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Central Bank of Montenegro’s Independence

The Central Bank of Montenegro’s independence principle is fully implemented in the Central Bank of Montenegro Law and aligned with the European Commission’s recommendations, and the Treaty on the Functioning of the European Union (TFEU) and the Statute of the ESCB and ECB.

Central Bank of Montenegro Law (OGM 40/10, 6/13, 70/17, 125/23)

The functional independence principle is fully implemented in the Central Bank of Montenegro.

The Central Bank of Montenegro Law regulates in detail its objectives from the day of Montenegro’s accession to the EU and its accession to the EMU, and is aligned with Articles 127(1) and 282 (2) of the TFEU and Article 2 of the Statute of the ESCB and ECB.

Namely, the Central Bank of Montenegro Law foresees that the primary objective of the Central Bank is to maintain price stability and that, without prejudice to the pursuance of this objective, it will support the general objectives of the economic policies of the European Union with a view to contributing to the achievement of the objectives of the European Union, as laid down in Article 3 of the TFEU.

The Central Bank’s institutional independence principle is fully implemented in the Central Bank of Montenegro Law and aligned with Article 130 of the TFEU and Article 7 of the Statute of the ESCB and ECB.

Thus, according to the Central Bank of Montenegro Law, the CBCG is independent in pursuing the objectives and exercising the functions laid down in this Law. The members of its bodies and employees in the Central Bank are independent in the performance of their functions and their activities established under the Central Bank of Montenegro Law and other laws and they may not take or seek any instruction from the government bodies and organisations and other bodies and organisations or any other persons. The government bodies and organisations and other bodies and organisations and other persons may not exert any influence on the performance and decision-making of the members of the Central Bank bodies and may not approve, cancel, annul or in any other way influence any decision within the Central Bank’s competence, whereas this does not pertain to the jurisdiction of the courts prescribed by the law.

After membership in the EU, in accordance with Article 130 of the TFEU and Article 7 of the Statute of the ESCB and of the European Central Bank, in exercising the tasks and/or functions set in this Law, the Treaty on the European Union, the TFEU and the Statute of the ESCB and of the ECB, the Central Bank and members of its bodies shall not seek or take instructions from the European Union institutions and bodies, agencies and offices, from any government of an EU Union Member State and from any other body. Moreover, the European Union institutions, bodies, agencies and offices, and governments of the Member States undertake to respect the principle of independence of the Central Bank and not to seek to influence the members of the bodies of the Central Bank in the performance of their tasks or functions. These provisions shall be without prejudice to the powers of the ECB with regard to the Central Bank as specified in the Statute of the ESCB and of the ECB.

The Central Bank of Montenegro Law lays down that an administrative dispute may be instituted against a Central Bank’s administrative decision and that an action shall not put off the execution of the Central Bank’s administrative decision.

The Central Bank’s institutional independence principle is consistently applied in practice. The Central Bank has all the instruments and competencies necessary to pursue monetary policy within the current monetary regime in Montenegro. It is independent in making decisions about the use of monetary policy instruments. Moreover, The Central Bank of Montenegro Law expressly established the Central Bank’s competencies in monetary policy from the date of Montenegro’s accession to the Economic and Monetary Union (EMU). As a central bank operating in a euroised economy, the Central Bank does not pursue an exchange rate policy. The Central Bank of Montenegro Law prescribes explicitly the Central Bank’s foreign exchange policy competencies as of the date of Montenegro’s accession to the EMU.

The personal independence principle is fully implemented in the Central Bank of Montenegro Law and aligned with Article 14.2 of the ESCB and ECB Statute.

The Central Bank of Montenegro Law defines that the term of office of the governor, vice-governor and other Council members lasts six years and that the term of office of a Council member appointed to the place of a member of the Council whose office has ended before the end of the mandate also lasts six years. It also defines that Council members may be dismissed before the end of their term of office if they are no longer eligible to serve on the Council or have been guilty of serious misconduct in the performance of their duty and that the governor, vice-governors and other Council members may initiate an administrative dispute against the decision on dismissal. The Law prescribes the eligibility criteria to serve on the Council and the incompatibility of functions, the employment status of the Governor and Vice-Governor, and the prohibition of employment of a member of the Council after the expiry of the term of office.

Moreover, the Law prescribes that, as of the day of Montenegro’s accession to the European Union, a Council member shall be dismissed before the end of his term of office only if the circumstances referred to in Article 14, paragraph 2 of the Statute of the ESCB and the ECB occur. The governor dismissed from office has the right to refer the decision on dismissal to the Court of Justice of the European Union, while other Council members may initiate an administrative dispute.

The financial independence principle is fully implemented in the Central Bank of Montenegro Law and aligned with the Statute of the ESCB and the ECB.

Pursuant to the Central Bank of Montenegro Law, the Central Bank independently passes the financial plan and adopts annual financial statements, appoints an independent external auditor; prescribes the audit by the State Audit Institution, decides on the acquisition and disposal of immovable property, decides on the distribution of the Central Bank profit, and decides on the use of special reserves of the Central Bank.

Moreover, the Central bank of Montenegro Law stipulates that, as of the day of Montenegro’s accession to the European Union, the operations of the Central Bank related to the ESCB may not be subject to audit performed by the State Audit Institution. In addition, the Central Bank shall draw up and publish financial statements in accordance with the accounting standards, rules and guidelines of the ECB and that the decision on the appointment of an independent external auditor to audit Central Bank’s financial statements shall be passed in accordance with the provisions of Article 27 paragraph 1 of the Statute of the ESCB and of the ECB. Furthermore, portion of profit in the amount of 50% of profit determined in accordance with the Central Bank of Montenegro Law shall be allocated to general reserves, a portion of profit may be allocated into special reserves in the amount determined by the Council and it may not exceed 10% of profit determined under the Central Bank of Montenegro Law, and the remaining portion of profit shall make the revenue of the Budget of Montenegro.

Central Bank of Montenegro’s Transparency

A central bank acts transparently if it continuously provides and clearly communicates information on its operations relevant for the functioning of the economic sector.

According to the IMF definition, transparency refers to an environment in which the objectives of policy (legal, institutional, and economic framework), policy decisions and their rationale, data and information related to monetary and financial policies are provided to the public on an understandable, accessible and timely basis. Moreover, central bank transparency is broadly defined as the absence of asymmetric information between financial markets and monetary policymakers, i.e. enabling financial market participants to better understand monetary policy actions and their effects on economic trends.

A central bank should communicate with the public on monetary and economic policy objectives, monetary policy instruments, and the macroeconomic environment in which the central bank objectives and forecasts are implemented.

The Central Bank of Montenegro may be considered as a central bank with a high degree of transparency.

The Central Bank regularly informs the public on the most important issues discussed at the CBCG Council meetings and also on the main trends in Montenegro’s economy. The reporting is done through the monthly CBCG Bulletin, the quarterly CBCG Macroeconomic Report and Inflation report, the annual Central Bank of Montenegro Annual Report, Financial Stability Report, the CBCG Annual Macroeconomic Report, the Price Stability Report and the CBCG Financial Report with the External Auditor’s Report. The Central Bank also prepares and publishes working papers covering current economic issues.