##20, imf or the world bank. in our region, the ebrd is playing a key role in coordinating these efforts under the vienna plus initiative. so, what should be the key requirement on our dinarization strategy? the strategy needs to have realistic objectives, and be technically feasible. it also has to involve all key stakeholders and to minimize the risks of adverse side - effects on the economic recovery or other segments of the economy. next, what extent of dinarization is achievable? i believe increasing the share of dinar corporate loans in the banking sector from the current 28 to around 45 % in the period of 2 – 4 years is a simple and appropriately ambitious objective. 2 under plausible assumptions, such an objective implies a net addition of circa 800 bn of new dinar denominated loans in the next 4 years compared to the existing stock of almost 300 bn. 3 although ambitious, this objective still provides enough room for the expansion of the fx credits – they could continue growing at 20 % in nominal terms, which was the rate of growth of corporate credits in 2009. 4 now, are there enough dinar sources for such dinar credit expansion? yes, and the central bank is ready to supply as much as needed ( as long as collateralized by dinar t - bonds ), should there be a structural dinar liquidity shortage in the future. our analysis ( based on an average multiplier from the recent years ) shows that the current stock of repos and dinar part of fx required reserves should comfortably support the needed dinar credit growth in the next 2 years. however, i would like to send a strong signal that the nbs is ready to start liquidity providing repo operations, if need be, so that the banking sector is not worried about the sufficient sources of dinars in the future. also, we have already prepared all the necessary infrastructure for such potential move, although we do not expect the need for such a move to arise this year. the dinarization strategy must involve all the key stakeholders – the nbs, banking sector government, and the public. most activities will inevitably be done by the nbs and the banking sector. however, increasing the public awareness and receiving an active support of i am assuming the cross - border loans are granted only to entities with fx denominated revenues and will not be a focus of dinarization campaign. assuming that the real credit volume in the corporate sector will grow at an average annual rate of

in dinars has been abolished, whereas for loans indexed to foreign currency it is still 30 %. government has been on board too, and from may 2010, state - subsided cash and liquidity loans are extended in dinars only. the nbs is cooperating and intends to further intensify its interactions with the banking sector and aci in all of these pillars. we would very much wish this to be a two - way process with the banking sector taking a lead in many areas. for instance, we welcomed the decision of the domestic banks to discontinue entirely their small lending programs in swiss francs. we would be happy to see further voluntary restrictions to target consumer loans to unhedged retail customers. we are ready to discuss and encourage any well meant initiative to help with dinarizing the economy. for example, formal market making or primary dealership arrangements could be considered if there is consensus that such arrangements could help. all in all, strengthening the resilience of our financial system must be based on increasing the use of dinars. the aim of the dinarization agenda is to discourage the buildup of foreign currency risk in the nonbank sector, to hedge any remaining risks, and to develop the market for local currency financial instruments. it involves a number of very different activities – from pursuing an inflation targeting regime to educating borrowers about the fx risk. and it also requires a good coordination among the banking sector, government and the nbs. a lot has already been done in the past 18 months, but more rests ahead of us. in the period from march to june this year the share of dinar denominated bank assets increased from 24. 6 % to 27. 4 % and more than 40 % of the newly granted credits were in dinars. true, much of it drew on the government subsidy programs, but several banks have started offering fixed - term dinar credits with a maturity of several years. however, we are not seeing any movements in the currency composition of savings so far. this is despite the fact that saving in dinars has been a more profitable strategy than saving in euros in the past several years ( see charts ). 7 but as i said earlier – changes in savers ’ behavior require years of sustained macroeconomic and financial stability, and they will come gradually. the nbs is assuming the leading role in the dinarization agenda, but will cooperate closely with the other stakeholders – most notably the banking sector. we therefore welcome your initiatives and