veselin pjescic : desirable tendencies in the debt securities market speech by mr veselin pjescic, vice - governor of the national bank of serbia, at the 11th international belgrade stock exchange conference, belgrade, 21 november 2012. * * * ladies and gentlemen, on the occasion of the anniversary of the belgrade stock exchange, founded on 21 november 1894, i wish to thank the organisers for their long - lasting and steadfast commitment to the development of the domestic capital market and organisation of a number of industry - related and educational activities. though generally we cannot boast any major results, what makes a difference is the perseverance and dedication of key market players to design and take all available measures to further upgrade the financial market in these turbulent times. the national bank of serbia is aware of its role of one of the key stakeholders, along with the government, banks and other financial institutions. when speaking of desirable tendencies in further development of debt instruments, we should reflect on the achievements so far, which are not insignificant considering the current, unfaltering crisis. the market of government securities had not even been set up until a few years ago, and today it is practically the dominant source of government funding. the maturity of these securities in the primary market was extended up to five ( for dinar securities ) and 15 years ( for foreign exchange securities ) and domestic and foreign investor participation has significantly increased. further, we have seen the first issues of municipal and bank dinar bonds, with some international institutions also showing interest in using such form of funding. these first steps of development of a proper capital market within the meaning used in developed countries are all the more significant because they represent the very driving force of further market growth. however, the development of the debt market must be properly guided to be sustainable and stable, as well as beneficial to all participants and the market itself. this can be achieved by pursuing the following three lines of development : 1 ) further development of the primary and improvement of the secondary market of government securities, 2 ) broadening the circle of issuers and the investor base of debt securities, and 3 ) stronger development of dinar debt instruments. as for the primary market, the maturity of government securities has been extended to a greater degree over the past two years : in march 2011, dinar - denominated securities with three - year maturity were issued for the first time, and in january this year those with fiveyear maturity. this has

billion dinars. within this figure, loans to economy increased by 37. 8 billion dinars ( + 27. 8 % ), whereas loans to households increased by 18. 8 billion dinars ( + 66. 6 % ). the remaining part of the lending activity of 17. 1 billion dinars is comprised of loans to public sector and investments in the public sector, banks and nonresidents. maturity structure is also improving : total long - term loans have increased by 42. 8 billion dinars, which represents an increase of 56. 1 %. short - term loans and investments have increased by 30. 9 billion dinars, or by 18. 6 %. according to data for the first eight months of this year, dinar loans amounted to 45. 4 billion dinars, and foreign exchange ones by 28. 3 billion dinars. five largest banks have accounted for 65. 9 % of the total lending increase in the course of this year. given its low basis, the growth of household loans is apparently more quick - paced, amounting to an average of 6, 300 dinars per capita. however, a large share of funds obtained from loan resources is used by the citizens for purchasing imported goods. such consumption results in increased imports ( january - august + 44. 8 % ; however, export expressed in euros accounts for 31. 6 % ), and results in an increase of foreign trade deficit ( usd 4. 5 billion ) at a slight increase of export level ( january september + 21. 7 % ; however, export expressed in euros is 10. 5 % ). restricting demand - acting in accordance with our resources the nbs is currently considering the measures which would provide for directing loan potential towards investments, i. e. economy, since the nbs bears the responsibility to ensure a sustainable economic growth rate in the long term, without which there will be no new employment opportunities nor any higher incomes in the long term. by contrast, if consumption is given priority over investments, everything can be consumed very quickly - not only incomes and foreign exchange, but the achieved macroeconomic stability as well. in case foreign debts are used for consumption rather than investments, the nbs shall have to react, which means that we have to act in accordance with our resources, - our real resources! 3. incomes - inflation - exchange rate compared to the matching period last year, in the course of the first nine months of 2004, net incomes registered an increase of 23. 7 %