CBM policy for 2014
Pursuant to Article 44 paragraph 2 point 1 of the Central Bank of Montenegro Law (OGM 40/10, 46/10 and 6/13), at its meeting held on 28 November 2013, the Council of the Central Bank of Montenegro adopted the following:
CENTRAL BANK OF MONTENEGRO POLICY FOR 2014
I. In line with its constitutional responsibilities and statutory obligations and accountability for monetary and financial stability and the banking system functioning, and adhering to the principles of transparency and independence, in 2014, the Central Bank of Montenegro shall:
With a view to further enhancing and preserving monetary and financial stability, use all available instruments and take all necessary measures within its authority to strengthen confidence in overall financial system, ensure preventive actions and improve safety and soundness of the banking system and minimize adverse effects and threats to financial stability. It will continue developing monetary policy instruments by revisiting the reserve requirement policy and the need to implement other monetary policy instruments. It will monitor the implementation of the Law on Voluntary Financial Restructuring. A particular attention will be dedicated to the improvement of instruments and indicators of financial stability monitoring and contingency planning instruments. In addition, due attention will be paid to overseeing of the macro prudential framework with a view to providing its adequate and purposeful implementation. Within measures aimed at the financial system strengthening, the CBCG will particularly focus on fostering and preserving a sound banking system. To that end, it will continuously monitor and analyze the situation in the banking system and, as necessary, take corrective measures, promote the strengthening of corporate governance and risk management in banks, and continue implementing internationally accepted standards and principles in this area.
Support economic policy objectives and measures of the Government of Montenegro, in particular those pertaining to intensifying the recovery of the economic system and the fostering of growth and economic competitiveness; it will also support measures of proper fiscal consolidation to the extent that will not jeopardise the attaining of objectives, constitutional responsibilities, and independence of the CBCG.
Maintain a sound, efficient and effective payment system and work on drafting relevant secondary legislation in line with the new Payment System Law that has been harmonized with EU Directives, international standards, principles and best practises in the functioning of modern payment systems and payment system transactions in general.
Manage the international reserves in the manner to ensure the safety of investments and undisturbed fulfilment of Montenegro’s international financial obligations without jeopardizing liquidity and with adequate managing of all risks pertaining to the placement of these funds, as well as analyze new opportunities for investments and increasing return on these investments.
Actively participate in Montenegro’s EU accession process and work on further harmonisation of regulations within its authority with the EU Acquis Communautaire, whereby the EU accession will be treated as one of the strategic priorities for which appropriate human and material resources shall be allocated.
Develop and, subject to the relevant need and possibilities, recruit new human resources with appropriate qualifications, know-how and skills to ensure an efficient and effective implementation of the established CBCG policy. It will work on the motivation, further education and promotion of its employees to allow them to fully express their working potential and contribute to the exercising of the CBCG functions.
Subject to adhering to the transparency standards, continue providing timely, reliable and relevant information within its competence to all relevant entities. It will pay special attention to raising awareness of the public, promoting the economic knowledge in the society, as well as a better understanding of the importance of financial stability and soundness of the banking system for the whole society.
With a view to preserving, protecting and maintaining historical and cultural numismatic heritage in Montenegro, it will continue with collecting and supplementing the collection of money and other monetary instruments, with a particular emphasis on completing the collection of the only Montenegrin money – Perper.
Properly develop other areas of importance for the attainment of objectives and the exercising of functions of the CBCG such as the information system development, international cooperation development, participation in combating counterfeit circulation and the like.
It will base its functioning on the principle of a socially responsible organisation and it will remain actively involved in a modern society development.
II. This Policy shall be published on the website of the Central Bank of Montenegro.
CENTRAL BANK OF MONTENEGRO COUNCIL
Dec. no. 0101-4014/50-5
Podgorica, 29 November 2013
Pursuant to Article 44 paragraph 2 point 2 of the Central Bank of Montenegro Law (OGM 40/10, 46/10, 6/13), at its meeting held on 29 November 2013, the Council of the Central Bank of Montenegro adopted the following
GUIDELINES FOR THE IMPLEMENTATION OF THE CENTRAL BANK OF MONTENEGRO POLICY IN 2014
1. With a view to further strengthening and preserving monetary and financial stability, and particularly encouraging and preserving the stability of the banking system, the Central Bank of Montenegro (the CBCG) shall:
a. take all necessary actions and available measures and instruments of monetary and prudential policy in accordance with the law;
b. continuously revisit its reserve requirement policy, as the most important monetary policy instrument and, as necessary, amend the reserve requirement rates and/or base coverage;
c. continuously analyse potential risks and threats to financial stability with a view to their identification and diminishing their impact by implementing other monetary policy instruments – open market operations, granting liquidity loans to banks, and exercising the function of the lender of last resort;
d. improve the existing and develop a new statistical base and instruments for monitoring financial stability in order to properly identify and assess potential risks in areas within the CBCG competence;
e. improve mechanisms for preserving financial stability, i.e. mechanisms for acting in a potential systemic crisis and carry out stress testing aimed at preventive diagnostics of potential threats to financial stability;
f. carry out crisis simulation exercises with a view to testing the efficiency of solutions proposed in the CBCG Contingency Plan in order to ensure effective, consistent and comprehensive acting in case of a bank or systemic crisis;
g. initiate regular analyzing of solutions proposed in the National Contingency Plan by the Financial Stability Council;
h. analyse the impact of both internal and external macroeconomic trends on financial stability in Montenegro, and depending on the results, take proper measures within its competence and recommend imposing adequate measures outside the CBCG authority, in accordance with its powers bestowed by the Central Bank of Montenegro Law, the Financial Stability Council Law, and the Law on Foreign Current and Capital Transactions;
i. monitor and analyse the situation in all segments of the financial system with a view to timely identifying all potential causes of instability and the ability of the system to absorb them;
j. in accordance with the Financial Stability Council Law, intensively cooperate with other financial system regulators in the country in the area of financial system stability, as well as with relevant international regulators and other institutions;
k. continuously analyse inflation trends, forecast inflation, and contribute to the attaining and maintaining of price stability;
l. with a view to maintaining stability of the banking system as the key financial sector element for preserving financial stability, the CBCG shall:
- together with the World Bank and the Government of Montenegro and with a view to stopping the increase of non-performing loans and lowering them to an acceptable level, monitor the implementation of the Law on Voluntary Financial Restructuring. To that end, it will improve its on-site supervision techniques, in line with modern supervisory trends;
- within the process of pre-accession negotiations with the EU, continue improving and harmonising the banking regulatory framework to bring it in line with the EU acquis;
- continue harmonising banking business requirements with those in the international financial market, in particular through the implementation of the latest standards defined in Basel III;
- continuously improve and carry out stress tests of banks with a view to timely determining additional capital and liquidity requirements for banks;
- starting from protecting the interests of bank depositors and creditors as the major concern, continue following the policy of prudent licensing and/or granting approvals to the entry of new entities into the banking system, as well as to changes in the shareholding structures of the existing financial institutions;
- work on the improvement of risk management in banks and risk-based supervision;
- develop systems that will contribute to the strengthening of transparency and market discipline through a comprehensive and ongoing exchange of information between banks and other market participants;
- pursuant to the new legislation, oversee the banks` enforcement of the regulation governing consumer loans;
- continue cooperating with international institutions in the area of anti-money laundering and terrorism financing, in parallel with the strengthening of mechanisms and procedures necessary for a successful implementation of this process;
- intensively monitor trends in the international financial market, with a particular consideration of volatility that could have adverse consequences to the banking system in Montenegro in order to ensure preventive actions and creation of an adequate capital buffer system as a safeguard against external shocks;
- develop cooperation with the supervisors of parent banking groups of subsidiaries operating in Montenegro, as well as with the key international financial institutions such as the World Bank, the European Bank for Reconstruction and Development, the European Central Bank, and the European Banking Authority with a view to synchronising supervisory activities;
- monitor and implement improvements based on international multilateral agreements and adopted conventions in banking industry.
2. With a view to supporting the Government of Montenegro in achieving its economic policy and to the extent that will not jeopardise the objectives and constitutional responsibilities and independence of the CBCG, the CBCG shall:
a. communicate recommendations to the Government of Montenegro in a manner that the proposed recommendations, measures and instruments contribute to economic recovery and increasing employment and competition in the function of maintaining financial stability and fostering economic growth and development;
b. participate in creating systemic solutions aimed at minimizing the lack of liquidity in the economy and fostering lending activity of banks to the extent that will not mean excessive risk taking and jeopardising the banking system stability;
c. monitor and analyse macroeconomic trends in Montenegro, other transitional economies, the European Union and at the global level, as well as trends of key macroeconomic variables forecasted by relevant international institutions, with a view to forecasting macroeconomic trends in Montenegro;
d. continuously develop macroeconomic model for the Montenegrin economy to forecast macroeconomic developments and analyse efficiency of the monetary policy instruments, whether this be done independently or in cooperation with other institutions in the system;
e. regularly collect, process and publish data on monetary and balance of payment statistics, as well as other statistical data produced by the CBCG and which represent significant inputs for the creation of economic policy;
f. publish theme working papers, monographs and other publications covering current macroeconomic and financial issues.
3. With a view to maintaining and improving safe and efficient payment system, the CBCG shall:
a. continuously work on maintaining a safe and sound CBCG payment system for interbank transactions, as the basic payment system infrastructure in Montenegro, and on its further improvement through the implementation of international standards, principles and best practises in the functioning of modern payment systems and payment system transactions in general;
b. continue performing quality and efficient national payment system services both for the current and new CBCG clients;
c. perform the activities of the depository, banker, and fiscal agent of the Government bodies and organisations in a quality and efficient manner through ongoing improvement of cooperation and regulation of mutual relations with the respective clients;
d. improve the existing, and establish new, correspondent relationships with foreign central and commercial banks and other international financial institutions and organisations;
e. draft secondary legislation pursuant to the new Payment System Law;
f. perform efficient payment system supervision with a view to providing payment services in line with positive regulations;
g. improve the functional model of enforced collection that the CBCG carries out in accordance with provision of the Law on Enforcement and Securing of Claims;
h. develop and improve the payment system oversight function following the principle of transparency, based on international standards and principles, the exercising of its authority and powers in cooperation with other relevant authorities; to that end, it will work on the implementation of the most recent international standards and/or principles for financial market infrastructure;
i. continue with activities on improving the payment system’s IT infrastructure and components at the backup site with a view to increasing security of the payment system functioning.
4. With a view to further improving institutional and other prerequisites for managing the international reserves, the CBCG shall:
a. continue expanding the portfolio of financial instruments and investing funds in safe, profitable and highly liquid instruments such as short- and medium-term securities of the OECD countries (issued by governments, agencies with the support of the government, federal units of countries and the like), deposits with commercial banks, covered bonds holding adequate ratings and the like;
b. continuously monitor trends in the international financial market and by applying tactic allocation timely adjust the investment policy to the market situation;
c. pursuant to the principle of liquidity and safety, reposition the existing financial instruments in the portfolio and improve already adopted techniques in managing funds and risks of international reserves, with a view to successfully balancing risks of investments and achieved return;
d. consider investment options regarding new financial instruments, primarily adhering to the principle of safety and taking into account profitability with a view to increasing the diversity of investments and potentially yielding higher returns;
e. continuously monitor and analyse the financial situation and ratings of banks, both the existing banks in the market and potential future partners, and timely invest funds in those entities that ensure a higher degree of safety of investment, simultaneously allowing for achieving a higher return.
5. Continuing with active participation in the process of Montenegro’s EU accession and respecting the obligations of Montenegro assumed with the receiving of the candidate country status and the recommendations published by the European Commission, the CBCG shall:
a. participate in the preparation of negotiation positions based on the screening results and within the CBCG authority;
b. continue activities on the harmonisation of legislation with the EU Acquis Communautaire in banking, payment system, monetary policy and statistics and other areas within the CBCG authority;
c. participate in the working and negotiating structures with a view to efficient negotiating with the EU;
d. participate in the preparation of the Pre-Accession Economic Programme (PEP);
e. continue activities on institutional capacity building thereby creating preconditions for the future undisturbed functioning of the CBCG within the ESCB;
f. improve the existing and establish new forms of cooperation with representatives of national banks of the EU Member States, as well as with representatives of the ECB and other EU institutions;
g. improve the communication strategy in the area of European integration through the preparation of working papers and other publications to deal with specific aspects of the EU accession;
h. participate in the preparation and implementation of projects financed from the EU funds;
i. continue activities on the implementation of obligations defined under the Stabilisation and Association Agreement (SAA), the Montenegro EU Accession Programme and the Action Plan for the implementation of recommendations set out in the Progress Report of the European Commission.
6. With a view to further professional development of employees and maintaining of adequate structure of human resources capable of implementing the defined policy, international standards and good business practice, as well as the implementation of changes resulting from the European integration process and other changes in the business environment, the CBCG shall:
a. make efforts to always have qualified, trained and highly motivated employees with the know-how and skills relevant to their job assignments;
b. stimulate employees to permanently improve their knowledge and skills necessary for the realisation of working processes in the Central Bank, especially within technical cooperation programmes, as well as the acquiring of academic titles and certificates;
c. develop mechanisms to improve the motivation of employees and further promote the system of rewarding employees for their performance;
d. promote employees who regularly achieve the best performance;
e. recruit, as necessary, trainees, volunteers and other categories of staff for the realisation of working processes;
f. pay due attention to the training of trainees and employees with short working experience in the CBCG, the training of deficient staff, as well as to further improvement and innovation of knowledge of all employees.
7. Following transparency standards, the CBCG shall:
a. timely, continuously and reliably inform both domestic and international public on all aspects of its operations and the exercising of its constitutional and legal powers in the manner understandable to the broadest public;
b. promote awareness and level of economic knowledge in the society in order to contribute to a better understanding of central banking, the financial system and financial stability in general;
c. continue informing the public in timely manner through press releases, the CBCG website, press conferences and, as required, interviews, participation in the media broadcasts and the like;
d. pay special attention to informing the staff.
8. With a view to preserving and valuing the historical and cultural numismatic heritage in Montenegro, the CBCG shall:
a. carry out activities on collecting and completing the money collection, with a particular focus on completing the collection of the only Montenegrin money – the Perper;
b. present the numismatic values to the domestic and foreign public in the professional manner;
c. promote the Money Museum as the institution of general importance for both wide professional and non-professional public and promote the role and importance of the CBCG in the Montenegrin financial system.
9. As a support to the implementation of the abovementioned objectives in other business areas, the CBCG shall:
a. work on improving the information system and ensuring an adequate level of its availability and safety, and particularly on improving the ICT infrastructure supporting the payment system (RTGS and DNS), the Main banking system, the enforcement collection system, and other system services for internal and external users;
b. work on harmonization with international standards, particularly the standard for information security management ISO/IEC 27001;
c. with a view to developing and improving cooperation with international financial institutions and organizations, central banks and regulatory bodies in other countries, the CBCG shall:
- meet the obligations under the membership of Montenegro in the International Monetary Fund and the role of the fiscal agent of the state of Montenegro in that international financial institution, as well as the meeting of conditions for its technical and potential financial assistance;
- continuously improve the quality of cooperation with the International Monetary Fund , the World Bank, the Bank for International settlements, and other international financial institutions;
- monitor activities and establish communication with the World Bank, the European Bank for Reconstruction and Development, the European Investment Bank, and other international organisations;
- develop cooperation with other central banks and financial regulatory authorities through the implementation of signed agreements, particularly in the area of banking supervision, as well as proposing new forms of cooperation and establishing strategic partnerships;
- work on further international promotion of the CBCG through the organisation of international gatherings and seminars, organisation of working and/or study visits, and the participation of the CBCG officials in international meetings and conferences;
- develop bilateral cooperation with international and regional financial and other organisations, regulatory bodies, and other central banks;
d. With a view to timely and adequate servicing the needs of banks and other clients for cash for the national payment system transactions, as well as the protection of the euro against counterfeiting, the CBCG shall:
- continuously monitor and plan cash needs from the perspective of providing an optimum quantity and the structure of banknotes and coins in circulation;
- initiate the buying of necessary quantities and denominations of banknotes and coins from the correspondent bank and/or selling of any surplus cash with a view to optimizing the costs of cash holdings in the CBCG vault on timely basis;
- intensify already established cooperation with relevant international entities dealing with the protection of the euro against counterfeiting (ECB, EC-OLAF, European Technical and Scientific Centre (ETSC)), and the national public authorities – the Supreme State Prosecutor’s Office and the Ministry of Interior - Police Directorate;
- continue cooperating with all cash handlers in Montenegro in order to ensure full implementation of the adopted legislation in the area of protection of the euro against counterfeiting, in line with the EU acquis;
- continue cooperating with domestic and foreign entities dealing with the protection of the euro against counterfeiting through ongoing exchange of information (correspondence and reporting), participation in seminars and trainings;
e. Continue with activities on risk management in the CBCG by developing and monitoring the internal controls system and operational and reputational risk management systems;
f. work on drafting the CBCG Business Continuity Plan.
10. In its operations, the CBCG shall follow the principles of a socially responsible institution, both regarding its employees and funds at its disposal, and it shall be an active participant in the development of a modern society; to that end, the CBCG shall:
a. build its operations on the universal principles of the protection of human and labour rights, environmental protection, and development of a civil society;
b. in accordance with its financial possibilities, continue contributing a portion of its revenues to charity and supporting the development of cultural, historical and other values of the society;
c. continue with its action “Week of Savings” with a view to promoting savings;
d. continue promoting the UN Global Compact’s ten principles in its operations;
e. contribute to the strengthening of the civil society through public participation in numerous social events and activities;
f. contribute to the development of the educational system through the participation of the CBCG representatives as guest lecturers in educational institutions, rewarding of the best pupils, graduate students, holders of MSc and PhD degrees and in other ways of mutual interest for the CBCG and educational institutions.
11. These Guidelines shall be published on the CBCG website.
CENTRAL BANK OF MONTENEGRO COUNCIL
Dec. no. 0101-4014/50-6
Podgorica, 29 November 2013