Press Releases 2017 - June

21.06.2017 - Appeal to legal entities to provide data in statutory terms

20.06.2017 - Roundtable covering the topic “Voluntary financial restructuring of debts towards financial institutions”

20.06.2017 - U.S. Government Agency OPIC interested to invest in Montenegro

19.06.2017 - Lebanon interested in investing in Montenegro

16.06.2017 - Summit of National Bank Governors, Finance Ministers and Tax Administration Directors of the Region Opens in Budva

15.06.2017 - Governor Žugić Meets the Erste Bank Management

15.06.2017 - ANNOUNCEMENT: Summit of National Bank Governors, Finance Ministers and Tax Administration Directors of the Region Opens

14.06.2017 - High-quality cooperation between banks and the regulator leads to a stronger and more profitable banking sector

13.06.2017 - The CBCG Governor held a meeting with the CEZAP representatives

07.06.2017 - IMF Staff Concludes Visit to Montenegro

CENTRAL BANK OF MONTENEGRO
Podgorica, 21 June 2017

Appeal to legal entities to provide data in statutory terms

Central Bank of Montenegro, as the institution accountable for balance of payment statistics, and in accordance with the Law on Foreign Current and Capital Transactions, passed the Decision on keeping separate records on foreign current and capital transactions and their reporting (“Official Gazette of Montenegro” No. 8/17).

Pursuant to the Decision, the residents are obligated to provide the CBCG with the data on direct investments, foreign credit operations as well as the balance and turnover on foreign accounts. Once received, the CBCG compiles them in line with the Law on Official Statistics and System of Official Statistics. The number of foreign direct investments and private foreign debt is determined in such way and these statistical data are being used for planning and implementing economic policy measures.

In accordance with the aforementioned Decision, the residents were obligated to provide the Central Bank with the data on direct investments and foreign credit transactions for 2016 in electronic form, using the CBCG website section “Residents Reporting” by 28 April 2017. Simultaneously, the residents were also obligated to provide the CBCG with the data on balance and turnover on foreign accounts on a monthly basis, by the tenth day in a month for the previous month at the latest.

Having in mind the fact that a number of legal entities did not provide the required data in specified terms, the CBCG hereby appeals to those entities to provide the required data in the shortest possible term. Otherwise, the CBCG will be forced to file a request for initiation of offence proceedings against those ignoring the appeal and not performing their legal obligations. The Article 88 of the Central Bank of Montenegro Law prescribed the fine of EUR 10,000 for those not providing the required data. Please note that paying the fine does not release the entity from performing its legal obligation to provide the required data.

The list of legal entities that have not provided the required data in the specified terms is being prepared and will be posted on the CBCB website shortly.

We also mention that the CBCG is obliged to use the received data exclusively for statistical purposes, keeping them confidential, with the aim of protecting survey participants and in line with the Law on Official Statistics and System of Official Statistics.

The reporting forms are enclosed with the Decision on keeping separate records on foreign current and capital transactions and their reporting and can be downloaded on the Central Bank of Montenegro website at the following link.

CENTRAL BANK OF MONTENEGRO
Podgorica, 20 June 2017

Roundtable covering the topic “Voluntary financial restructuring of debts towards financial institutions”

The Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, with his associates took part at the Roundtable “Voluntary financial restructuring of debts towards financial institutions” organized by the Chamber of Economy of Montenegro.

The Vice President of the Chamber, Mr Ivan Saveljić, opened the Roundtable discussions, pointing out that primary aim of today`s gathering was to present more closely to economy representatives the latest legal solutions, i.e. amendments to the Law on Voluntary Financial Restructuring of Debts towards Financial Institutions. Mr Saveljić mentioned these amendments were prepared with the aim to further improve the process of voluntary financial restructuring and in such way make contribution to decrease in a share of non-performing loans.

In his speech, the Governor Žugić presented to the real and banking sector representatives the basic elements of the Law, underlining it enables the additional incentives for both banks and clients, i.e. the debtors. The amendments to the Law, among other, prolong the implementing term to one year, while extending the implementation coverage to loans classified as “D” category. The Governor stressed these amendments were prepared prudently and carefully, taking into account a comparative experience, provided that financial stability as a whole or in individual banks should not be endangered in any segment.

The Governor Žugić also mentioned that the CBCG will continue with the enhanced supervision of banks in the upcoming period regarding their obligations arising from the Law, with the aim of reducing non-performing loans and creating environment for further credit activity growth while cutting down interest rates, which are still an expensive input for a real economy. This will enable the financial sector to provide even stronger support to real economy and the overall development of the country in the upcoming period. 
 
The Central Bank of Montenegro Vice-Governor for Banking Supervision, Ms Irena Radović, said this Law, with the all mentioned innovation and benefits it bears for banks and clients, simplifies the administrative procedures for voluntary financial restructuring and in such manner saves time and funds of the clients.

The real sector and bank representatives joined the discussion by exchanging views and opinions, posing specific questions on the Law implementation to the CBCG representatives.

In conclusion of the meeting today, the Governor Žugić said the CBCG has a pro-active approach in communication with all interested parties, therefore having a communication with banks on a daily basis. He invited the economy representatives, in case there are objections to certain banks’ practices, to address the CBCG, which will intermediate in resolving disputes under its competences.

At the close of the meeting, the Vice President Saveljić said the Chamber of Economy will contribute to connecting companies and banks through available mechanisms, with the purpose to precipitate the process of voluntary restructuring of debts.

CENTRAL BANK OF MONTENEGRO
Podgorica, 20 June 2017

U.S. Government Agency OPIC interested to invest in Montenegro

The Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, met with Mr James Polan, Vice President of the United States Government Agency OPIC (Overseas Private Investment Corporation). The President of the U.S. Chamber of Commerce, Ms Katarina Bulatović and Deputy Chief of the Political and Economic Section in the United States Embassy to Montenegro, Mr Vivek Joshi were also present at the meeting. 

OPIC is a financial and development institution founded by the U.S. Government with the aim of providing support to private sector overseas. As Mr Polan mentioned, OPIC invested over USD 20 billion in implementing development projects in some hundred countries in the world. The OPIC representatives are visiting Montenegro to discuss the possible cooperation with public and private sector representatives.

The Vice President Polan emphasized that OPIC showed interest to invest in Montenegro primarily in a way to provide support to small and medium sized businesses. On the other hand, there is also a possibility to make larger investments in Montenegro, as Mr Polan mentioned.

The Governor Žugić showed gratitude to the speakers, primarily for the support American partners provided to Montenegro in the process of joining the NATO and afterwards for showing interest to invest in Montenegro. “Montenegro is an interesting destination for foreign investments, having a significant level of those up to now while expecting their further increase in the upcoming period, which will be impacted by the fact that Montenegro joined the NATO and the constant improvement in business environment it has been committed to” said the Governor Žugić, adding he was especially pleased with the interest OPIC showed for Montenegro, for the fact that American investors are still not so present in our country as we would like them to be.

The Governor Žugić presented the current condition in the banking system, mentioning the possible fields of cooperation between Montenegro and OPIC when it comes to the CBCG competences. As the Governor Žugić said, cooperation would be possible in the following three segments, those being: support to Montenegrin investment-development fund in providing funds required for the real sector, support to micro-credit institutions in demonopolisation with the final aim of reducing interest rates these institutions offer to their clients, as well as support to individual banks in resolving current vulnerabilities.

The Governor Žugić also added that Montenegro has at its disposal a vast, non-valorised resources, therefore, to that effect, the OPIC support would be precious in energetics, tourism, industry, infrastructure, agriculture and alike.

Further communication with the aim of making cooperation proposals discussed today more concrete was also agreed.

CENTRAL BANK OF MONTENEGRO
Podgorica, 19 June 2017

Lebanon interested in investing in Montenegro

Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, met the honorary general consul of Montenegro to Lebanon, Mr Marwan Paul Kebbe today.

The consul Kebbe presented to the Governor Žugić the current economic development in Lebanon and showed interest of Lebanese investors to invest in Montenegro. Preparation for the meeting between the governors of Montenegro and Lebanon has been arranged at the meeting, with the aim of defining concrete areas of the future cooperation.

The Governor Žugić emphasized that the CBCG is open to communicate and provide support in the process of connecting Montenegrin and Lebanese companies, thus creating preconditions for intensifying economic cooperation between the two countries.

CENTRAL BANK OF MONTENEGRO
Podgorica, 16 June 2017

Summit of National Bank Governors, Finance Ministers and Tax Administration Directors of the Region Opens in Budva

The Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, opened the Summit of national bank governors, finance ministers and tax administration directors of the region in Budva today, organised by the Belgrade’s weekly NIN, under the institutional auspices of the Ministry of Finance of Montenegro.

This year’s summit topic “Regional Financial Stability in the New Global Environment” gathered the governors, ministers of finance and tax administration directors of the region as well as a number of experts in monetary and fiscal policy, alongside a significant number of corporate sector representatives.

In its panel presentation called “Monetary Policy in Regional Countries – Between the U.S. Federal Reserves and European Central Bank” the Governor Žugić gave an overview on the environment in which regional countries create and lead their fiscal and monetary policies, influenced by the U.S. Federal Reserves and European Central Bank policies as well as by a number of internal and external factors. Due to slight increase in interest rates on a global level that may have future impact on the borrowing price in our countries, it is necessary to take measures with the aim of stabilizing public finances and strengthening the real economy. “The role of central banks in this cycle is to preserve financial stability, trigger credit activity and strengthen regulatory framework in order to lower both risk premium and interest rates, inciting credit support to corporate sector and “unlock” the growth potential, emphasized the Governor Žugić.

Mr Aleksandar Vlahović, President of the Serbian Association of Economists also addressed the audience. Mr Vlahović mentioned these gatherings were very important for further strengthening of the regional cooperation which is needed, for the fact that all countries in the region are interconnected. “In order to recover the key economic issues the region is currently facing, coordination between monetary and fiscal policy is needed. Namely, monetary policy must be in line with the fiscal one, on one hand, while the fiscal policy must have the efficient monetary policy by its side on the other” mentioned Mr Vlahović.

The governors also discussed both economic trends in the region and banking sector indicators in individual countries, presenting and exchanging views on resolving the issue of non-performing loans as a prerequisite for increasing credit activity in banks.

The panel “Financial Inclusion – Global Challenge, Local Solutions” will be held in the second part of the day, starting at 12:30 hours. Representatives of the Alliance for Financial Inclusion (AFI), the World Bank, the European Investment Bank and the Regional Cooperation Council will take part in the discussion.

Ministers of finance and tax administration directors’ panels will be held the next day, on Saturday 17 June.

The purpose of the summit, traditionally organized by the weekly NIN sixth year in a row was to develop dialogue and improve cooperation between regional financial institutions.

CENTRAL BANK OF MONTENEGRO
Podgorica, 15 June 2017

Governor Žugić Meets the Erste Bank Management

The Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, with his associates, met today with the representatives of the Erste Bank management, Mr Christoph Schöfböck, President of the Board of Directors, Mr Hannes Frotzbacher and Mr Sava Dalbokov, members of the Board of Directors and Mr Aleksa Lukić, Chief Executive Officer.

The Erste Bank representatives presented to the Governor the functioning of the institution as well as their future business plans for strengthening position of the Bank in the Montenegrin market.

The Governor Žugić showed his delight with the presented development plan which, among other, includes further Bank growth, emphasizing that the CBCG is open to intensify cooperation with Erste Bank, which, as per its business indicators, has been singled out as one of the leaders in the banking market in Montenegro.

The Erste Bank representatives approved the proactive policy and „Open Door“principle, promoted by the CBCG in both communicating with Erste and other banks and financial institutions in Montenegro. 

More frequent communication and further cooperation in the area of reaching mutual goals, specifically in additional strenghtning of the banking system and preserving financial stability was agreed at the meeting.

CENTRAL BANK OF MONTENEGRO
Podgorica, 15 June 2017

ANNOUNCEMENT: Summit of National Bank Governors, Finance Ministers and Tax Administration Directors of the Region Opens

Summit of national bank governors, finance ministers and tax administration directors of the region organised by the Belgrade’s weekly NIN, under the institutional auspices of the Ministry of Finance of Montenegro will be held on 16 and 17 June 2017 in Hotel Splendid in Bečići.

This year’s summit topic will be “Regional Financial Stability in the New Global Environment”.

The official part will start on 16 June at 9:30 hours with the Governor’s panel “Monetary Policy  in Regional Countries – Between the U.S. Federal Reserves and European Central Bank” when the Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD and Mr Aleksandar Vlahović, President of the Serbian Association of Economists will have the foreword. The regional central bank governors` panel will cover, inter alia, coordination between fiscal and monetary policy, possible impact the latest FED and ECB policies might have on monetary policy, interest rates and local exchange rates in the Western Balkans, at the same presenting their experience in resolving the issue of non-performing loans as a prerequisite for increasing credit activity with banks.

The panel “Financial Inclusion – Global Challenge, Local Solutions” will be held in the second part of the day, starting at 12:30 hours. Representatives of the Alliance for Financial Inclusion (AFI), the World Bank, the European Investment Bank and the Regional Cooperation Council and others will take part in the discussion.

The finance ministers` panel “New Priorities – Faster Economic Growth with Sound Public Finance and Lower Public Debt” will be held the next day, on Saturday 17 June starting at 9:30 hours and will be opened by Mr Darko Radunović, Finance Minister in the Government of Montenegro. The regional finance ministers will discuss fiscal consolidation, need to accelerate the economic growth, measures for reducing public debt, shadow economy issue, impact the European integration might have on the public finance in the region, structural reforms as well as other numerous current topics.

The tax administration directors’ panel “Tax Administration Reform and Fight against Shadow Economy” will be opened by Mr Miomir Mugoša, Director of Tax Administration of Montenegro. This panel will, among other, discuss topics such as: role and importance of the Tax Administration for the public sector reform, resolving debt issues of the large tax debtors, shadow economy, importance of tax payers` education, reform results, modernization of tax administrations and alike.

The purpose of the summit, traditionally organized sixth year in a row was to develop dialogue and improve cooperation between regional financial institutions.

CENTRAL BANK OF MONTENEGRO
Podgorica, 14 June 2017

High-quality cooperation between banks and the regulator leads to a stronger and more profitable banking sector

The Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, with his associates met with representatives of banks and financial institutions in Montenegro today.

In his introductory speech, opening the meeting, Mr Esad Zaimović, President of Association of Montenegrin Banks, said that today`s coordination is a continued successful cooperation with the CBCG and the opportunity for an open dialogue between the bankers and the regulator on a number of topics important for functioning of the banking and financial system as a whole.

Governor Zugic underlined that the CBCG has a continuous communication and cooperation with all banks in Montenegro, stressing this practice should remain in the upcoming period as well, with the aim of mutual acting to further develop banking sector and strengthen financial stability as well as directly improve the economy. “Strong, sound and profitable banking sector is the best support to the overall economy development” mentioned the Governor Žugić.

The Governor also looked back on the condition in the banking sector, observing it to be characterized by an increase in assets, loans, receivables and capital and a slight drop in deposits. Credit activity of banks intensified while the share of non-performing loans in total is constantly decreasing, currently being 9.25%. Even though lending and deposit interest rates have downward trend, the Governor pointed out to the fact that these are still high and represent an “expensive input for the real economy”. The mentioned indicators prove the banking sector to be stable, even though having minor vulnerabilities and risks at the individual level, the Governor argued.

The Governor Žugić presented the current activities in the CBCG, primarily relating to regulation improvement, introducing European standards and the best practice.

The representatives of the banks were mainly interested in the new legal regulations and their implementation, whether these, and to what extent will have impact on the amount of handling charges. The Governor mentioned that the current improvement in regulation and implementation of the EU standards are determined by the process of joining the EU, therefore representing obligation of the State on the path to European integration, but he also mentioned that the CBCG will take care that these activities neither jeopardize profitability of banks nor the banking sector stability.

The representatives of banks showed their readiness to work with the regulator in improving legal regulation and implementation of the standards, offering their knowledge and experience to contribute to creating more favourable environment and better system functioning.

The participants at the meeting stated that collaboration between financial and banking system in Montenegro is of a high-quality and agreed to further intensify it in the upcoming period.

CENTRAL BANK OF MONTENEGRO
Podgorica, 13 June 2017

The CBCG Governor held a meeting with the CEZAP representatives

The Central Bank of Montenegro Governor, Mr Radoje Žugić, PhD, with his associates, met with representatives of the Consumers Protection Centre of Montenegro (CEZAP) today with the aim of resolving the open issues concerning the implementation of the Law on conversion of loans in Swiss francs (CHF) to euro (EUR).

The CEZAP representatives informed the Governor that the clients are generally satisfied with the Addiko Bank activities related to implementation of the aforementioned law, having a significant number of loans with this Bank already converted. On the other hand, the CEZAP representatives informed the CBCG team about the discontent of clients with treatment of companies „Heta Asset Resolution“ and „B2 Capital“ specifically when it came to interest calculation. This issue occurred due to different interpretation of provisions of the Law on conversion of loans in Swiss francs (CHF) to euro (EUR) and the Law on Contract and Torts.

With the aim of resolving the mentioned issue, it was agreed that, during the court proceedings, the CEZAP team of lawyers address the competent court for receiving opinion on the merits to disputable provisions of the Law mentioned. Once the official opinion is received, the CBCG will take strict care of coherent implementation of provisions against the position of the relevant institution.

As the CBCG did not receive any objection on interest calculation so far, it was also agreed at the meeting today that the CEZAP should sent the objection to this institution on interest calculation for specific agreement on taking over the loan, therefore the CBCG could be in a position, in line with its competences, to closely examine the case and takes its stand toward this issue.

The present ones found the meeting today very important, representing the first step in resolving the open issues concerning the implementation of the Law amending the Law on conversion of loans in Swiss francs (CHF) to euro (EUR), therefore further cooperation was agreed with the aim of protecting clients, which is a primary goal of both CEZAP and CBCG.

INTERNATIONAL MONETARY FUND
Podgorica, 07 June 2017

IMF Staff Concludes Visit to Montenegro

An International Monetary Fund (IMF) mission, led by Martin Petri, visited Podgorica during May 31 – June 7, 2017, to continue discussions on the authorities’ fiscal consolidation strategy, initiated during the last Article IV mission (see Concluding Statement of February 28, 2017). At the conclusion of the visit, Mr. Petri made the following statement:

“The economic outlook for 2017 appears favorable with growth expected around 3 percent and low inflation. Credit growth seems robust. The current account deficit is projected to be around 20 percent of GDP, mainly because of imports for investment activity. Steady export growth—particularly in tourism and energy—is expected to narrow the deficit in the future.

“The authorities’ draft fiscal adjustment strategy published this week is in line with our recommendations. If approved and implemented by the government, it would put government finances on a strong footing to achieve fiscal sustainability. The announced fiscal adjustment, alongside the measures already contained in the 2017 budget, is necessary to deal with debt challenges and to sustainably address future financing needs.

“The policies described in the draft strategy would enable the authorities to achieve a primary surplus of about 4½ percent of GDP by 2020, a substantial improvement compared to a projected primary deficit of 4 percent of GDP in 2017. The strategy entails net fiscal adjustment measures amounting to 2½ percent of GDP in addition to the anticipated reduction in capital spending as the current phase of the highway project is completed.

“The projected fiscal adjustment, if implemented, would put public debt on a sustainable path: after peaking in 2019 at 81 percent of GDP including guarantees (72 percent of GDP in the authorities’ debt definition without guarantees), the debt ratio is projected to decline to 67 percent of GDP including guarantees by 2022 (59 percent in the authorities’ debt definition).

“The envisaged adjustment measures are of good quality and include policies to protect the most vulnerable. The increase in the standard VAT rate is broad based and excludes food products that are taxed at the lower VAT rate, which will not be changed. Excises on cigarettes, alcohol, sugary drinks, and coal—goods with negative externalities—are increased to bring their prices closer to their true economic cost. The mission encourages the authorities to increase the coal excise even further to reduce the significant local pollution and global warming costs over time. Overall, these measures are expected to have a modest impact on economic growth.

“The costly and badly-targeted mothers’ benefit is being transformed by increasing social assistance and child allowances, which will benefit those truly in need. The original benefit was fiscally unaffordable and has been declared unconstitutional. The redesign will be compatible with stronger female labor participation and better child protection.

“The proposed fiscal adjustment measures should be followed by reforms to gradually reduce wage and pensions spending, which is relatively high by international comparison. The authorities are already taking some steps to limit wage costs by reducing the wages of the senior officials and shrinking the public sector work force. They do not intend to reduce existing pensions but rather limit costly early retirement options. There is also a need to improve local government finances, service delivery, and fiscal accountability.

“The authorities are aware that the fiscal adjustment strategy might impact the financial sector and are monitoring developments in this sector carefully. NPLs in the banking sector have continued to decline, and capital adequacy ratios have improved. Deposits have been growing steadily, and interest rates have declined. Some consolidation in the banking sector could be beneficial for credit provision and financial stability.

“On the basis of this mission, staff will update the assessment initiated during the Article IV mission, and present it to the Executive Board for discussion.

“The mission would like to thank the authorities for fruitful discussions and their warm hospitality. The mission wishes the authorities good luck with their difficult, but necessary, fiscal adjustment efforts.”