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Open market operations represent an indirect monetary policy instrument which the CBCG uses to purchase and sell securities in order to regulate the banking sector’s liquidity. Moreover, open market operations affect the amount and the structure of interest rates, banks’ lending potential and lending activity, and consequently the country’s overall economic activity.

Open market operations are a monetary policy instrument allowing the CBCG to purchase and sell securities issued by Montenegro, EU Member States and international financial institutions or other securities it deems acceptable for this purpose.

The CBCG may perform open market operations through spot trading contracts. The CBCG may perform a purchase or a sale of securities through direct trade with a certain bank through forward contracts.

The CBCG may perform the purchase and sale of securities as:

• Permanent open market transactions - the purchase and sale of securities without the obligation of their repurchase and/or resale.
• Repurchase (repo) transactions - the purchase and sale of securities in which a seller agrees to sell securities to a buyer, and the latter agrees to pay the purchase price to the former, subject to the commitment of the buyer to resell the securities to the seller and the commitment of the seller to repurchase the securities from a buyer at the specified future date and at the predetermined repurchase price.

Although the Law enables the CBCG to perform open market operations, this monetary policy instrument has not been used so far, since due to the sound banking sector and macroeconomic stability this instrument has not been needed.

Decision on Open Market Operations (OGM 15/11)