##m 2 mechanism for at least two years and delivering stable currency, inflation and long term interest rates comparable with those in the eu, and disciplined and prudent public finance. all of these are euro convergence criteria that at the end boil down to having safe and sound economy and disciplined monetary and fiscal policy, as a precondition for smooth monetary integration. hence, entering the eu not only will facilitate trade and finance, and make movement of people much easier, but it will also open the doors to gradually move towards a single currency. the benefits of adopting the euro are well known, in particular for a country that already has the exchange rate as a target, which means smoother transition. the single currency eliminates the currency risk and transaction costs, and thus facilities trade of good and services. it can also reduce the costs of financing, enabling easier access to finance and better opportunities for business decisions. the single currency and the participation in the monetary union provides the country with a backstop in case of financial difficulties and disabled access to international markets through the so - called european stability mechanism. of course, adopting the single currency would mean giving up on the monetary policy independence, which is already limited given the exchange rate peg, and would not require major adjustments. this cost is lesser compared to the benefits that the single market and single currency would bring, under the assumptions that all the policies would be in place and prudent enough to secure sound fundaments and stability of the economy. to recap, the eu integration is a process, which will provide boost and will shape reforms in many areas, underpinning the process of real, social and institutional convergence of the country. it will also impact the monetary policy making, both before and after the final stage of complete monetary integration. the challenges for the central bank are of a multidimensional nature – macroeconomic, institutional, and operational. steering the wheel properly would require strong institutional capacity and awareness of all the policy makers that smooth integration requires healthy economy, absence of imbalances and sound policies. thank you. 2 / 2 bis central bankers'speeches

dimitar bogov : impact of international regulatory cooperation on the republic of macedonia opening speech by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the 36th meeting of the european banking federation, skopje, 7 june 2013. * * * distinguished participants to the 36th european banking federation associates ’ meeting, dear guests, ladies and gentlemen, let me wish you a very warm welcome at today ’ s meeting. the topic i want to dedicate my welcoming speech on is international regulatory cooperation. the banking system in the republic of macedonia is predominantly foreign - owned and consists mostly of either subsidiaries of foreign banks or of banks owned by foreign portfolio investors. foreign ownership has assisted banks in their efforts to follow sound market practice, develop and maintain high credit standards and receive encouragement and advice from their larger and longer established parent institutions. the global financial crisis and eurozone debt crisis have not fundamentally changed this relationship. nevertheless, these exceptional crises do constitute a real challenge for international and global banking. the vienna initiative, the framework to safeguard the financial stability of emerging europe, has been valuable in raising awareness that the deleveraging process in developed europe should not unduly restrict operations of bank subsidiaries in emerging europe. in this context, it is important to note that even before the crises stroke, deposits raised in the macedonian banking system by the predominantly foreign - owned domestic banks were lent by those same banks to borrowers in the republic of macedonia. as a rule, foreign funding, excluding equity and reserves, did not exceed 10 % of all sources of financing of the banking sector. there has always been a difference amongst individual banks, a reflection of the different strategies for funding and acquiring sources, yet the overall importance of foreign funding is not in its percentage, but in its long - term nature. this is the premise on which the good business relations between parent banks and subsidiaries is based. when the crises stroke the relative importance of domestic deposits in financing the claims on macedonian borrowers actually increased. in the republic of macedonia the ratio of loans to domestic gdp is still 47 – 50 %, while the ratio of deposits to domestic gdp is around 55 %. these ratios in the developed world tend to be above 100 %, which shows the potential for growth. similarly, the ratio of household debt, including mortgages, to household disposable income, is around 25 %, substantially lower than most countries at a similar level of development, also offering opportunities for the banking sector. regulatory capital