LAW
ON MODIFICATIONS AND AMENDMENTS TO THE LAW ON ESTABLISHING THE MACEDONIAN BANK FOR DEVELOPMENT PROMOTION

Article 1

Article 2 in the Law on Establishing the Macedonian Bank for Development Promotion (Official Gazette of the Republic of Macedonia, no. 24/98 and 6/2000) shall be changed and shall read: "The primary task of the Bank shall be to support the development, which shall be performed through financing investments of small and medium enterprises, promoting exports, and implementing foreign loans and donations.

The Bank shall establish a Guarantee Fund as separate organizational unit to support the development through guaranteeing approved investment credits by banks and other financial institutions."

Article 2

Words: "Law on Banks and Savings Houses" in Article 3, shall be replaced with the words: "Law on Banks".

Article 3

Words: "DM 30 million" in Article 4 paragraph 3, shall be replaced with the words: "15 million euros".

Paragraph 5 shall be deleted.

Article 4

In Part 3 Scope of Operations in front of Article 6 a subtitle shall be added and shall read: "3.1. Activities of the Bank".

Article 5

Article 6 shall be changed and shall read: "The Bank shall have the following financial activities:

1)  crediting the initiation of operations and development of small and medium size enterprises in the Republic of Macedonia by providing medium-term and long-term credits;

2)  crediting (providing finances) investments abroad, export and preparing export of companies from the Republic of Macedonia ;

3)  refinancing up to 50% of medium-term and long-term export credits and investments abroad, approved by domestic banks and other financial institutions, previously insured in the Bank against noncommercial risk;

4)  issuing instruments for securing the payment (guarantees, backing guarantees, contract pledge and other forms of security) upon credits approved by banks and other financial institutions for projects from points 1 and 2 of this paragraph;

5)  temporary uniting with other banks for issuing guarantees for investments of companies from the Republic of Macedonia abroad in a value of more than 1,000,000 euros (bank consortium)

6)  insurance and reinsurance of claims on the basis of performed export against commercial and noncommercial risk;

7)  insurance and passive reinsurance of foreign investments in the Republic of Macedonia and investments of domestic companies abroad against noncommercial risks;

8)  purchase, sell, and collection of claims;

9)  factoring and forfeiting on behalf of clients;

10)  financial consultancy, and

11)  collecting, processing and publishing of data for making (establishing) a credit rating of legal entities and its selling.

The Bank shell perform the operations referred to in paragraph 1 points 1, 2, 3, and 4 of this Article through commercial banks, and the exposure of the Bank to a certain bank may amount up to double amount of the guarantee capital of the Bank.

To indemnify potential loss emerging from concrete risk active balance sheet and off-balance sheet the Bank shall appropriate separate reserve according to a special methodology prescribed by the National Bank of the Republic of Macedonia .

Regulations that regulate the open foreign currency position shall not apply to the Bank.

In order to perform its operations referred to in paragraph 1 of this Article, the Bank may, on its own behalf and for its own account, on the basis of decision by the Management Board, conclude credit operations with domestic and foreign institutions and issue securities pursuant to the law.

The Bank shall not approve credits or issue guarantees to the state, public enterprises and institutions financed from the Budget of the Republic of Macedonia and from the budgets of the municipalities.

The Bank shall perform the activities stipulated in this Article only with enterprises that timely settle their liabilities due to the banks.

The manner of performing the operations referred to in paragraphs 1, 2, and 5 of this Article shall be prescribed more precisely by the Statute of the Bank".

Article 6

Words: "guarantee for insurance and reinsurance against commercial and non-commercial risks" in Article 8 paragraph 2 shall be replaced with the words: " instruments for securing payments in relation to the activities of the Bank referred to in Article 6 paragraph 1 and Article 8-a paragraph 1 of this Law".

Article 7

New subtitle 3.2 shall be added after Article 8, and shall read: "3.2 Activities of the Guarantee Fund", which shall include three new articles 8-a, 8-b, and 8-v and shall read:

"Article 8-a

Funds from the Guarantee Fund shall be used for issuing guarantees for securing payments upon long-term credits for investments approved by the banks and other financial institutions in the Republic of Macedonia to micro, small and medium size traders, sole traders and craftsman registered in the Republic of Macedonia .

Guarantees referred to in paragraph 1 of this Article shall not be approved for projects that:

1)  shall be financed or guaranteed with Bank's funds (Article 6 paragraph 1 points 1, 2, 3, and 4);

2)  shall contaminate the living environment and nature;

3)  shall be intended for production and distribution of weapon and military equipment, and

4)  shall be intended for production of drugs and other narcotics.

Guarantees referred to in paragraph 1 of this Article shall be approved to the commercial banks and other financial institutions of the Republic of Macedonia , and the exposure of the Guarantee Fund to a certain bank can not exceed the amount of the funds of the Guarantee Fund. Exposure of the Guarantee Fund to a certain bank shall not be calculated in the exposure referred to in Article 6 paragraph 2 of this Law.

A commission shall be charged for issuing guarantees in an amount set by the Management Board of the Bank.

Article 8-b

Guarantee Fund shall guarantee up to one third of a credit in an amount up to 150,000 euros, and the amount of the guarantee can not exceed 35,000 euros.

Guarantees shall be issued for a period up to ten years.

Single legal entity or natural person and related entities in regard to the Law on Banks can not be issued out of the funds of the Guarantee Fund more than one guarantee in a period of three years.

Guarantees shall be issued on the basis of an agreement concluded in accordance with the Law on Obligations.

The Management Board shall prescribe more precisely the conditions and the procedure for issuing guarantees and the instruments for their securing.

Article 8-v

Guarantees issued from the Guarantee Fund shall be paid within three months from the day the commitment is due."

Article 8

New subtitle 4.1 shall be added in front of Part 4 ASSETS and shall read: "4.1. Assets of the Bank."

Article 9

Words: "Article 6 paragraph 1 indent 4" in Article 12 shall be replaced with the words: " Article 6 paragraph 1 points 6 and 7."

Article 10

New subtitle 4.2 shall be added after Article 14 and shall read: "4.2. Assets of the Guarantee Fund" and shall include three new articles 14-a, 14-b, and 14-v that shall read:

"Article 14-a

Funds of the Guarantee Fund shall be provided from:

-  the Budget of the Republic of Macedonia , as non-repayable deposit in an amount of MKD 265,000,000.00;

-  foreign and inland donations;

-  income from commissions for issued guarantees;

-  income from placements in securities, and

-  other sources.

Funds referred to in paragraph 1 of this Article shall not bear interest.

Funds of the Guarantee Fund shall not be included in the guarantee capital of the Bank and may be used only for the purposes referred to in Article 8-a of this Law.

Article 14-b

The Bank shall open a separate account for operating the funds of the Guarantee Fund in the National Bank of the Republic of Macedonia .

The Bank shall keep separate accounting records for the funds of the Guarantee Fund.

Up to 70% of the funds of the Guarantee Fund may be placed as short-term securities with a period of three months issued by the Government and by the National Bank of the Republic of Macedonia .

Article 14-v

The total amount of issued guarantees can not exceed the triple amount of funds of the Guarantee Fund, and in the first year of operation shall not exceed the amount of funds of the Guarantee Fund, and in the second year the double amount of funds of the Guarantee Fund."

Article 11

New title shall be added before article 15 and shall read: "4.3. Guarantees for commitments."

Article 12

Words: "Article 6 paragraph 1 indents 1 and 2 and paragraph 3 of the same article" in Article 15 paragraph 1 shall be replaced with the words: "Article 6 paragraph 1 points 1, 2, 3, 4, 5, 8, 9, 10, and 11, and Article 8-a paragraph 1 of this Law."

Words: " indent 1" in paragraph 2 shall be deleted.

Article 13

Article 16 shall be changed and shall read: "Internal organization of the Bank shall be regulated by the Statute of the Bank and other general acts of the Bank."

Article 14

The title of Part 7 shall be changed and shall read: "7. Management."

Article 15

Article 17 shall be changed and shall read:

"The Republic of Macedonia shall be represented with five persons appointed by the Government of the Republic of Macedonia in the Assembly of the Bank � representatives of the state capital.

Until privatization of at least 15% of the capital of the Bank the appointed representatives of the state capital in the Assembly of the Bank at the same time shall be members of the Management Board of the Bank.

With privatization of at least 15% of the capital of the Bank, the Management Board of the Bank shall comprise of five members appointed by the Assembly of the Bank, three on proposal of the representatives of the state capital in the Assembly of the Bank upon preceding agreement of the Government of the Republic of Macedonia and two members on proposal of the other shareholders of the Bank.

With privatization of at least 15% of the capital of the Bank decisions in regard with the funds of the Guarantee Fund shall be made by the members of the Management Board appointed on proposal of the representatives of the state capital in the Assembly of the Bank."

Article 16

Article 18 shall be deleted.

Article 17

Article 19 shall be changed and shall read:

"The National Bank of the Republic of Macedonia shall perform supervision of the Bank, pursuant to the Law on Banks and the Ministry of Finance, pursuant to the Law on supervision of insurance."

Article 18

Words: "economic appraiser" in Article 20 shall be replaced with the word "auditor."

New paragraph shall be added and shall read: "The Bank shall submit reports to the Government of the Republic of Macedonia for utilization of the funds of the Guarantee Fund twice a year."

Article 19

This Law shall become effective on the eight day of its publication in "Official Gazette of the Republic of Macedonia ".