the regulation strategy midway, it is imperative that we press on with the full implementation of the tbtf package. we will then be in a position to assess its effectiveness and decide whether further measures are necessary. full implementation entails, necessarily, further progress on the following four issues : first, the big banks must stay on track, and must fully and consistently implement the tighter risk - weighted capital and liquidity requirements as currently planned. this will, importantly, lead to a significant improvement in their leverage ratios. second, the quality of the banks ’ own risk assessment methods must be improved. increasingly, doubts have been raised on the reliability of the internal models which banks use to compute their risk - weighted assets ( rwas ). a stable financial system cannot be based on questionable and opaque risk assessments. to regain confidence in these calculations, banks should make sure that their rwa calculations are transparent and traceable. in particular, they have to ensure that changes in rwas over time, and differences in published rwas between institutions, can be explained and economically accounted for. third, the ongoing work on recovery and resolution plans should be pursued with total determination. if required for the guaranteed maintenance of systemically important functions, changes in the current organisational structure should be explored and initiated without delay. fourth, on the regulatory side, further progress in defining the key elements of a viable resolution and recovery strategy for globally active banks is needed. in the absence of global bank insolvency legislation, this necessitates close coordination among regulators across borders. specifically, further steps are necessary to guarantee that resolution measures – such as a bail - in – ordered by the home regulator are mutually recognised by foreign authorities. in this regard, it is encouraging that the resolution and recovery plans for our big banks are being developed in close collaboration with the foreign regulatory authorities concerned. let me finish with some words regarding the cyclical risks. mortgage volumes and real estate prices continue to grow at rates significantly above those justified by fundamental factors such as income and population growth. this means that the imbalances, which are already large, are increasing further. at the same time, indications of a possible slowdown in momentum became visible during the course of 2013. 8 taken together, these developments make it difficult to judge precisely where we are in the credit cycle or the direction in which we are heading. this situation is an example of the fundamental identification difficulty nominal growth rates for mortgage claims have slowed to about 4. 5 % from around 5

speech at the presentation of the annual financial stability report for 2017 dr jorgovanka tabakovic, governor belgrade, 30 july 2018 ladies and gentlemen, members of the press and dear colleagues, welcome to the presentation of the annual financial stability report for 2017. today we have the pleasure to present a report about a year marked by exceptionally positive developments, in serbia and the international environment alike, as well as by the results we have achieved. owing to this, financial stability has not only been maintained, but also reinforced, which is reflected in a financial system that is to a large degree resilient to any potential future shocks. global economic growth stepped up in 2017, which reflected positively on the growth prospects of central, eastern and south - eastern european countries and pushed their risk premiums down. on the other hand, risks in the international commodity and financial markets persisted, primarily those associated with volatile movements in global oil prices and divergent monetary policies of the ecb and fed. thanks to improved structural characteristics and favourable growth prospects, coupled with the enactment of well - timed measures and regulations and full coordination between monetary and fiscal policies, serbia is now more resilient to potentially adverse effects from the international environment. this was confirmed in 2017 by credit rating upgrades by all three rating agencies, successful completion of the three - year stand - by arrangement with the international monetary fund and a decline in the country risk premium to its historic low. the national bank of serbia remained cautious in the conduct of monetary policy in 2017 due to uncertainties in the international financial and commodity markets. as inflationary pressures were running low, the key policy rate was cut by 0. 25 pp on two occasions, feeding through into lower cost of borrowing for the government, corporate and household sectors. favourable interest rates are one of the key drivers of credit growth, which means that by easing its monetary policy the national bank of serbia encouraged the increase in investment and private consumption and supported sustainable economic growth. in 2017 the national bank of serbia achieved its key objectives – it ensured monetary and financial stability. throughout the year inflation was low and stable, moving within the new target band, which was lowered from 4 % ±1. 5 pp to 3 % ±1. 5 pp as of early 2017. the fact that inflation stood at the 3. 0 % target in december only confirms that the decision to lower the inflation target was correct. at the same time, inflation expectations of the financial and corporate sectors have been anchored within the target band for quite