One of the long-debated domestic themes is non-existence of retail NPL market in Serbia. Following the 2008 World Economic Crisis in Serbia, the country managed to regulate corporate NPL market, and to decrease NPL level from 20% to 3,19 %.
However, retail NPL market remained a taboo. There are several reasons for this and the main one is that the general public fears that regulating retail NPL (“RNPL”) market would legalize debt slavery.
Stil, the true is quite different. Instead of establishing RNPL market, the NPL companies mostly offer side services to the banks on debt collection, whereas the real effects of such services is de facto purchase of RNPL.
Having this in mind, and that Serbian law completely lacks regulation of personal insolvency (as well as entrepreneur’s insolvency), this creates close to a debt slavery situation for many citizens that defaulted, and brings into jeopardy many more. When we take in consideration the current crisis, inflation, which includes sharp increase of interest rates, Serbian society could enter the dark ages.
On the other hand, the necessity to establish RNPL market could be beneficial for all parties: (i) the banks could release large amount of reserves with the National Bank of Serbia (“NBS”) and invest them further, (ii) the state could improve its legislation through introducing a personal insolvency, which could be further used to improve social service offices, and (iii) the citizens in distress could be offered with a fresh start and assistance from the social services to overcome the crisis. Even the NPL companies would benefit, as they would be doing their business in much better environment for investing into RNPLs.
Social service is in its decades long neglection period, and should be re-established as an institution that should also assist debtors to overcome their personal debt crisis via well-educated and skilled insolvency administrators (counsels).
At the end, establishing solid system of personal insolvency on the one side and RNPL market on the other, could boost economic growth.
By Ivan Nikolic, Senior Associate, SOG Law Firm
