The World Bank Implementation Status & Results Report State Owned Financial Institutions Reform Project (P156837) State Owned Financial Institutions Reform Project (P156837) EUROPE AND CENTRAL ASIA | Serbia | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 3 | ARCHIVED on 18-Apr-2019 | ISR36428 | 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: -- 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 Moderately Satisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Progress under the Project continues to be moderately satisfactory, as verified during the implementation support mission between March 25-28, 2019. Disbursements have advanced with EUR 4.01 million disbursed against the achievement of three Disbursement Linked Results in March 2019. Banka Postanska Stedionica (BPS) continues to perform well with good end-2018 financial results. The team emphasized that there has been no progress related to three actions specified in the Government conclusion on the restructuring of BPS and this requires urgent attention: (a) initiation of negotiations between BPS and Serbia Post to establish a new business relationship; (b) revocation of BPS’ status as a user of public funds; and, (c) implementation of market-based compensation by BPS. The reforms on development finance are progressing well. Another Development Finance Working Group meeting was held in March 2019 and the procurement for hiring consultants to help with the development of the strategy is ongoing as planned. 4/18/2019 Page 1 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Reform Project (P156837) Progress on the resolution of non-performing loans (NPLs) continues to be in line with expectations. The sale of the first NPL portfolio is expected to be completed shortly and the updated NPL Resolution Strategy was adopted in December 2018. The work on developing a Conclusion on corporate governance for State-Owned Banks is continuing as planned. 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. It is expected that the first outreach session with business representatives as part of the citizen engagement strategy will be held by end May 2019. This is delayed from agreements reached in June 2018. 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 IN00683952 ►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 5.60 35.00 1,620.00 Date 31-Dec-2016 28-Sep-2018 31-Dec-2018 31-Dec-2021 IN00683954 ►BPS gross NPLs are reduced compared to end-2016 (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target 4/18/2019 Page 2 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Reform Project (P156837) Value 23.32 7.20 7.00 11.66 Date 31-Dec-2016 28-Sep-2018 31-Dec-2018 31-Dec-2021 Promote the reform of Development Finance Institutions and Other State-Owned Financial Institutions IN00683953 ►Reduction in state-owned NPLs compared to end-2016 (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.87 3.10 3.24 1.20 Date 31-Dec-2016 05-Dec-2018 31-Dec-2018 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. Intermediate Results Indicators by Components Restructure Banka Postanska Stedionica AD Beograd IN00683955 ►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 28-Sep-2018 31-Dec-2018 31-Dec-2021 IN00683979 ►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 28-Sep-2018 31-Dec-2018 31-Dec-2021 IN00683981 ►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 Date 30-Dec-2016 05-Dec-2018 29-Mar-2019 31-Dec-2021 IN00683982 ►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 4/18/2019 Page 3 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Reform Project (P156837) Date 30-Dec-2016 05-Dec-2018 29-Mar-2019 31-Dec-2021 Implement NPL Resolution Strategy and State-Owned Banks Strategy IN00683977 ►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 No Yes Yes Date 30-Dec-2016 05-Dec-2018 29-Mar-2019 31-Dec-2021 IN00683980 ►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 05-Dec-2018 29-Mar-2019 31-Dec-2021 Complete Reforms and Develop Strategy on Development Finance IN00683978 ►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 05-Dec-2018 29-Mar-2019 31-Dec-2021 Support the Reform of State Owned Financial Institutions IN00683976 ►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 05-Dec-2018 29-Mar-2019 31-Dec-2021 Data on Financial Performance 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 5.01 44.49 10% 4/18/2019 Page 4 of 5 The World Bank Implementation Status & Results Report State Owned Financial Institutions Reform Project (P156837) 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. 4/18/2019 Page 5 of 5