The World Bank Implementation Status & Results Report State Owned Financial Institutions Strengthening Project (P156837) State Owned Financial Institutions Strengthening Project (P156837) EUROPE AND CENTRAL ASIA | Serbia | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 4 | ARCHIVED on 19-Oct-2019 | ISR38656 | Implementing Agencies: Republic of Serbia, Ministry of Finance Key Dates Key Project Dates Bank Approval Date: 20-Mar-2018 Effectiveness Date: 22-Aug-2018 Planned Mid Term Review Date: 14-Sep-2020 Actual Mid-Term Review Date: Original Closing Date: 01-Aug-2022 Revised Closing Date: 01-Aug-2022 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective is to improve the performance of Banka Postanska Stedionica AD Beograd and promote the reform of Development Finance Institutions and Other State-Owned Financial Institutions. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Support the Reform of State Owned Financial Institutions:(Cost $34.87 M) Strengthen Institutional Capacity:(Cost $15.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Satisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Progress under the Project continues to be moderately satisfactory. Banka Postanska Stedionica (BPS) continues to perform well, with good financial results in the first half of 2019 that resulted partly from the implementation of its new retail-focused strategy. The actions specified in the Government conclusion on BPS that remain uncompleted are: (a) revocation of BPS’ status as a user of public funds; and, (b) implementation of market-based compensation by BPS. There has been no progress on these issues. The reforms on development finance are progressing well. The drafting of the Development Finance Strategy and Action Plan is underway with a planned completion date of end-December 2019. Progress on the resolution of non-performing loans (NPLs) continues to be satisfactory. The sale of the first NPL portfolio was completed in June 2019 and the tender for the second, large portfolio was issued on September 30, 2019. 10/19/2019 Page 1 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Strengthening Project (P156837) Progress has been made on identifying ways to strengthen corporate governance of state-controlled banks, with implementation still pending. Thirteen consultants have been hired under the technical assistance component of the Project. Most of these consultants are directly supporting the Ministry of Finance financial sector unit on matters including strategic advice, legal advice, financial analysis, business analysis, and advice on insurance and capital markets reforms. Two firms were hired to support the sale of the large portfolio of non-performing loans and the preparation of the development finance strategy. Outreach session with business representatives as part of the citizen engagement strategy have not yet taken place. It is expected that one session will be held by end March 2020. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Substantial Substantial Substantial Macroeconomic Moderate Moderate Moderate Sector Strategies and Policies Moderate Substantial Substantial Technical Design of Project or Program High High High Institutional Capacity for Implementation and Sustainability Substantial Substantial Substantial Fiduciary Substantial Substantial Substantial Environment and Social Moderate Moderate Moderate Stakeholders Substantial Substantial Substantial Other -- -- -- Overall Substantial Substantial Substantial Results PDO Indicators by Objectives / Outcomes Improve the performance of Banka Postanska Stedionica AD Beograd IN00747126 ►BPS gross amount of performing credit exposures to medium and large private sector enterprises is reduced compared to end-2016 (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 4,050.00 35.00 6.30 1,620.00 Date 31-Dec-2016 31-Dec-2018 28-Jun-2019 31-Dec-2021 IN00747128 ►BPS gross NPLs are reduced compared to end-2016 (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target 10/19/2019 Page 2 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Strengthening Project (P156837) Value 23.32 7.00 6.88 11.66 Date 31-Dec-2016 31-Dec-2018 28-Jun-2019 31-Dec-2021 Promote the reform of Development Finance Institutions and Other State-Owned Financial Institutions IN00747127 ►Reduction in state-owned NPLs compared to end-2016 (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.87 3.24 3.15 1.20 Date 31-Dec-2016 31-Dec-2018 28-Jun-2019 31-Dec-2021 Based on new information received from the DIA regarding the level of state-owned NPLs on December 31, 2016, the baseline number was revised upwards from USD 3.10bn to USD 3.87bn. The end target Comments: remains at the level of USD 1.20bn. Overall Comments PDO The actual/ current numbers are using two different dates. The numerical indicators are based on the last semi-annual report which was submitted by the MoF in July 2019 with end-June numbers. The next report will be available in January 2020 with end-December 2019 numbers. The qualitative indicators are as of the end-date of the mission. Intermediate Results Indicators by Components Restructure Banka Postanska Stedionica AD Beograd IN00747129 ►BPS is in compliance with the prudential ratios set forth in Selected NBS Decisions (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value Yes Yes Yes Yes Date 30-Dec-2016 31-Dec-2018 28-Jun-2019 31-Dec-2021 IN00747133 ►BPS in compliance with limit on lending to State Owned Enterprises (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value Yes Yes Yes Yes Date 30-Dec-2016 31-Dec-2018 28-Jun-2019 31-Dec-2021 IN00747135 ►BPS BoD adopts (i) strengthened risk management policies and the Executive Board adopts implementing procedures, and (ii) compensation scheme in line with approved 2018-2020 business plan (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes 10/19/2019 Page 3 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Strengthening Project (P156837) Date 30-Dec-2016 29-Mar-2019 11-Oct-2019 31-Dec-2021 IN00747136 ►BPS completes installation of core banking system and associated software, hardware and services (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 30-Dec-2016 29-Mar-2019 11-Oct-2019 31-Dec-2021 Implement NPL Resolution Strategy and State-Owned Banks Strategy IN00747131 ►Updated NPL resolution strategy, which includes a strategy for state-owned NPLs with a separate action plan, has been adopted (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 30-Dec-2016 29-Mar-2019 11-Oct-2019 31-Dec-2021 IN00747134 ►Tender issued for the sale of SOFIs' NPLs, in an approximate amount of EUR 145.6 million (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 30-Dec-2016 29-Mar-2019 11-Oct-2019 31-Dec-2021 Complete Reforms and Develop Strategy on Development Finance IN00747132 ►Strategy for Development Finance has been adopted (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 30-Dec-2016 29-Mar-2019 11-Oct-2019 31-Dec-2021 Support the Reform of State Owned Financial Institutions IN00747130 ►Number of outreach sessions organized with business representatives as a two-way interaction (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 3.00 Date 30-Dec-2016 29-Mar-2019 11-Oct-2019 31-Dec-2021 Data on Financial Performance 10/19/2019 Page 4 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Strengthening Project (P156837) Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P156837 IBRD-88320 Effective USD 50.00 50.00 0.00 7.66 41.50 16% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P156837 IBRD-88320 Effective 20-Mar-2018 21-Mar-2018 22-Aug-2018 01-Aug-2022 01-Aug-2022 Cumulative Disbursements Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 10/19/2019 Page 5 of 5