Meeting of the Central Bank of Montenegro Council


At today’s meeting, the Council of the Central Bank of Montenegro (CBCG) adopted recovery plans for all credit institutions in Montenegro. Under the Law on Resolution of Credit Institutions, the resolution plan is a comprehensive document that describes in detail the preferred resolution strategy for a specific credit institution, including the instruments applied in the resolution. Along with the recovery plans, it also adopted decisions on minimum requirements for statutory capital and eligible liabilities (MREL), which all credit institutions must maintain on an individual basis at a minimum level determined by the CBCG.

By adopting resolution plans and determining MREL requirements under the Law on Resolution of Credit Institutions, the CBCG ensures that credit institutions have sufficient capacity to cover possible losses and capital increase. It means they have the minimum amount of regulatory capital and qualified liabilities that can be credibly and feasibly reduced or converted into capital. In addition, it established the Resolution Fund to provide funds for implementing resolution instruments and resolution powers. The credit institutions will make the first payment of the regular annual contribution to the Resolution Fund no later than 31 July 2022. As new CBCG mechanisms, Resolution plans and the Resolution Fund will have a strong positive effect on the financial stability and long-term sustainability of the Montenegrin banking system during the possible resolution. By creating resolution plans and starting to pay contributions to the Resolution Fund, the CBCG has aligned its operations with central banks in the European Union in this segment.

To remind, according to the new Law on Resolution of Credit Institutions, the resolution burden is first borne by the shareholders of the credit institution undergoing rehabilitation. When applying resolution instruments or exercising rehabilitation powers, the CBCG starts from the resolution objectives: ensuring the continuity of critical functions of the credit institution; avoiding a significant adverse effect on the financial system stability; protecting the budget and other public funds by minimising reliance on extraordinary public financial support to the resolution of credit institutions; protecting depositors that have covered deposits in the credit institution; protecting client funds and client assets.