulation applicable to the National Bank (currently unavailable on the website) under the menu item “Regulation” (“Laws”). - Publish explanation of the functions of the Data Protection Officers and their organizational set-up in the Strategy and Prevention Office on the National Bank website under “About National Bank,” “Organizational chart.” - Actions to implement: - Translate the confidentiality framework not currently available on the website in English. - Publish the legal framework on the National Bank website. - Prepare a short explanation, understandable to the public, regarding the Data Protection Officers’ functions and publish it. ### Committee for Operational Monetary Policy (COMP) - Provide a stronger institutional foundation by disclosing the COMP’s role, composition, and structure to enhance transparency of policy decisions. - Planned disclosures: - Publish the Rules of Procedures of the Committee for Operational Monetary Policy in the website section dedicated to implementation of monetary policy (planned for July). - Post a short description of composition and structure of the COMP. ### Macroprudential policy transparency - Enhance transparency of macroprudential policy objectives, expected benefits, and rationale behind policy decisions; explain how policy instruments address specific risks. - The Law on Financial Stability should be adopted by the end of 2021. - In the meantime, update the website with clarifications on the role, objectives and rationale behind implementation of capital buffers as the main macroprudential instruments enabled with the current legislative framework. ### Cross-border flows and foreign exchange administration - Disclose internal processes for the adoption of by-laws related to cross-border flows and foreign exchange administration. - By end of the year, enhance transparency and availability of data regarding requirements arising from the Stabilization and Association Agreement (SAA), and regarding the process on preparation, adoption and public communication of by-laws related to cross-border flows. ### Official relations and inter-agency cooperation - Improve the structure and content of the International Relations section on the website to meet transparency standards; replace the current section with the new structure and content. - Summarize in an understandable manner the Law on the National Bank’s regulation of the relationship with the Government and mechanisms of cooperation and exchange of information; publish under “About National Bank” (“Public Relations”). - Actions to implement: - Analyze inter-agency mechanisms of cooperation and exchange of information used by the National Bank and prepare a short explanation. - Publish this information on the National Bank website. - Contact counterpart agencies regarding the possibility of publishing existing agreements and memorandums of cooperation; publish these agreements upon consent of the counterparty. *Source: 1mkdea2022001 - 1. The NBRNM’s legal (IMF).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1mkdea2022001.pdf_