Introduction
The National Bank of Serbia (“NBS”) has prepared the Draft Law on Credit Institutions (“Draft”) as part of the broader process of aligning Serbia’s financial system with European Union (“EU”) law under Negotiation Chapter 9 – Financial Services, moving toward a broader regulatory framework based on EU terminology and concepts. The purpose of the draft is to strengthen the system’s stability, improve supervision, and prepare domestic law for Serbia’s future EU membership. The Draft introduces an EU-style CRD/BRRD framework, reshapes governance and remuneration rules, expands the catalogue of permitted services, and creates a phased framework for cross-border banking once Serbia joins the EU.
Against this background, one of the key changes is terminological and regulatory in nature. The Draft introduces the EU-style concept of a “credit institution”, while retaining the concept of a “bank” for institutions established in Serbia. In the domestic context, the two terms are largely used as synonyms, whereas the broader terminology becomes particularly relevant for the treatment of EU and third-country credit institutions, branches, financial groups and certain large investment firms.
Proposed Amendments to the Existing Legislation
The Draft sets out a broad package of changes, starting with the definition of a credit institution. In addition to the classic banking activity of taking deposits and granting loans, the scope is expanded to include investment and additional financial activities.
The Draft also introduces a more structured framework for cross-border banking. It distinguishes between Serbian credit institutions, credit institutions from EU Member States and credit institutions from third countries, as well as their Serbian branches. However, the EU passporting regime is largely linked to Serbia’s future EU accession. Until Serbia becomes a full EU Member State, credit institutions from EU Member States will be treated under the rules applicable to third-country credit institutions.
The Draft introduces a distinction between small and simple credit institutions on the one hand, and large credit institutions on the other, with the regulatory burden adjusted to the size and complexity of their business. Smaller institutions are subject to a simpler regime in certain areas such as recovery and restructuring, while large institutions, especially systemically important ones, are subject to stricter requirements.
Compared with the current Law on Banks, the Draft significantly expands and systematises the catalogue of services that credit institutions may provide. In addition to traditional banking services, the Draft expressly refers to financial leasing, custody and administration of securities, money-market intermediation, asset management, advisory services relating to capital structure, business strategy and M&A, as well as certain additional financial services such as the operation of payment systems and trading in gold, in some cases subject to prior NBS consent. The Draft also recognises electronic money and, subject to deferred application and Serbia’s EU accession, electronic money tokens and crypto-asset services under the EU MiCA framework.
The Draft also revises the terminology structure of corporate governance bodies. The General Meeting of shareholders and the Executive Board remain in place, while the existing Board of Directors is replaced by a Supervisory Board, reflecting the two-tier governance terminology used in Serbian company law. Beyond terminology, the Draft introduces more detailed governance requirements, including individual fit-and-proper assessments and an assessment of the collective suitability of the management body as a whole.
For credit institutions that are significant in terms of their size, internal organisation and the nature, scope and complexity of their activities, the Draft requires the establishment of additional Supervisory Board committees, including a nomination committee, a risk committee and a remuneration committee. For non-significant institutions, the Draft provides certain simplifications, including the possibility for the Supervisory Board to perform some of these functions, and for the risk committee to be combined with the audit committee. In relation to remuneration, the Draft introduces stricter rules on pay structures, requiring a sufficiently high proportion of fixed remuneration and allowing variable remuneration to be reduced or withheld. Variable remuneration is capped at 100% of fixed remuneration, with the possibility to increase this ratio up to 200% subject to conditions prescribed by the NBS.
The Draft also broadens the recovery and resolution framework and tailors it to credit institutions. While many of the underlying concepts will be familiar from the existing banking regulatory regime, the Draft expands their scope by applying them to a wider category of regulated entities (credit institutions, financial and mixed financial holdings, third country branches, etc.) and by introducing more detailed rules for recovery and resolution planning at both the individual and group levels. It strengthens the NBS’s role in assessing resolvability, identifying impediments to effective resolution, and coordinating resolution measures within financial groups, further aligning the Serbian framework with the EU recovery and resolution standards.
Conclusion
In conclusion, the draft introduces a more demanding regulatory framework for banks and other credit institutions, with the clear aim of strengthening the stability, transparency, and resilience of the financial system. The Draft is not only a formal replacement of the current Law on Banks, but a broader regulatory reset of Serbia’s banking framework. Its practical impact will be most relevant for banks, banking groups, financial and mixed financial holdings, current and prospective shareholders, foreign credit institutions considering a Serbian presence, and institutions active in payment services, digital finance and investment-related services. Although the Draft provides for a 24-month transition period and certain EU-related rules will apply only upon Serbia’s accession to the EU, market participants should already begin assessing the impact on governance, permitted activities, remuneration, recovery and resolution planning, and group-level compliance.
Legislative Procedure and Entry into Force
As the Draft is currently at an early stage of the legislative process, its provisions remain subject to change. Accordingly, the final text may undergo significant amendments as it advances through its next procedural stages. The Draft has recently been subject to public consultation, which is now closed. Following the review of comments received during the consultation process by the NBS, the Draft is expected to be submitted to the National Assembly in the form of a bill for consideration and adoption.
The Draft provides that the law will enter into force on the eighth day after publication in the Official Gazette, while its application will begin only 24 months after it enters into force. At the same time, certain provisions will begin to apply only upon Serbia’s full membership in the EU.
FAQ
What is Serbia’s Draft Law on Credit Institutions?
The Draft Law introduces a new regulatory framework for banks and other credit institutions, aligning Serbia’s banking legislation with EU rules and strengthening governance, supervision, and financial stability.
How will the Draft Law change the current banking framework?
The Draft expands the range of permitted financial services, introduces new corporate governance and remuneration requirements, strengthens recovery and resolution rules, and prepares the banking sector for future EU membership.
Who will be affected by the Draft Law?
The Draft will primarily affect banks, banking groups, financial and mixed financial holding companies, foreign credit institutions operating in Serbia, and businesses active in payment services, digital finance, and investment services.
When will the new Law on Credit Institutions apply?
The Draft provides for a 24-month transition period after it enters into force. Certain provisions will only apply once Serbia becomes a member of the European Union.
Is the Draft Law already in force?
No. The Draft has completed the public consultation stage but is still subject to the legislative process and may be amended before its adoption by the National Assembly.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
