Interview with the Governor of the Central Bank of Montenegro for the Bankar portal
02/09/2026
CBCG After 25 Years: A Strong Institution Poised for Its Greatest Transformation Since Its Establishment
The Central Bank of Montenegro (CBCG) is marking its 25th anniversary at a time when the country is approaching the final stage of European integration and CBCG is preparing for the greatest institutional transformation since its establishment. In an interview with Bankar, Governor Irena Radović discusses the Bank’s readiness to join the European System of Central Banks (ESCB), the resilience of the banking system, credit growth and interest rates, as well as SEPA cross-border payments and TIPS instant payments, through which CBCG has already turned European integration into tangible benefits for citizens and businesses.
CBCG is marking 25 years of operation just as it enters the final stage of preparations for future membership of the ESCB. Following the completion of the Needs Assessment project with partner central banks from the Eurosystem, how close is CBCG today to ESCB standards, institutionally and operationally, and what are the most important changes the institution will implement before Montenegro joins the EU?
We are marking the Central Bank’s 25th anniversary at a highly symbolic moment – poised for CBCG’s greatest institutional transformation since its establishment. When Montenegro joins the European Union, the CBCG will become part of the ESCB, and we must be ready for that role well before the actual accession date.
That is why we launched the Needs Assessment in good time, carrying it out in partnership with the central banks of the Netherlands, Belgium, Germany and Slovakia. More than 60 experts from partner EU central banks analysed 13 key specialist areas of central banking and six horizontal support areas. We did not want merely to verify formal compliance; we wanted a genuine answer to the question of whether our people, processes, data and systems are ready to operate within the European central banking architecture.
The findings confirm that CBCG has a solid institutional foundation and a credible path towards integration into the ESCB and, in due course, the Eurosystem. Our task now is to take the institution to a higher level of operational maturity, technological integration and specialised capacity – by further upgrading IT systems and data management, increasing automation and strengthening specialist expertise across all key central banking functions, from monetary operations and statistics to financial stability, supervision, resolution and payment systems.
The most important part of this transformation, however, is our people. A small central bank does not have fewer European obligations than EU central banks, which are generally several times larger – in some cases up to 27 times the size of CBCG. We will therefore strengthen our capacity in a targeted manner and develop the expertise required for effective and equal participation in ESCB committees and working bodies.
This transformation is taking place in parallel with the final stage of the accession negotiations. CBCG leads the work on negotiating Chapter 9 – Financial Services and Chapter 17 – Economic and Monetary Union. Through intensive cooperation with the Government, Parliament, the European Commission and the Delegation of the European Union to Montenegro, we are working to meet the remaining obligations and moving closer to closing these chapters. For us, this is important confirmation that regulatory alignment and institutional readiness for the ESCB are developing as part of the same European process.
For CBCG, the most intensive phase of European integration is taking place right now. Our aim is not merely to comply formally with European standards on the date of accession, but to be a credible institution from the very first day of membership – operationally ready, technologically connected and capable, in line with its obligations and expectations, of contributing to the work and decision-making of the European System of Central Banks.
As European integration enters its final stage, the CBCG’s constitutional position is also being further strengthened. What does CBCG’s full institutional, functional and financial independence mean in practical terms for the credibility of the financial system and for the Bank’s future role in the ESCB?
The adoption of the constitutional amendment by the Parliament of Montenegro has further strengthened CBCG’s institutional position and independence, as one of the key pillars of a credible financial system and a prerequisite for EU membership and future participation in the ESCB.
The essence of central bank independence is that decisions are taken on the basis of the statutory mandate, expert analysis and the long-term interest of financial stability, independently of political, fiscal or other short-term influences. This safeguards consistency in decision-making, the confidence of markets, citizens, foreign investors and partners, and the central bank’s ability to act promptly, particularly in periods of heightened risk.
European central banking rests precisely on this institutional autonomy. For Montenegro, strengthening CBCG’s independence is therefore much more than a formal requirement of European integration – it is a lasting guarantee of professional decision-making, stability and confidence in the financial system.
The share of non-performing loans has fallen sharply in recent years, while banks’ capital indicators remain well above the regulatory minimum. However, the quality of a credit portfolio is usually tested not during periods of strong growth, but when the economic cycle turns. How resilient would Montenegrin banks be today to a more severe adverse scenario – a decline in economic activity, a correction in property prices or a weaker tourist season – and where does CBCG see the system’s greatest potential vulnerability?
The Montenegrin banking system would enter a more severe adverse scenario from a strong starting position today – with substantial capital and liquidity reserves and significantly higher-quality assets than in previous periods of crisis.
At the end of July, the ratio of non-performing loans and receivables stood at just 2.4%, its lowest level since 2010, while the capital adequacy ratio at the end of the second quarter was 21.08%, significantly above the statutory minimum of 8%. These are not merely sound performance indicators – they represent a strong layer of protection that enables banks to absorb potential losses and continue supporting citizens and businesses even in a less favourable environment.
The CBCG assesses the system’s resilience not only on the basis of current indicators, but also through continuous supervision, stress testing and analysis of potential shock-transmission channels. Strong indicators today do not mean that we can afford to pay less attention to risks. Given the structure and openness of the Montenegrin economy, we monitor particularly closely the concentration of exposures to sectors that are sensitive to changes in the economic cycle, primarily tourism, real estate and construction.
A correction in property prices, the performance of the tourist season or a slowdown in economic activity can be transmitted to the banking system through several channels – including borrowers’ income, collateral values and the quality of the credit portfolio. That is why we insist on prudent risk management, realistic collateral valuation and the early identification of any deterioration in creditworthiness.
Additional resilience is provided by the considerably more developed institutional framework for managing potential crises, including the Law on the Resolution of Credit Institutions and the Resolution Fund, which give CBCG a broader range of instruments for timely action should difficulties arise at an individual bank.
For me, the true measure of the system’s resilience is its ability to function steadily even when circumstances change. Today’s indicators confirm that the Montenegrin banking sector has a strong foundation for such resilience, with capital, liquidity and asset quality providing a high level of security.
Our aim is to reinforce that strength further, while continuing to align with European standards, so that Montenegro enters the next phase of European integration with a stable, well-capitalised and institutionally mature banking system. This is the best foundation for maintaining citizens’ confidence, continuing to support the economy and achieving sustainable economic growth.
The Montenegrin banking system is characterised by high capitalisation, strong liquidity and a historically low level of non-performing loans. At the same time, at the end of last year CBCG recorded annual credit growth of around 15%, almost four times the projected rate of GDP growth. How does CBCG assess the quality of this growth, and which lending segments are you currently monitoring most closely from the perspective of the potential accumulation of systemic risks? How does CBCG strike a balance between access to credit and preventing excessive household indebtedness?
Strong credit growth amid rising incomes, consumption and overall economic activity can be a sign of confidence and can support economic growth. For CBCG, however, the key issue is not only how much lending grows, but also the quality of that growth and whether it is creating risks that could become visible when economic conditions change. Our approach is therefore preventive, rather than restrictive.
We monitor household lending particularly closely. In 2025, loans to citizens increased by 21.2%, and of approximately 1 billion euros in new loans to individuals, around 60% were cash loans. At the same time, asset quality is very high, with a historically low level of non-performing loans. It is precisely when the system is strong that we should build further resilience.
That is why, during 2025, we increased banks’ combined capital buffer from 3.73% to 6.16%, equivalent to 263.4 million euros, further strengthening the system’s ability to absorb future shocks without jeopardising lending to citizens and businesses.
At the same time, we are completing the new macroprudential policy framework, bringing our system even closer to European standards. This is not merely a matter of formal alignment with EU rules. Our aim is for Montenegro to enter the European financial framework with an established culture of risk prevention and citizen protection.
The new framework therefore focuses on sustainable indebtedness and the quality of new lending. For housing loans, it has been proposed that total monthly debt-service payments should not exceed 50% of income, that a loan should not exceed 90% of the property’s value, and that the maximum maturity should be 30 years, while preserving banks’ flexibility in justified cases and avoiding undue restrictions on access to prudent lending.
The point is that we do not have to choose between access to credit, financial stability and European standards: our task is to bring them together. Credit should remain accessible and support growth, but borrowing must be based on a realistic capacity to repay and be sufficiently resilient to changes in the economic cycle.
For me, that is also the essence of European convergence: not merely adopting the same rules, but building institutions and a market that protect citizens and the stability of the system equally well.
In recent years, the banking sector has recorded strong profitability and high capital indicators, while the average effective interest rate on total loans has remained at around 6%. In such an environment, do you see scope for stronger price competition among banks and a further reduction in financing costs for citizens and businesses? What can CBCG do to further promote transparency and competition?
Bank profitability is not, in itself, an indication of insufficient price competition. It depends on a number of factors – the volume of lending activity, asset quality, impairment costs and operational efficiency. At the same time, healthy profitability is an important pillar of financial stability, as it enables banks to strengthen their capital, absorb potential losses and continue financing citizens and businesses.
At the end of July 2026, the banking sector recorded a profit of 77 million euros, around 10% less than in the same period of the previous year.
What matters most to citizens is that stronger competition among banks is already reflected in the price of new loans. Interest rates on new loans to individuals are currently at their lowest level in the past 12 years. The weighted average effective interest rate fell from 8.79% in March 2024 to 6.92% in July 2026, a decrease of 1.87 percentage points. CBCG’s initiative to reduce interest rates, which all banks joined voluntarily, also contributed to this decline.
Interest rates are, however, market-determined and depend on euro-area benchmark rates, the cost of funding, the client’s credit risk, the maturity and type of loan, operating costs and the level of competition in the market.
Montenegro uses the euro as its currency and CBCG cannot set commercial interest rates, but it can create conditions in which transparency and competition work more strongly in clients’ interests. Through the data available on our website and the mCBCG application, we therefore insist on clear and comparable presentation of lending terms, enabling citizens to compare offers from different banks in one place. The new regulatory framework has also created the conditions for switching banks to be straightforward.
The more transparent the market is, and the easier it is for clients to compare offers and choose a more favourable one, the more motivated banks are to compete on price, quality and innovation. This is where we see the greatest scope for a further reduction in financing costs.
The Montenegrin economy has traditionally relied heavily on bank financing, while the capital market remains underdeveloped. Are you satisfied with the structure of banks’ lending activity – namely, the balance between consumer loans, housing finance and business lending – or do you believe that the banking sector must play a stronger role in financing investment, exports and the more productive sectors of the economy?
The Montenegrin economy is highly bank-centred, and banks play a crucial role in financing both households and businesses. Consumer and housing loans meet important household needs, while the growth in business lending confirms that the banking sector is already providing strong support to economic activity.
Nevertheless, long-term sustainable growth depends not only on the volume of lending, but also on the extent to which capital is channelled into investments that increase productivity, exports and the competitiveness of the economy. Banks make lending decisions on the basis of risk assessments, project viability and borrowers’ capacity to meet their obligations; it is not the supervisor’s role to determine, administratively or in any other way, the sectors towards which lending should be directed.
However, the broader development picture requires more than a strong banking sector. Montenegro needs a more developed capital market and a wider range of alternative sources of finance. A combination of a strong and stable banking system, a developed capital market and a greater number of high-quality investment projects would enable available capital to be channelled more effectively towards productive activities, exports and sustainable growth. This is the direction in which the financial system should continue to mature.
If the goal of Montenegro becoming a member of the European Union by 2028 is achieved, the domestic banking market will become part of a much broader single financial area. Do you expect EU membership, and the resulting easier cross-border market access, to create scope for new European banks or their branches to enter Montenegro? Could greater competition bring lower interest rates and fees, while at the same time triggering a new wave of consolidation among existing banks?
Membership of the European Union will change the very nature of competition in the Montenegrin banking market. Integration into the single European financial area and the application of EU passporting rights will facilitate the cross-border provision of financial services and the operation of banks from Member States in Montenegro. Whether this leads to the entry of new banks or their branches will depend on their business strategies and their assessment of the potential of our market.
For citizens and businesses, the more important point is that the boundaries of the market will effectively expand. Domestic banks will no longer compete only with one another; they will operate within a far more integrated European financial area. Greater competition can bring more favourable financing conditions, lower fees, faster digitalisation and a wider choice of products and services.
For existing banks, this will also create a new incentive to improve efficiency, upgrade their technology and adapt their business models. Mergers and acquisitions may also occur, but consolidation should not be judged in advance as either positive or negative. What matters is what it brings to the market – whether it preserves healthy competition, improves efficiency and contributes to financial stability at the same time.
For CBCG, therefore, the decisive issue is not how many banks will operate in Montenegro, but the quality of competition among them. Our interest lies in a market that is stable, open and innovative, and in which deeper European integration results in greater choice, higher-quality services and more favourable terms for citizens and businesses.
Montenegro’s first six months in SEPA brought more than 82,000 transactions worth over 1.6 billion euros, while CBCG estimates that citizens and businesses saved around 3.8 million euros in international payment costs during that period alone. Have the effects of SEPA integration exceeded your expectations, and where do you see the next major opportunity for savings – in the full digitalisation of transactions or in a further reduction in bank fees?
The results have exceeded our initial expectations, above all in terms of how quickly citizens and businesses adopted SEPA as the new standard for cross-border payments.
In the first ten months of implementation, more than 180,000 SEPA transactions were processed, with a total value of almost 3.3 billion euros. In a very short period, SEPA became the dominant channel for international payments in euros: among individual customers, more than 93% of transactions up to 200 euros and almost 89% of transactions between 200 and 20,000 euros are already being processed through SEPA.
What matters most to us, however, is that the European integration of CBCG and Montenegrin commercial banks into SEPA can be measured here in very tangible benefits for citizens and businesses. In just ten months, savings exceeded 8.1 million euros, while the average transaction cost fell to 5.82 euros from the previous 73.40 euros for SWIFT payments, with scope for further cost reductions through greater use of digital channels. In other words, in less than a year, the average cost of a cross-border payment fell by almost 92% compared with October 2025, when we processed the first SEPA transactions. This is perhaps the clearest evidence that European integration is not merely an institutional process – it is already delivering measurable value to citizens and businesses today.
ECB President Christine Lagarde offered the clearest illustration of the scale of this change for Montenegrin citizens and businesses, noting that in just a few months Montenegro had moved from being the market with the highest cross-border payment costs in the Western Balkans to becoming the least expensive payment corridor to the European Union.
The next opportunity for savings now lies primarily in the even greater use of digital channels. We have already encouraged this transition through significantly lower fees for electronic SEPA transactions, and our estimates show that, if all transactions capable of being processed electronically were moved to digital channels, citizens and businesses could achieve approximately 2.15 million euros in additional savings.
The focus, therefore, is no longer only on making payments less expensive, but also on making them simpler, safer and almost seamless for users. One of CBCG’s next priorities is therefore the introduction of Verification of Payee (VoP), which checks that the beneficiary’s IBAN and name match before a payment is executed, further enhancing the security of electronic transactions. The next step will be cross-border instant euro payments through SCT Inst. Our aim is for an individual or company in Montenegro to be able to transfer funds to the European market in just a few seconds, as simply and securely as making a domestic payment.
This is perhaps the best example of how we at CBCG view European integration: not as a process that begins on the date of membership, but as one whose benefits citizens should feel much earlier. Montenegro is already becoming part of the European payments area – through lower costs, faster payments and simpler business transactions with Europe.
Montenegro is the first country in the Western Balkans to have made instant payments available across its entire banking market, through all 11 banks, from day one, and the initial data show rapid growth in their use. What does the successful implementation of the TIPS Clone system say about the technological and operational readiness of CBCG and domestic banks, and what is the next phase in the development of instant payments in Montenegro?
For us, TIPS Clone is much more than a new payment system. It is evidence that Montenegro can adopt and implement technological solutions in line with leading European practice very quickly and well ahead of full EU membership. By introducing it, we have enabled citizens and businesses to transfer money in just a few seconds, 24 hours a day, every day of the year.
At the same time, the implementation demonstrated the high degree of technological, operational and organisational readiness of CBCG and the domestic banking sector. We established the system in just eight months, and Montenegro is the only one of the five countries covered by the joint project of the European Central Bank (ECB) and Banca d’Italia to have provided a full instant payment service through all 11 banks from day one. This demonstrates that our banking system can deliver complex infrastructure projects quickly, in a coordinated manner and across the entire market.
The initial results confirm that Montenegrin users are adopting the new infrastructure rapidly. Almost 150,000 instant transactions, with a total value of around 53 million euros, were processed in the first month alone, equivalent in number to approximately 15% of the transactions processed through the DNS. This is a strong indication that there is genuine demand for faster and simpler ways to pay.
From the outset, it was important to CBCG that technological innovation should not remain merely an infrastructure achievement, but that citizens and businesses should experience its benefits directly. That is why we capped the fee for electronic instant payments up to 200 euros at just five cents.
We are now moving from the infrastructure-building phase to developing its full potential. The focus is on wider use of instant payments, greater financial inclusion and stronger competition. We are considering additional services such as alias-based P2P payments, where, for example, a telephone number would be sufficient to make a transfer, as well as Request-to-Pay and QR payments at merchants, which would enable funds to be transferred directly from the customer’s account to the merchant’s account simply by scanning a QR code.
We see particular potential in QR payments, as they give citizens another simple and fast option alongside cash and cards, while potentially offering merchants a more competitive channel for accepting payments. Our aim is not to favour any particular instrument, but to create a market in which high-quality alternatives promote competition, innovation and lower costs for users.
In parallel, by the end of 2027 we also plan to unify BBAN and IBAN, as the next step towards simpler domestic and cross-border payments and Montenegro’s further integration into the European payments area.
If we built European-standard infrastructure in 2026, the next phase is to translate its full potential into wider use of digital payments, lower costs and stronger market competition. In other words, our aim is a payment system that not only keeps pace with European standards, but already delivers to citizens today some of the benefits associated with full participation in the European financial area.
The CBCG will mark 25 years of operation with a high-level international conference bringing together exceptionally prominent figures from European and global central banking and finance. What does such a strong response say about CBCG’s international standing and the reputation it has built over the past 25 years, and what message do you wish to convey through this conference?
We are marking the Central Bank’s 25th anniversary together with the institutions and people with whom, over the years, we have built trust, mutual professional respect and concrete cooperation. I therefore see the fact that our anniversary conference will bring together numerous governors, heads and senior representatives of leading European and international financial institutions as powerful recognition of Montenegro and of the standing CBCG has established within the international central banking and financial community.
In Montenegro, we will bring together an exceptionally distinguished group from the European and international central banking community – governors of leading central banks in the euro area and the European Union, the Vice-President of the European Central Bank, the heads of the European Systemic Risk Board (ESRB) and the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), as well as senior representatives of the Bundesbank, numerous other EU central banks, the Bank of England and the IMF. We will be joined by the governors of the central banks of France, Belgium, Slovakia, Slovenia, Croatia and Iceland, as well as the governors of the central banks from our region, together with Klaas Knot, Jacob Frenkel and other figures who have shaped – and continue to shape – European and global monetary and financial policy for decades.
It is rare, even at much larger European gatherings, to see this level of experience, institutional authority and influence brought together in one place. For me, this confirms the journey CBCG has made – from an institution established 25 years ago to a credible European and international partner.
It is particularly symbolic that the conference is taking place now, at a time when Montenegro is completing one stage of its European journey and CBCG is preparing for a new role within the European central banking family. In Montenegro, we will bring together people who help shape European and global financial policy and discuss the issues that will determine the future of central banking and modern finance – from stability and global fragmentation, through financial integrity and technological transformation, to the future role of the euro in a rapidly changing world.
CBCG After 25 Years: A Strong Institution Poised for Its Greatest Transformation Since Its Establishment