111th Meeting of the CBCG Council


22/12/2021

The Council of the Central Bank of Montenegro (CBCG) held its 111th meeting today, chaired by Governor Radoje Žugić.

The Council discussed the Report on Central Bank operations and implementation of the Central Bank Policy in October 2021. The Report stated that CBCG activities conducted during the reporting period were according to the planned obligations.


The Council adopted the Decision on Minimum Standards for Risk Management in Credit Institutions to harmonise national legislation with the updated guidelines of the European Banking Authority (EBA). The Decision, to be applied from 1 January next year, significantly improves the existing Decision’s part on credit risk management and contains new provisions governing information system risk management. It sets safe and sound operations standards that credit institutions must ensure and implement in managing all significant risks they are and/or may be exposed to in their operations and information system and risks arising from its use. This has created preconditions to establish the information systems supervision following international standards.


The Council adopted the Decision on the Countercyclical Capital Buffer Rate. to comply with the obligation from the Law on Credit Institutions to be applied from 1 January 2022. 


Discussing the Quarterly Report on banks’ operations as of 30 September 2021, the Council concluded that all key balance sheet items at the system level grew in Q3 and compared year-on-year. Bank assets, total loans and deposits reached an all-time high this quarter. Banks are very liquid. The total banks’ liquid assets accounted for 27.5% of their total assets. The ratios subject to the asset quality review improved, except 90+ days past due loans that increased. The aggregate solvency ratio is high at 18.53%. All banks reported a solvency ratio above the statutory minimum.


At today’s meeting, the Council discussed and adopted the Quarterly Report on the financial service providers’ operations as of 30 September 2021. The Investment and Development Fund’s operations in Q3 2021 were characterised by assets quarterly decline of 1.6%. At the same time, loans remained approximately the same. Increased credit risk is observed through the high level of NPLs that amounted to 10.95% on 30 September 2021. The Report stated the microcredit sector recorded a quarterly decline in assets, loans and borrowings and a year-on-year decline in Q3 this year. During the same period, aggregate capital increased. Non-performing loans and receivables year accounted for 10.04% of total loans and receivables at the end of this September. In the current year’s third quarter, leasing companies’ assets, capital, and total loans increased while receivables decreased. The operations of the factoring sector, which consists of two factoring companies, ran a quarterly decline in key balance sheet items, excluding capital.


The Council also adopted the Central Bank of Montenegro Macroeconomic Report for Q3 2021. The Report pointed out that the domestic economy was gradually recovering from the 2020 deep recession caused by the coronavirus pandemic. Tourism, industrial production and trade sectors recorded growth in Q3 2021. Due to increased revenues from services provided in the tourism and transport sectors, the current account deficit at the end of September 2021 declined 71.1% compared y-o-y.


The Council adopted the Inflation Report for Q3 2021, which stated that consumer prices increased by 0.9% in Q3 this year. Compared year-on-year, they increased by 2.9% in September 2021. Price increase in Montenegro resulted from external factors. To wit, increased demand after epidemiological measures easing and expansive central banks’ policy and monetary assistance provided worldwide, combined with increased prices of fuels, metals, and food, led to an abrupt global price increase. The Report also stated that the model forecast projected inflation ranging between 3.4% and 4.6% at end-2021, with a central tendency of 4%. The CBCG experts’ forecast gave a similar projection ranging between 3.5% and 5.5%, with a central prediction of 4.5%.


At this meeting, the Council discussed the Report on Bank Lending Survey Results for Q3 2021. The banks’ expectations point to lending conditions easing to the economy and households in the next quarter through lower interest margins, commissions, and fees. Still, a slight tightening of lending standards to the economy may be expected, with continued credit standards easing for micro, small and medium-sized enterprises. Tighter standards can also be expected for approving housing loans to households. In contrast, standards could be eased for consumer and other loans to households.


The Council also discussed other current issues under its competence.