Press Releases 2016 - November

25.11.2016 - First meeting of the Council of the CBCG was held

22.11.2016 - CBCG held a meeting with the chief executive officers of banks

11.11.2016 - Meeting of the Governor of the Central Bank of Montenegro with the representatives of the IMF mission

09.11.2016 - Governor Žugić held a meeting with the management of the Zapad Banka AD Podgorica

CENTRAL BANK OF MONTENEGRO
Podgorica, 25 November 2016

First meeting of the Council of the CBCG was held

Council of the Central Bank of Montenegro, chaired by Governor Radoje Žugić, held its first meeting today.

The Council adopted the Governor's Report on operations and implementation of the Central Bank of Montenegro's policy for September 2016, in which it was stated that the activities of the Central Bank in this period were carried out in accordance with the planned obligations determined by the Work Program of the Central Bank for 2016. The Council analysed and rated the influence of the potential risks from the macro-economic environment and from the financial system on the financial situation and found that the financial system is stable, with a moderate level of systemic risk.

The Council adopted the Policy of the Central Bank of Montenegro for 2017, with the guidelines for its implementation. The Central Bank will, in the coming year, pursue a policy of monetary and financial stability based on taking all necessary actions and use all available instruments and measures under its jurisdiction, in order to strengthen confidence in overall financial system, improve the safety and soundness of the banking system, timely identification and minimize negative impacts. For the purpose of further enhancing and preserving of financial stability, the CBCG will develop components of the macro prudential framework; promote indicators for the evaluation of financial stability and the prevention of systemic risks and the instruments for their suppression. In order to strengthen the financial system, particularly focus will be on the promotion of stability of the banking system. In this context, the CBCG will continue to monitor and analyse the situation in the banking system, and, if necessary, take corrective measures, promote the strengthening of corporate governance and risk management in banks and continue with further implementation of internationally accepted standards and principles in this area. It will encourage the implementation of activities on the consensual financial restructuring of debts with financial institutions. Within its competences, the CBCG will continue harmonization of the regulatory framework and statistics with the EU acquis, and reporting obligations to the ECB.

The Council adopted the Financial plan of the Central Bank of Montenegro for 2017 with a plan of investments, public procurement and cash flows while continuing the implementation of measures of internal economy and active relations in the management of international reserves. The plan for 2017 was prepared on the basis on the execution of the financial plan of the Central Bank for the first nine months of 2016, and projections of expected financial income and expenses in the coming year.

The Council adopted the Quarterly report on the operations of banks and MFI as at 30 September 2016. It was noted that the operations of banks in the third quarter were characterized by the growth of assets, loans, deposits and capital. Indicators of liquidity and solvency were significantly above the prescribed level. Compared to the previous quarter, there was an improvement in all the parameters of asset quality. The financial result at the system level was positive and amounted to 23.7 million euros.

The Council adopted the Information on implementation of strategies and operational goals of banks to resolve non-performing loans in the third quarter of 2016. Analysing the efficiency of realization of the underlying strategies it was assessed that the banks were successful in restructuring, which resulted in a reduction in non-performing loans by 15.2% at the end of the third quarter of the current year. On the other hand, banks were less efficient when it comes to enforcement of nonperforming loans.

The Council adopted Recommendations to the Government of Montenegro for Economic Policy in 2017. The recommendations are aimed at minimizing the vulnerability of the economic system of Montenegro for the following areas: fiscal policy, financial system and the real sector statistics. The overall aim of the recommendations in the fiscal area is to increase budgetary discipline and making a credible plan for the repair of deficit and public debt. It was pointed out that the structure of expenditures of the budget should reflect the development priorities of the country and to monitor the dynamics of the revenue performance. Risk reduction and fiscal stability can be achieved only with balanced budget of current expenditure, while the potential deficit can only be planned for development projects and removing bottlenecks in the economy. The overall aim of the recommendations in the financial system is to preserve its stability, achieving smooth and stable functioning of all segments of the system, as well as an effective intermediation in the country. Recommendations in the area of real sector are aimed at increasing competitiveness, improving the institutional environment and promoting development in key sectors of the revaluation - tourism, energy, agriculture and manufacturing industry. In the area of structural reforms, recommendations are aimed at creating higher flexibility in the labour market, increasing the sustainability of the pension system and the system of social benefits and harmonization of education with the needs of the real sector and the labour market. Recommendations in the area of statistics aim to achieve full harmonization of official statistics with the EU acquis.

CENTRAL BANK OF MONTENEGRO
Podgorica, 22 November 2016

CBCG held a meeting with the chief executive officers of banks

Representatives of the Central Bank of Montenegro held a meeting with the chief executive officers of all banks operating in Montenegro. They discussed key vulnerabilities that are present in the banking system, as well as modalities for their resolution.

Representatives of the CBCG pointed out three key vulnerabilities: high level of non-performing loans, high interest rates and lack of credit support. Although non-performing loans are significantly reduced, it was pointed out that the Podgorica Approach model is not exploited enough and that the CBCG plans to modify this law, through the extension of its validity, the expansion of coverage, as well as the potential additional tax incentives. They also pointed that the experience of other countries shows that with decreasing levels of non-performing loans creates space for higher lending activity and lower interest rates. It was pointed out that the possibility of introducing additional provisions for banks that have high level of NPLs and who are not ready to accept clients' proposals for restructuring have to be considered. Banks are suggested to release the collateral as soon as possible, particularly for the loans which greatest part is repaid, because in this way a significant economic potential is captured. Representatives of banks have agreed with the proposal that this model is under-utilized and it is necessary to prepare amendments. The CBCG suggested that the banks should submit their written proposals for improvement of this law as soon as possible.

Special attention was paid to the interest rates. It was pointed out that even though interest rates have a downward tendency, the CBCG is not satisfied with the pace of lowering interest rates. Bankers have pointed out a number of issues that, in their opinion, affect the level of current interest rates. Key issues that are listed relate to the slow judicial resolution of activating mortgages and recovery of disputed claims, poor quality financial reports, the presence of shadow economy, inadequate transparency of clients, the absence of institution that would guarantee the loans, thus sharing risks with the banks and the like. It was agreed to work jointly work on solving these problems. Also, bankers have stated certain structural specificities of the Montenegrin market which affect the level of interest rates and lending activity, such as a high level of deposit interest rates, dominance of short-term deposits, strong competition, due to too many banks that adversely affect profitability.

In the end, it was emphasized that the CBCG expects from banks to engage more in addressing these vulnerabilities, as well as willingness of the CBCG to work with banks in order to improve the environment.

CENTRAL BANK OF MONTENEGRO
Podgorica, 11 November 2016

Meeting of the Governor of the Central Bank of Montenegro with the representatives of the IMF mission

Governor of the Central Bank of Montenegro, Radoje Žugić, with his associates, held a meeting today with the representatives of IMF mission to Montenegro, led by the new Head of Mission, Martin Petri.

The IMF mission in Montenegro will be conducted in Podgorica from 09 to 15 November on the occasion of regular changes at the head of the team that monitors Montenegro.

The Governor of the Central Bank of Montenegro informed the IMF mission with the situation, current affairs and prospects in the banking sector which is stable, liquid and solvent, as well as on the upcoming commitments in the area of further harmonization of legislation in the banking supervision with the EU acquis.

At the meeting it was noted that the level of interest rates and the level of non-performing assets represent the main challenges in the banking system, and that both of these challenges have been decreasing. Governor Žugić said that the CBCG considers possibilities for improving the regulatory framework to encourage the restructuring of non-performing assets so that the banks could actively contribute to the development of entrepreneurship.

Representatives of the mission were also informed about the proposal of the CBCG recommendations t to the Government of Montenegro in connection with the conduct of economic policy for 2017.

When considering the financial stability as a key objective of the Central Bank and economic prospects of Montenegro in the medium term, a special focus was on the challenges in the fiscal sector relating to the fiscal consolidation measures aimed at the rehabilitation of public finances, the level of deficit and public debt level.

The Governor of the Central Bank of Montenegro thanked for the successful cooperation with the former chief of the IMF mission to Montenegro, Alasdair Scott, who also attended the meeting.

CENTRAL BANK OF MONTENEGRO
Podgorica, 9 November 2016

Governor Žugić held a meeting with the management of the Zapad Banka AD Podgorica

Governor of the Central Bank of Montenegro, Radoje Žugić, with his associates, met today the President of the Board of Directors of the Zapad Banka AD Podgorica, Vladimir Morokhovski and CEO Mladen Rabrenović.

In his opening speech, Governor Žugić emphasized that the CBCG is open to constant and intensive communication with the banks, with the aim of achieving common interests, especially in the area of strengthening of the banking system and maintenance of financial stability. The results of strengthening of the banking system primarily reflect the constant reduction in the level of NPLs and interest rates, as a necessary condition for strengthening the real economy.

President of the Board of Directors Morokhovski pointed out that the main objectives of the Zapad Banka are asset and loan portfolio quality, with the continuity of investments and lending in Montenegro. He noted that at this point Montenegrin credits make 90% of the loan portfolio, with the intention of further growth in future. Morokhovski informed Governor Žugić that Zapad Banka rounded the first year of operations with positive business results and significant assets acquired in a short period. Development plans of the West Bank were presented and new investments through a subordinated loan as well as capital increase of around one million euros this year, which will make the bank more capitalized.

Governor Žugić expressed satisfaction with the presented development plan that includes further growth of the bank, and pointed that the CBCG leads a proactive policy aimed at well-capitalized, sound and sustainable banking system. Continuation of intensive cooperation at the operational level has been agreed as well as the full support to the planned activities of the Zapad Banka within the powers and competences of the CBCG..