Borovic: Nonsense that lawsuits over loans threaten the business of banks

The President of the Committee for Economy and Finance of the City Board of the People’s Party Belgrade, Borislav Borović, stated today that the claim that lawsuits regarding loans can endanger the operations of banks is meaningless.

Borovic said that everything that banks and their “wooden lawyers” put at risk could make sense if it were “loans that banks would give to citizens, and not loans that are placed,” the People’s Party said.

“Apart from the fact that such actions of banks have only led to the destabilization of millions of families in Serbia, it is high time to present to the general public the essence of the way of placing loans and point out the alleged risks of banks they refer to in these lawsuits. arbitrating the outcome of these disputes, “Borovic said.

He added that banks never, or with rare exceptions, give loans to citizens, but give loans as their depositors.

A new issue of Macroeconomic Analysis and Trends (MAT) issued by the Serbian Chamber of Commerce and the Belgrade Institute of Economics warns that litigation between citizens and banks over loans could jeopardize the stability of the banking sector.

It is stated that the effects of court decisions regarding fees and costs of loan processing to the banking sector would bring losses that could lead to the bankruptcy of some banks.

The cabinet of the governor of the National Bank of Serbia (NBS), Jorgovanka Tabaković, also interprets these lawsuits with similar warnings about the potential destabilization of the banking sector.

Borovic pointed out that “what the Law on Obligations knows, the NBS and banks do not know or will not know, and unfortunately, citizens know the least about it as loan users.”

According to him, the important difference between loans and credits is that when a bank gives a loan, it is an intermediary between the money of depositors or funds from foreign debts of commercial banks on the one hand, and those who need that money on the other hand.

He added that the difference between interest rates is their earnings.

“It is about money that is already in circulation,” states Borović.

As he stated, in the case of a loan, the value of the business assets of the banks does not change, but the liquid funds on the account are converted into receivables based on the given loans.

“All the risk is on the bank, it is real and cannot be completely eliminated, and it is covered by various means of security in order to reduce that risk,” he pointed out.

Borovic said that loans are actually accounting operations of banks through computers, where “out of nothing” they create their receivables on the basis of placed loans on the one hand, and obligations of clients on the basis of received funds on the other hand.

“When giving loans, banks actually issue money that did not exist in the financial system until then through the secondary, and essentially through the primary issue of money that the NBS enabled them,” states Borović.

He adds that when banks give loans, the value of their balance sheet amount or business assets increases.

“Then what is the risk for the funds that were placed ‘out of nowhere’ that the banks and their sponsors warn us about? The answer is no,” claims Borović.

He states that from the point of view of banks, it is only about the risk of reducing the enormous profit of the banking sector, and not about any loss that would allegedly bring them into bankruptcy.

“That is why it is ordinary nonsense that judgments about fees and costs of loan processing could jeopardize their business and drive them into bankruptcy, because the income that banks generate by placing loans on various bases far exceeds the stated interest rates, which should actually be the bank’s earnings.” , stated Borović in a written statement.

By Editor

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