Project: “Serbia Deposit Insurance Strengthening Project

Project: “Serbia Deposit Insurance Strengthening Project (IBRD Loan No. 8340YF)“ Project Financial Statements for the period from 1 January 2017 to 31 December 2017 and Independent Auditor's Report

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Serbia Deposit Insurance Strengthening Project International Bank for Reconstruction and Development

Loan no. 8340 YF

Page CONTENTS 1 - 3 PROJECT FINANCIAL STATEMENTS

Cash Receipts

Cash Payments

Summary Statement of Expenditures

Project Account Statements

Explanatory Notes

Balance Sheet of Deposit Insurance Fund

INDEPENDENT AUDITOR’S REPORT

TO THE MANAGEMENT OF THE DEPOSIT INSURANCE AGENCY

Opinion We have audited the financial statements of the Deposit Insurance Agency Strengthening Project (hereinafter “the DIA”) for the project no. P146248 (hereinafter “the Project”), financed under the International Bank for Reconstruction and Development (hereinafter the “IBRD”) loan no. 8340 YF, which comprise Cash Receipts, Cash Payments, Summary Statement of Expenditures, Project Account Statements and Explanatory Notes for the period from 1 January 2017 to 31 December 2017. The Balance Sheet of the Deposit Insurance Fund is an integral part of these Project financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, cash inflows and outflows related to the Project for the period from 1 January 2017 to 31 December 2017, in accordance with the accounting basis based on cash inflows and outflows described in Note 2.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the DIA in accordance with the ethical requirements that are relevant to our audit of the financial statements in the Republic of Serbia and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter – Basis of accounting and Restriction on Distribution and Use We draw your attention to Note 2 to the Financial Statements, which describes the accounting basis. The Financial Statements have been prepared in order to meet the requirements of the Loan Agreement concluded between the IBRD, Ministry of Finance of the Republic of Serbia and the supplementary agreement between the Ministry of Finance of the Republic of Serbia and the DIA, and for the purposes of informing the IBRD and the Ministry of Finance of the Republic of Serbia. As a result, these financial statements may may not be suitable for another purpose. Our report is indended solely for the DIA, IBRD and the Ministry of Finance of the Republic of Serbia and therefore it cannot be distributed or used by third parties without our prior consent. Our opinion is not modified in respect of this matter. The Balance Sheet of the Deposit Insurance Fund is an integral part of the financial statements of the Project in accordance with the Project Task and the Project Management Manual. This report was prepared by the DIA in accordance with the accrual basis of accounting. The Balance Sheet of the Fund is an integral part of the standalone financial statements of the organisational unit of the Deposit Insurance Fund, which does not have the status of a legal entity.

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INDEPENDENT AUDITOR’S REPORT

TO THE MANAGEMENT OF THE DEPOSIT INSURANCE AGENCY (Continued)

Responsibilities of Management and Those Charged with Governance for the Financial Statements The management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting basis based on cash inflows and outflows described in Note 2; which implies determining whether the accounting basis based on cash inflows and outflows is an acceptable basis for the preparation of financial statements in the circumstances and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the DIA’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the DIA or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the DIA’s internal control.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the DIA's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the DIA to cease to continue as a going concern.

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INDEPENDENT AUDITOR'S REPORT

TO THE MANAGEMENT OF THE DEPOSIT INSURANCE AGENCY (Continued)

Auditor's Responsibilities for the Audit of the Financial Statements (Continued)

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Belgrade, 23 May 2018 Danijela Krtinić

Certified Auditor

BDO d.o.o. Belgrade

IBRD LOAN 8340-YF – Deposit Insurance Strengthening Project No. P146248

For the Period from 1 January 2017 to 31 December 2017

IBRD Loan 8340-YF - Deposit Insurance Strengthening Project No. P146248 EXPLANATORY NOTES For the period from 1 January 2017 to 31 December 2017

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1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT

The International Bank for Reconstruction and Development (hereinafter referred to as “the IBRD”) has granted to the Republic of Serbia (hereinafter referred to as “the RoS”) a loan in the amount of EUR 145.30 million (IBRD Loan No. 8340YF) to finance the Deposit Insurance Strengthening Project (hereinafter referred to as “the Project”). The IBRD made the loan available to the RoS as per the Loan Agreement (hereinafter referred to “the LA”), executed on 10 July 2014 and ratified by the Law on Ratification of the Loan Agreement (Deposit Insurance Strengthening Project) between the RoS and the IBRD (“Official Gazette of the Republic of Serbia – International Treaties, No. 92/14), which includes the terms of its utilisation and implementation. The RoS made the loan proceeds available to the Deposit Insurance Agency (hereinafter referred to as “the DIA”) as per the Subsidiary Agreement, entered into on 24 October 2014. The Principal Payment Date begins on April 15 2019 and ends on 15 October 2031. In addition to the Loan Agreement, on 10 July 2014 the IBRD also concluded the Project Agreement (hereinafter referred to as “the PA”) with the DIA, setting forth the DIA’s obligations in terms of the Project implementation. An annex to the Loan Agreement (hereinafter referred to as “the Annex“) was signed on 21 April 2016, which prolonged the Project's validity period until 31 May 2017 and changed the allocation of funds in the manner that EUR 1 million was transferred from Component 1 to Component 2. On 30 May 2017 the IBRD submitted a Document on Project Restructuring that prolonged the Project's validity period until 31 December 2017. The Project consists of two components:

1. Component 1: Strengthening of the financial capacity of the DIA 2. Component 2: Strengthening of the institutional capacity of the DIA

Total financing under the Project amounted to EUR 145,300,000 and is allocated between the components in accordance with the LA and the Annex as follows:

Component 1 of EUR EUR 143,230,000 aims at strengthening the financial capacity of the DIA and envisages the transfer of the loan proceeds to the Deposit Insurance Fund (hereinafter referred to as “the DIF”) after meeting certain conditions which are expected to help build up the DIA’s capacity to fulfil its deposit insurance and bank resolution obligations;

Component 2 provides for technical assistance of EUR 1,706,750 to strengthen the DIA’s institutional capacity to fulfil its deposit insurance and bank failure resolution obligations, and achieve the Disbursement Linked Indicators (hereinafter referred to as the DLIs). Technical assistance is meant to help improve the areas linked with the DLIs and includes the consulting services which should add to: 1) the improved independence of the DIA’s governance bodies; 2) improved information exchange among the participants in the financial stability system in order to ensure that the DIA has access to relevant data; 3) DIA’s strengthened capacity for the recovery and realisation of the failed banks’ assets; 4) improved capacity of the Ministry of Finance to collect and monitor the information about the state-owned banks.

The objective of the Project is to strengthen the financial and institutional capacity of the DIA, so as to enable it to meet its deposit insurance and bank resolution obligations and serve as a core part of the financial sector safety net. The loan proceeds are also used to cover the front-end fee of EUR 363,250 paid to the IBRD.


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1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT (Continued)

The deadline for the disbursement is 31 December 2017, until when the IBRD may receive disbursement applications, whereas the deadline for documenting the project costs is 30 April 2018. The Annex prolongs the Project's completion date to 31 May 2017, while the Document on Project Restructuring prolongs the Project's validity period until 31 December 2017, as a closing date for meeting the requirements for the disbursement of the loan proceeds. According to the LA, the withdrawal of the loan proceeds is conditioned by the fulfilment of a number of agreed disbursement linked indicators (DLIs) by the RoS (Ministry of Finance), National Bank of Serbia (hereinafter referred to as “the NBS”) and the DIA. The IBRD also provided technical assistance under the Project to support the implementation of the DLIs. All DLIs were fulfilled until 31 December 2017. As of 31 December 2017, the DIA withdrew a total amount of EUR 144,935,515 while the amount of EUR 363,250 was paid for the front-end fee, leaving total of EUR 1,235 undisbursed as of 31 December 2017. The DIA's management and the Project Implementation Team (hereinafter referred to as “the PIT“) are responsible for the preparation of the financial statements and their appropriate disclosure.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING

CONVENTION

2.1. General The Project financial statements are prepared according to the comprehensive basis of accounting that is in line with the requirements of the Loan Agreement no. 8340YF, signed on 10 July 2014 between the IBRD, the Republic of Serbia Ministry of Finance and DIA. The financial reporting provisions of the Agreement are based on the generally accepted accounting principles and relevant IBRD guidelines. The Project financial statements are prepared in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting (IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board (IPSASB) within the International Federation of Accountants (IFAC), and presented in accordance with the Financial Management Manual for World Bank Financed Investment Operations (March 2010): RM 3- Financial Reporting and Auditing.

2.2. Accounting Records and Basis of Preparation The Project financial statements, except for the Balance sheet of the DIF, for the period from 1 January 2017 to 31 December 2017 were prepared on a cash basis. According to this basis, funds are recognized when cash is received, and expenses are recognized when cash is paid out. The following statements that constitute an integral part of the Project Financial Statements were prepared cumulatively from 26 November 2014 to 31 December 2017 and for the period ended 31 December 2017: Cash Receipts, Cash Payments, Summary Statement of Expenditures and Project Account Statements.


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2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING

CONVENTION (Continued) 2.2. Accounting Records and Basis of Preparation (Continued)

The DIF's Balance Sheet is an integral part of the Project financial statements in accordance with the Terms of Reference and Project Operational Manual. This report was prepared on accrual basis and is a part of the audited separate financial statements of the DIA – the deposit insurance fund for the year ended 31 December 2017. Pursuant to Article 20 of the Deposit Insurance Law (“Official Gazette of the Republic of Serbia“ no. 14/2015 dated 1 April 2015) which stipulates that: “the Agency shall keep separate books of account and financial statements of the Deposit Insurance Fund and shall make such data available to internal and independent auditors engaged by the Agency“, the Deposit Insurance Agency separated in 2016 the DIF's books of account from those of the DIA. The separation was done for the operating period from 1 January to 31 December 2016. The DIA's Balance sheet as of and for the year ended 31 December 2017 was prepared on the basis of the separated books of account and it constitutes separate financial statements of the DIF's organisational unit that has no status of a legal person. The comparative figures as of and for the year ended 31 December 2017 are taken from the financial statements that were prepared according to the previously applicable regulations on deposit insurance.

2.3. Exchange rates

All cash receipts and transfers were made in the reporting currency (EUR). Expenses paid in Serbian Dinars (RSD) from the Special Account were translated from EUR at the exchange rate of the depository bank prevailing on the date of each payment.

2.4. Reporting currency

The reporting currency of the Project financial statements is EUR. All reports apart from the Balance sheet are originally prepared in EUR. The Balance Sheet of the DIF was originally prepared in RSD thousands. Amounts in EUR are calculated using NBS official middle exchange rate on 31 December 2017 - 1 EUR = 118.4727 RSD, apart from the receivables and payables related to the reimbursement of the depositors of Univerzal banka a.d. Belgrade in bankruptcy (hereinafter referred to as “UBB“) recognised under the items “Other Assets“ and “Other Liabilities“. Accounts receivable and accounts payable were translated using the official middle exchange rate of the National Bank of Serbia on the day when the Decision on Initiating Bankruptcy Proceedings against UBB was issued by the Commercial Court (3 February 2014) until 31 December 2016. Taking into consideration that UBB partially settled its liability in 2017 and that the official middle exchange rate prevailing on the payment date was applied, the balance of receivables and payables in RSD does not correspond to the retranslated receivables and/or payables on the day when the bankruptcy procedure was initiated (1 EUR = 115.9378).


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3. CASH RECEIPTS

As of 31 December 2017 the DIA withdrew the total of EUR 144,935,515, whereas the amount of EUR 363,250 was paid for the front-end fee leaving the total of EUR 1,235 undisbursed as of 31 December 2017. Out of the total received funds, the amount of EUR 143,230,000 relates to Component 1, the amount of EUR 1,705,515 is related to Component 2, while the amount of EUR 363,250 refers to the paid front-end fee.

Year to dateCumulative as of

31 December 2017 Component I Advance - 54,490,000First withdrawal - 54,490,000Second withdrawal - 34,250,000Total amount: - 143,230,000 Total budget: - 143,230,000 Available: - - % of finance provided: - 100% Component II Advance - 200,000First withdrawal - 108,638Second withdrawal - 61,169Third withdrawal - 99,188Fourth withdrawal - 65,766Fifth withdrawal - 61,024Sixth withdrawal - 63,181Seventh withdrawal - 20,000Eighth withdrawal - 123,896Ninth withdrawal - 76,203Tenth withdrawal - 130,569Eleventh withdrawal 40,000 40,000Twelfth withdrawal 48,861 48,861Thirteenth withdrawal 56,101 56,101Fourteenth withdrawal 145,722 145,722Fifteenth withdrawal 185,720 185,720Sixteenth withdrawal 93,155 93,155Seventeenth withdrawal 94,013 94,013Eighteenth withdrawal 32,309 32,309 Total amount: 695,881 1,705,515 Total budget: - 1,706,750 Available: - 1,235 % of finance provided: - 99,9% Front end fee: - 363,250 Total funds received: 695,881 145,298,765


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4. SUMMARY STATEMENT OF EXPENDITURES

Total payments made as of 31 December 2017 amounted to EUR 145,291,625 and are related to the payments for Component 1 in the amount of EUR 143,230,000, Component 2 in the amount of EUR 1,698,375 and to the paid front-end fee in the amount of EUR 363,250.

a) Component 1: Strengthening of the financial capacity of the DIA A total amount of EUR 143,230,000 was withdrawn in whole for Project Component 1 in the previous reporting periods. Transfer 1 relates to the initial deposit in the amount of EUR 54,490,000. Transfers 2 and 3 amount to EUR 88,740,000. According to the Summary Statement of Expenditures, the DLIs were fulfilled and documented cumulatively from 26 November 2014 to 31 December 2017 in the total amount of EUR 143,230,000, i.e. from 1 January 2017 to 31 December 2017 in the amount of EUR 23,700,000.

b) Component 2: Strengthening of the institutional capacity of the DIA A total amount of EUR 1,705,515 was withdrawn for Project Component 2 to the designated account of the RoS (Ministry of Finance) and transferred to DIA’s account in the amount of EUR 1,698,375 for the following expenses: EUR 1,595,755 for Component 2A: Technical Assistance and EUR 102,620 for Component 2B: Technical Assistance. The remaining amount relates to the balance on the Designated Account for Component 2 in the amount of EUR 7,140, which is available to be used for audit costs. The following was submitted in the reporting period for Reporting Eligible Expenditures paid from the designed accounts: 1) List of payments against contracts that are subject to the Bank’s prior review;

2) Eight Statements of Expenditures 3A – against the contract valued at EUR 70,000 for companies, EUR 35,000 for individuals;

3) Eight Statements of Expenditures 3B – for all other payments made for eligible expenditures against contracts below the thresholds above-mentioned and Operating Costs.

5. DESIGNATED ACCOUNTS

Details concerning the Project’s Designated Accounts are as follows: Account No. RS35908504622019323075 Ministry of Finance, TreasuryDepository bank National Bank of SerbiaAddress Pop Lukina 7-9Currency (Euro) EUR Account No. RS35908504622019323041 Ministry of Finance, TreasuryDepository bank National Bank of SerbiaAddress Pop Lukina 7-9Currency (Euro) EUR


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5. DESIGNATED ACCOUNTS (Continued)

According to the bank statements:

- Outstanding balance on account no. RS35908504622019323075 amounts to EUR 0. - Outstanding balance on account no. RS35908504622019323041 amounts to EUR

7,140 and completely relates to the consultants’ costs related to the project audit, which will be paid in the following period.

When cash receipts were made, funds were transferred to the DIF Account No. RS35908504020000723714 within seven days of the credit to the Designated Account from the Loan Account for Component 1. For Component 2, when payments are made, funds are transferred to the separate DIA’s RSD Account No. 780-641-32.

6. BALANCE SHEET OF DEPOSIT INSURANCE FUND

Balance Sheet of the DIF

In EURITEM 31 Dec 2017 31 Dec 2016 ASSETS Cash and cash equivalents with the bank 1,060 21,337Financial assets at fair value through profit and

loss account held for trading 12,905,599 31,487,198 Financial assets held to maturity 147,859,183 19,333,876Loans and receivables from banks and other

financial organizations 231,802,066 245,196,241 Other assets 43,111,746 52,361,240 TOTAL ASSETS 435,679,654 348,399,892 LIABILITIES Deposits and other liabilities due to banks, other

financial organizations and central bank 143,663,318 143,762,615 Other liabilities 43,424,343 52,956,687 TOTAL LIABILITIES 187,087,661 196,719,302 CAPITAL DIF capital 248,591,907 151,680,508Retained earnings 86 83 TOTAL CAPITAL 248,591,993 151,680,590 TOTAL LIABILITIES 435,679,654 348,399,892 The amounts recorded in the DIF's balance sheet are translated from RSD to EUR according to the official middle exchange rate of the National Bank of Serbia on 31 December 2017 and 31 December 2016, except the accounts receivable and accounts payable related to the reimbursement of the depositors of UBB recognised under the items “Other Assets“ and “Other Liabilities“, which were translated using the official middle exchange rate of the National Bank of Serbia on the day when the Decision on Initiating Bankruptcy Proceedings against UBB was issued by the Commercial Court (3 February 2014) as of 31 December 2016.


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6. BALANCE SHEET OF DEPOSIT INSURANCE FUND (Continued)

Due to the settlement of the UBB's liability in the amount of EUR 5 million, which was retranslated at the official middle exchange rate prevailing on the payment date in 2017, the final debt balance in RSD as of 31 December 2017 does not correspond to the retranslated liability at the official middle exchange rate on the day when the bankruptcy procedure was initiated against UBB (1 EUR = 115.9378 RSD). Financial assets at fair value through profit and loss include RoS securities – held-for-trading treasury bills, whereas financial assets in the amount of EUR 147,859,183 refer to investments of the fund’s proceeds in RoS coupon bonds held-to-maturity. The loans receivable arising from Banks and Other and Financial Institutions relates to cash balances in the account held with the NBS in the amount of EUR 31,802,066 and DIF’s foreign currency term deposits held with the NBS in the amount of EUR 200,000,000. The accounts receivable from UBB for reimbursing the depositors, which are related to the receivables from unpaid funds from the bankruptcy estate for the purpose of paying insured deposits in the amount of EUR 43,111,746, are recorded in the DIA’s Balance Sheet – the deposit insurance fund under the item “Other Assets“. In order to provide funds necessary for the payment of UBB insured deposits, on 3 February 2014 DIA transferred the securities from its proprietary account to the proprietary account of the payer bank – Banka Poštanska Štedionica (hereinafter referred to as “BPŠ“) opened with the Central Securities Depository and Clearing House in the amount of 1.8 million of RSD long-term state securities and 70 million of long-term state securities. BPŠ paid out the amount of RSD 1,792,867 thousand for RSD insured deposits and EUR 66,945,483 for insured deposits in a foreign currency until the first quarter of 2017 inclusive, whereas the remaining portion of the unpaid funds in the amount of RSD 7,133 thousand and EUR 3,054,517 BPŠ paid to DIA on 10 May 2017. On 30 May 2017 the DIA submitted a Request for the Compensation of Funds to UBB, which sets out the instructions for the future settlements of a foreign currency liability in the case when a payment is made in a foreign currency: - when a payment is made in a RSD countervalue, the official middle exchange rate

of RSD against EUR prevailing on the payment date will be applied,

- when a payment is made in a foreign currency, such a currency will be translated to EUR at the exchange rate of EUR against the payment currency, calculated on the basis of the official middle exchange rate of RSD against EUR and the official middle exchange rate of RSD against the currency applicable on the payment date.

The final debt balance of UBB for the payment of depositors in the amounts of RSD 1,882,904 thousand and EUR 69,105,625 was determined according to the given instruction. Furthermore, the Request indicates that UBB transferred RSD 1,919,130 thousand and EUR 20,700 thousand to the DIF account, debited to the bankruptcy estate, until 30 May 2017 inclusive, while the overpaid amounts in RSD were used for partial closure of the foreign currency liability towards the Agency based on the payment of insured deposits and payment-related costs (the rate prevailing on the payment date of 29 December 2016, i.e. 123.2678 RSD = 1 EUR, was applied to the translation of the RSD overpaid amount to EUR). The amount of EUR 5,000 thousand is to be paid next under the Request and UBB is obligated to pay the indicated portion of the debt until 15 July 2017, which it did in accordance with the Request and payment instruction.


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6. BALANCE SHEET OF DEPOSIT INSURANCE FUND (Continued)

Receivables arising from the reimbursement of insured depositors from UBB were reconciled as of 31 December 2017 both in EUR and RSD, i.e. EUR 43,111,746 (out of which EUR 43,111,746 or RSD 4,974,363 thousand). The reconciled RSD amounts correspond to the amount of receivables presented in the official audited financial statements of the DIA - the deposit insurance fund. The aforementioned amounts related to the liabilities arising from the reimbursement of the UBB depositors are recognised under the Fund’s Balance Sheet liabilities – other liabilities. The liabilities related to the IBRD Loan 8340-YF and liabilities as of 31 December 2017 amounting to EUR 143,593,250 and Fund's liabilities arising from accrued interest on the deposits held with the NBS in the amount of EUR 70,068 are recognised under the item Deposits and Other Liabilities to Banks, Other Financial Institutions and Central Bank. Other liabilities in the amount of EUR 43,424,343 are not liabilities to third parties, but the liability to the Fund related to the payment of UBB's insured deposits in the amount of EUR 43,111,746 and the DIF's liability to DIA for operating costs amounting to EUR 312,597. The DIF's capital amounts to EUR 248,591,907 and includes a RSD fund in the amount of EUR 76,703,556 and a EUR fund in the amount of EUR 171,888,351. Pursuant to the Deposit Insurance Law (“Official Gazette of the Republic of Serbia“, no. 14/15), the DIF's capital is comprised of premiums for deposit insurance paid by banks, income from investing DIF proceeds, proceeds generated from the collection of DIA receivables from the bank's bankruptcy and/or liquidation estate based on the payment of insured deposits along with supporting costs related to the security, management and payment of Fund's proceeds, i.e. proceeds generated during the bank's restructuring procedure in accordance with the law that govern banks, proceeds provided from borrowings and donations and the RoS Budget funds. The DIF proceeds are used for the payment of insured amounts in case of bank's bankruptcy and liquidation, payment of administrative costs related to the payment of such amounts and to the management of the fund's proceeds for deposit insurance, as well as for the refund of the borrowed funds used for the allocations under this paragraph. Furthermore, the DIF's Balance sheet as of 31 December 2015 included the accounts receivable from the DIF based on the IBRD loan – Component 1, Fund capital, as well as liabilities as per the IBRD loan - Component 1. Taking into consideration the Resolution issued by the Audit Committee, which was submitted to the Board of Directors that instructed in its resolution that the capital related to grants be separately recorded at the capital item of the DIF and the liabilities towards lender be separately recognised, the DIA derecognised the accounts receivable from the DIF arising from the IBRD loan – Component 1, as well as the DIF's capital for the year ended 31 December 2016. Additionally, the DIF's Balance sheet as of 31 December 2015 included the accounts receivable from the DIF based on the IBRD loan – Component 2, as well as liabilities as per the IBRD loan - Component 2, which were not presented in the DIF's B20alance sheet for the year ended 31 December 2016 according to the resolution passed by the Audit Committee at its session held on 28 July 2016 since the said resolution specifies that the project costs are to be posted under DIA's business operations, not under the DIF's. Moreover, the management's position is that the Component 2 loan liability should accordingly be recorded in the DIA's books of account under other activities.

Documents

Project: “Serbia Deposit Insurance Strengthening Project