116th Meeting of the CBCG Council
29/03/2022
The Council of the Central Bank of Montenegro (CBCG) held its 116th meeting chaired by Governor Radoje Žugić.
At today’s meeting, the CBCG Council discussed and adopted the Financial Statements of the CBCG for 2021, together with the Independent Auditor’s Report.
Independent external auditor Ernst&Young gave a positive opinion on the CBCG financial statements and stated that “the enclosed financial statements accurately and objectively present the Bank’s financial position as of 31 December 2021, business results and cash flows for the year ending on that day following International Financial Reporting Standards (IFRS)”. For the third consecutive year, the independent external auditor did not give any recommendation on the financial operations of the CBCG. It is the first time that the mentioned company has audited the CBCG financial statements.
According to the Financial Report data, the CBCG recorded a 3.4 million euros net profit in 2021. At today’s meeting, the Council adopted the Decision on distributing the Central Bank of Montenegro’s profit for 2021. According to the Decision, 50% of net profit is allocated to the Budget of Montenegro and the remaining 50% to general reserves. In the last five years, i.e. from 2017 to 2021, the CBCG redirected 9.3 million euros to the state budget based on the achieved positive business results.
At today’s meeting, the Council concluded that the operating expenses trends confirm the rational management of CBCG resources. Namely, operating expenses in 2021 were 3.4% lower than planned and 3% lower than the previous year. As a result of rationalisation and continuous internal economy measures, the share of operating costs in total expenditures has reduced from 93% in 2017 to 74% in 2021. In the same period, total employee costs in total expenses reduced from 66% in 2017 to 54% in 2021, with a reduced share of all administrative and operational costs.
The Council members assessed the recorded business results as highly positive. They emphasised that the presented indicators confirm the very successful operations of the CBCG despite challenging business conditions during the COVID-19 pandemic and the fact that the CBCG services’ pricing policy has not changed. They particularly noted high balance sheet growth managed by the CBCG, which increased by over 1.5 billion euros from 2011 to 2021, thus reaching the historical peak since the start of CBCG operations.
The Council adopted the Central Bank of Montenegro Policy on the Climate Change Challenges. The Policy confirms the commitment of the CBCG to become more involved in activities undertaken globally aimed at reducing adverse climate consequences as a source of systemic risk that may threaten financial system stability. In this regard, the Central Bank of Montenegro Policy on the Climate Change Challenges specifies its future activities. They, inter alia, relate to membership in international organisations dealing with climate change and the financial system’s “greening”, development of professional and analytical capacity for identification, understanding, assessment and monitoring of climate risks, integration of sustainability criteria and commitment to reducing the climate risks’ impact in the policies, strategies and prudential regulations of the CBCG and others. The awareness of the CBCG about climate change’s importance and its commitment to the green economy is best confirmed by this institution’s previous investments in green securities.
To comply with the new Law on Accounting, which entered into force on 8 January 2022, the Council adopted the Decision on the content, deadlines and manner of compiling and submitting bank’s financial statements.
To comply with the Law on Comparability of Fees Related to Consumer Payment Accounts, Payment Accounts Switching and Payment Account with Basic Features that entered into force on 8 January 2022, the Council adopted the Decision on Criteria for determining credit institutions required to open and maintain payment accounts with basic services. Under the Decision, credit institutions with total assets of more than 500 million euros, according to the audited annual financial statements for the previous year, have to open and maintain consumer accounts for payment with basic services.
The Council adopted the Decision on the countercyclical capital buffer rate to meet the CBCG obligation from the Law on Credit Institutions to determine the quarterly countercyclical buffer rate for Montenegro’s territory. Based on the previously conducted analysis of relevant trends in the banking sector and the overall economy, the Decision determined that the countercyclical capital buffer rate for 2022 Q2 will be 0%.
Today, the Council also adopted decisions determining nine credit institutions from the system as other systemically important credit institutions (OSICI), obliged to maintain the prescribed buffer rate. The new Law on Credit Institutions recognises the “other systemically important credit institutions” category for those whose business disruption or cessation could cause systemic risk in Montenegro. The Law determines the criteria for assessing the credit institutions’ systemic importance on Credit Institutions. They include the credit institution’s size, its importance for Montenegro’s economy, the importance of its cross-border activities, and the connection of the credit institution or group with the financial system.
The Council adopted the Report on Central Bank operations and implementation of the Central Bank Policy in January 2022 and quarterly reports of banks’ and financial services’ operations (for 2021 Q4). It also discussed other current issues within its competence at the meeting.