Speeches - 2002

At the First Anniversary of the CBM on April 3, 2002
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At the First Anniversary of the CBM on April 3, 2002

Ladies and Gentlemen,

This conference is arranged on the occasion of the anniversary of the Central Bank operations and the expiry of dual currency system in the process of transition to the Euro as the only means of payment in Montenegro.

Having previously regained monetary sovereignty, after almost one century, Montenegro successfully introduced German mark into the payment system while the sound core of the banking system was preserved through imposition of 100% provisions on demand deposits.

Within one year of operations, the new team of the Central Bank, in a short period of time, succeeded to implement and improve regulations established with the adoption of the Law on the Central Bank of Montenegro and the Law on Banks,  through realization of goals  posed to the Central Bank of Montenegro by the new regulations.  Those goals were as follows: 1) establishment of control and supervisory function over banks based on international standards aimed at creation of sound banking system, 2) establishment and implementation of sound accounting policy and practice   through implementation of International Accounting Standards, 3) establishment of the function of Fiscal Agent of the state, 4) modernization of reserves and international transaction procedures management, 5) creation of macro-economic and financial statements,  6) maintenance of efficient and reliable  payments system and its reform.

With the assistance of foreign experts, this institution has been enabled to design new rules, implement international standards and change previous attitudes in the very important segment of reforms.

In the process of comprehensive social and economic reforms and regaining of state sovereignty the Central Bank of Montenegro has (without exaggeration) become the pillar of Montenegrin economic and state sovereignty and significant obstacle to those who wanted to bring into question these two processes. Although the presentation that will follow up later on will make you fully convinced on this issue, I would like to emphasize several facts:

• With the establishment of off site and on site examination and adoption and implementation of enabling acts through process of reconciliation with new rules, 6 out of 11 existing banks were re-licensed, two new foreign banks and one new private bank founded, interim administration in two biggest banks introduced;
• The process of regaining trust into banks was initiated and it reflects into deposit growth of about DEM 30 million to about DEM 190 million or EUR 95 million, re-capitalization of banks within a year at above DEM 35 million, entry of foreign investors like KFW, DEG, EBRD and private American investors into domestic banks;
• If reorganization and privatization plan of Montenegrobank is realized, 75% of banks capital will be in possession of private investors;
• Conversion process of DEM into EUR was realized under quite difficult circumstances, DEM 913 million was converted, and out of that amount 300 million was converted by 115.000 citizens, 9 million banknotes was checked and we have had not a single forged banknote reported by our partner;
• Over thirty young highly educated people who are the future of this important institution were employed and trained or have been under the training process.
• The Central Bank of Montenegro realized the process of MVP through payment system operations;
• Acting like the Fiscal Agent of the government, the Central Bank has  until now realized eight auctions of government bonds at which it sold EUR 23 million, fulfilled its obligations concerning the establishment of relations and  fulfillment of commitments to IMF, as well as  settlement of obligations  to international trustees.

Previous results of the banking system reform, i.e. the establishment of the Central Bank of Montenegro on the basis of EUR as the only legal means of payment in Montenegro, were verified by the signing of the agreement on establishment of relations between Serbia and Montenegro. Additionally, a step forward was made through provisions that enable presentation in international financial institutions. This will enable, as soon as this stage of reforms is over, the beginning of the next stage of reforms that would primarily consist of:

• Further improvement and strengthening of already established principles and procedures;
• Improvement of development and diversification of banking services;
• Creation of conditions for fast savings growth through adoption of the Law on Public Debt and establishment of limited deposit insurance system;
• Continuation of payment system reform;
• Establishment of cooperation with monetary authorities in Serbia.

Everything that we have been working on is not self-serving, as the establishment of sound banking system is the prerequisite of comprehensive reforms and  sound banking system, prerequisite  of comprehensive reforms and sound investments  as there is no stable employment in sound companies without those investments.