65th Meeting of the Financial Stability Council
13/09/2023
The Financial Stability Council held its 65th meeting today, chaired by Radoje Žugić, the CBCG Governor and the Council Chairman. Council members Aleksandar Damjanović, Minister of Finance and Željko Drinčić, President of the Capital Market Authority, attended the meeting.
Today, the Council discussed the Information on Financial Stability for Q2 2023. Preliminary MONSTAT data show that in Q1 this year, the Montenegrin economy grew by 6.1% compared year-on-year. Data for the first six months of 2023 show year-on-year increases in industrial production, retail trade turnover, tourist arrivals and overnight stays of 4.5%, 21%, 39.5% and 37.2%, respectively. Inflation continued decelerating, so the annual CPI inflation in June was 7.5%, further declining to 6.9% in July.
Preliminary Ministry of Finance data show that source budget revenues in H1 2023 were 23% higher than planned and 35% higher compared y-o-y.
The banking sector is characterised by a high capital adequacy ratio (20.1% at the end-Q2 this year) and a reduced share of non-performing loans in total loans (5.2% at the end of June 2023).
In the insurance sector, during the first six months of 2023, gross invoiced premiums grew by 9.1% compared to year-on-year.
The Council assessed the systemic risk to financial stability as moderate for now. The Council members pointed out that the monetary policy tightening by key central banks strongly affected the international financial market by worsening borrowing conditions, i.e., increasing financing costs. In this regard, it is essential to create Montenegro’s economic policy in the coming period to respond to these challenges, especially when managing public debt and the impact on risks in the fiscal sphere.
At today’s Council meeting, members agreed to form an interdepartmental team to prepare an impact analysis of possible issues of government bonds on the domestic market on the financial system stability risks.
Given the near date of entry into force of the Law Amending the Payment System Law (8 October 2023), the CBCG representatives informed the Council members of the banks’ activities to ensure the conditions for the full implementation of this Law. Considering the status of the activities so far, all banks will harmonise their operations with the amended regulation and thus ensure its effective implementation within the statutory deadline (8 April 2024).
The Council supported the Capital Market Authority’s initiative to organise an international conference on the financial market’s role and importance, expected to promote the capital market development in Montenegro.