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Article 143 of the Constitution of Montenegro (OGM 01/07 and 38/13) defines the responsibility of the Central Bank of Montenegro for financial stability, where it specified that the CBCG is responsible for “monetary and financial stability and the functioning of the banking system.”

The definition of the primary objective of the CBCG is underlined in Article 4 of the Central Bank of Montenegro Law (40/10, 6/13, 70/17, 125/23), and confirms this authority through specifying “fostering and maintaining the stability of the financial system, including fostering and maintaining a sound banking system and secure and efficient payment transactions.”

By focusing on the financial market participants and overall financial infrastructure, the Central Bank implements its activities in several areas by using different policy instruments for maintaining financial stability, micro-prudential policy instruments, as well as monetary policy instruments, whenever possible. Generally, the performance of all CBCG functions is directed towards the ultimate objective and that is the fostering and preservation of financial stability.

Preserving financial stability includes an assessment of the soundness of financial institutions and markets, the supervision of the financial system, as well as overseeing the financial infrastructure in order to identify vulnerabilities and define the manner of their management. The policy of preserving stability implies the assessment of the level of stability of all system components, take preventive actions in order to control risk appetite, regular regulatory and supervisory actions aimed at increasing the system’s resilience and, potentially, undertaking the necessary measures in case of the actual materialisation of these risks.

With the goal of a comprehensive and systemic approach to preserving the stability of the system, the CBCG also acts through the Financial Stability Council (FSC) comprised of representatives of the CBCG, the Ministry of Finance, the Capital Market Authority, and the Insurance Supervision Agency. The FSC was established under the Financial Stability Council Law (OGM 44/10) enacted in July 2010 and it started operating in October that year. This body represents an effective platform for consultation on financial stability issues. Activities within the scope of work of the FSC are focused on the goal of preventing or mitigating systemic risks in the financial system of Montenegro as a whole in order to ensure its stability and reduce the impact of factors that could threaten the financial stability in the country.