Press Releases 2016 - August

31.08.2016 - Press release from the 92nd CBCG Council Meeting

26.08.2016 - Meeting of the Governor of CBCG and the Governor of the De Nederlandsche Bank

22.08.2016 - Loans Approved in Swiss Francs

17.08.2016 - 91st CBCG Council Meeting

CENTRAL BANK OF MONTENEGRO
Podgorica, 31 August 2016

Press release from the 92nd CBCG Council Meeting

In relation to a number of false, unfounded and biased attacks on the Central Bank due to its professional position concerning resolution of problematic loans in Swiss francs, stated during the meeting of the Fourth Extraordinary Session of the Parliament of Montenegro from 30 August 2016, a meeting of the Council was held:
     
Aimed at protecting the reputation of the Central Bank of Montenegro as an independent institution, the Council of the Central Bank indicates that the abovementioned attacks are deliberately misleading the public, with ulterior motives. Arbitrary and unfounded accusations that the Central Bank and its management are involved in corruptive practices and thus cooperated with "Hypo Alpe Adria Bank" are absolutely untrue and we reject them with indignation.

Contrary to the aforementioned allegations, and in accordance with its constitutional and legal role, the Central Bank has continuously, since the onset of problems with loans granted in CHF, provided its expert views in a constructive and professional manner and indicated the possible applicable and equitable solutions. By giving its full contribution to the advancement of the proposed solutions, the CBCG demonstrated its professionalism and responsibility during the process of adoption of the Law on conversion of loans in Swiss francs (CHF) into euros (EUR) in July 2015, as well as in the process of considering the Draft law amending the Law on conversion of loans in Swiss francs (CHF) into euros (EUR) whose adoption procedure is ongoing.

With the view to objectively informing the public, and having in mind the importance of the issue discussed in the Parliament, the Central Bank reiterated the facts that deny the false allegations, namely:

• False argument that the Central Bank promoted loans in Swiss francs. On the contrary, since 4 December 2006, the Central Bank informed the borrowers that a loan agreement in Swiss francs bears a currency risk, due to possible changes in the exchange rate of the Swiss franc;
• False claim that there is no methodology for calculating interest, given that there is a universally accepted methodology (compound interest account and decursive calculation method), which is based on the rules of financial mathematics and included in the "Decision on the manner of calculation and reporting of effective interest rate". The problem is that by using this methodology in the solutions proposed in the Draft law amending the Law on conversion of loans in Swiss francs (CHF) into euros (EUR), certain categories of borrowers would be unequally treated. For example, by implementing the calculation method from the Draft law, for two loans amounting to 100,000 euros, each, which have been approved at the same day and having the same repayment period as well as an interest rate, the difference between the remaining debt of the beneficiary whose loan was not assigned to a third party and the beneficiary whose loan was assigned to that party could amount to as much as 20,000 euros. This method favors beneficiaries who failed to regularly meet their obligations and whose receivables in respect of those loans were assigned to a third party;
• The claim that created the public perception that the loans in Swiss francs were taken exclusively to address the housing needs of citizens is completely false, as best illustrated by the fact that out of 129 assigned loans 15 largest loans that are given for business purposes, accounted for more than 75% the value of all assigned loans, which is more than 50 million euros. To be more precise, the average value of these 15 loans is about 3.33 million euros;
• The claim that loans in Swiss francs were granted exclusively by the “Hypo Alpe Adria bank” is false because these loans were granted by several banks in a large number of countries – Austria, Germany, the Netherlands, Italy, France, Hungary, Poland, Slovakia, Czech Republic, Luxembourg, Greece, Italy, Slovenia, Croatia, Serbia, Bosnia and Herzegovina and other. Also, compared to other countries, Montenegro had the smallest share of these loans (Montenegro 762 loans, Serbia about 23,000 loans, in Croatia over 60,000, in Poland close to 700,000, in Slovenia around 10,000 in Bosnia and Herzegovina over 5,000 loans, etc.);
• The claim that the loans in Swiss francs represent absolutely void legal matters is false because this claim is contrary to the current legislative framework regulating this area;
• There is also a false claim that "Hypo Alpe Adria Bank" assigned their claims to the company "Hypo-Alpa-Adria Development" doo Podgorica (now "Heta Asset Resolution" doo Podgorica) without compensation based on part of loans granted in Swiss francs, because "Hypo Alpe Adria Bank" collected 54,103,000 euros for the amount of assigned receivables amounting to 66,698,000 euros, of which there is adequate documentation.

This is only a response to some of the numerous unfounded and untrue accusations that were said at yesterday's session of the Parliament of Montenegro, which convincingly indicate the intent of those who created them.

CENTRAL BANK OF MONTENEGRO
Podgorica, 26 August 2016

Meeting of the Governor of CBCG and the Governor of the De Nederlandsche Bank

The Governor of the Central Bank of Montenegro, Milojica Dakić, and his associates received the Governor of the De Nederlandsche Bank, Klaas Knot. During the meeting participants also discussed the economic situation in Montenegro and in the Netherlands, as well as the challenges of maintaining financial stability. 

Governor Dakić pointed out that the banking system is stable, liquid and solvent and that non-performing loans no longer represent a systematic but rather an individual problem. He also stated that the interest rate had decreased significantly, and that the capital of banks is increasing.    

Also, the Governor of the Central Bank of Montenegro thanked the Governor of the De Nederlandsche Bank for numerous technical assistance programmes that had previously been provided by the De Nederlandsche Bank, as well as the fact that he has been, for a longer period of time, a member of the editorial board of the Journal of Central Banking Theory and Practice, published by the Central Bank of Montenegro. It was jointly concluded that there was a successful cooperation between Montenegro and the Netherlands within the Dutch-Belgian constituency in the IMF. It was agreed that the De Nederlandsche Bank will provide assistance to the CBCG in the process of the EU accession.

CENTRAL BANK OF MONTENEGRO
Podgorica, 22 August 2016

Loans Approved in Swiss Francs

In relation to repeated false, unfounded and malicious attacks on the Central Bank due to its position concerning resolution of problematic loans in Swiss francs, especially the view that the Central Bank continues to obstruct the adoption of the law on this issue, the Central Bank would like to point out the following:

The Central Bank has, even before the Adoption of the Law on conversion of loans in Swiss francs (CHF) to euro (EUR) in July 2015, repeatedly indicated that the best solution to this problem would be to find a possibility for a mutual solution between banks and users of loans approved in Swiss francs, and that, in case of a failure to find a mutual solution to this problem, that such cases should be decided by a competent court. Namely, the CBCG believes that the adoption of a law that changes earlier contractual relation between banks and their clients would create legal uncertainties, thus questioning the rule of law principle. The Law on Contracts and Torts recognises a number of legal institutes (the principle of equal consideration (Article 8), substantial mistake (Article 54), circumstances relevant for interpretation (Article 97), alteration or rescission of contract due to changed circumstances (Articles 128-131), impossibility of performance (Article 132-133), etc.), which implementation would resolve the problem of loans approved in Swiss francs either by mutual agreement or before a competent court, with a possibility of a justified approach of individual resolution of every loan approved. This is the only thing that would completely ensure that the resolution of problems arising during the fulfillment of each individual loan agreement considers all relevant conditions of the loan, as well as all subsequent circumstances arising in the period of fulfillment of the loan agreement. For these reasons, several years ago, loan beneficiaries themselves initiated appropriate legal proceedings before competent courts. Solving the problem in this manner would avoid the risk of insufficient legal security for investors, which occurs in a situation when the state interferes in concluded contractual relations. Also, this enables to avoid the risk of retroactive implementation of certain norms when adopting the law, thus also avoiding the risk of assessment of the constitutionality of such decision from the aspect of existence of the previously established public interest.

In this respect, the Central Bank believes that it is important to point out certain views of the European Central Bank, given in their view on the conversion of loans in Swiss francs, adopted on 18 September 2015 (following the aforementioned position of the Central Bank):

• conversion of loans in Swiss francs can have negative consequences if it would harm the interest of foreign investors due to the noticeable increase of legal uncertainty and country risk;
• The authorities of certain countries should assess whether this way retroactively interferes with the relationship of certain contractual parties and whether it is in accordance with the constitution and laws of a particular country. However, the ECB notes that the introduction of measures with retroactive effect reduces legal certainty, which is not in accordance with the principle of legitimate expectations.

The Central Bank held the above positions solely in order to avoid possible risks and adverse effects of the adoption of the law governing the conditions for the conversion of loans granted in Swiss francs, which it believes was its constitutional and legal obligation.

Therefore, the allegations that the Central Bank unfoundedly obstructed the adoption of the law governing the conditions for conversion of loans granted in CHF, as well as accusations given in public about illegal or corruptive influence on the Central Bank are so frivolous that the Central Bank will not even comment them.

However, during the process of adoption of the applicable Law on the conversion of loans in Swiss francs CHF into euro EUR and now that the amendments to this law are proposed, while respecting the will of the legislator to address this problem under the law, the Central Bank demonstrated its professionalism by giving their expert opinions for improving the text of the proposed legislation, even in the form of amendments that could be submitted by the authorized proponent. 

While continuing to demonstrate its professional attitude, and in accordance with the agreement between the Minister of Finance and the Governor of the Central Bank, representatives of the Central Bank participated in a meeting with representatives of the Ministry of Finance and representatives of the beneficiaries of loans granted in Swiss francs, in which they discussed the Draft law amending the Law on the conversion of loans in Swiss francs CHF into euro EUR, as of 01 August 2016.

During the meeting, participants discussed the particular issues and agreed to take actions towards appropriate correction of solutions from the Draft law during further procedure of its adoption.

CENTRAL BANK OF MONTENEGRO
Podgorica, 17 August 2016

91st CBCG Council Meeting

The ninety-first meeting of the Council of the Central Bank of Montenegro, chaired by the Governor Milojica Dakić, was held today.

The Council considered the Draft law amending the Law on conversion of loans in Swiss francs (CHF) into euros (EUR) as of 1 August 2016, and having in mind all possible risks and adverse consequences of the adoption of this law, it concluded that the CBCG will remain faithfull to its position regarding the first version of this document from July 2016.

By reviewing the newly proposed solutions from the Draft law amending the Law on conversion of loans in Swiss francs (CHF) into euros (EUR) as of 1 August 2016, it was noted that they are substantially different from the proposal that the Central Bank gave in its opinion. The Council assessed that the newly proposed solutions put the borrowers at a disadvantage, prevent consistent application of the methodology used when calculating the obligations of the borrower, and lead to a revision of conversions conducted in accordance with the applicable law. Also, the suggested solutions contain a number of ambiguities and contradictions that would, in case of adoption, prevent their proper implementation and would cause further dilemmas and difficulties when it comes to its implementation in practice.

The Council concluded that if the legislator decides to adopt the proposed amendments to the Law on conversion of loans in Swiss francs (CHF) into euros (EUR), for the above reasons, it is essential to change the text of the Draft law, and to this end, the Central Bank proposed appropriate changes in the form of amendments, which could be proposed by an authorized proponent.