56th Meeting of the Financial Stability Council
Today, the Financial Stability Council (FSC) held its 56th meeting chaired by Radoje Žugić, Governor of the Central Bank (CBCG) and Council Chairman. Milojko Spajić, Minister of Finance and Social Welfare, Uroš Andrijašević, President of the Council of the Insurance Supervision Agency and Zoran Đikanović, President of the Capital Market Authority, also attended the meeting. Upon the invitation, Vojin Vlahović, Director of the Deposit Insurance Fund, also participated in the meeting.
At the meeting, the members discussed the Information on the state of financial stability for Q3 2021.
The Information stated that economic activity in the euro area in Q3 of the current year recorded a quarterly increase of 2.2% and a y-o-y increase of 3.7%. In Q3 this year, the economies of the USA and Chinese both grew compared quarterly and y-o-y.
Preliminary data from MONSTAT concerning Montenegro showed real GDP growth of 19% in the second quarter of 2021 compared to the same period in 2020. Such a high growth rate primarily resulted from the successful tourist season. According to preliminary data, the number of tourist arrivals in the first nine months of 2021 was 162.9% higher year-on-year, and the number of overnight stays increased by 214.9% y-o-y. Estimated revenues from tourism for the nine months of this year amount to almost 700 million euros, representing about 70% of revenues from tourism in 2019.
Compared y-o-y, industrial production in the first nine months of 2021 recorded a y-o-y growth of 7%, while retail trade turnover in Q3 2021 increased by 45.1% y-o-y.
The data presented in the Information indicate a further annual inflation increase, amounting to 2.9% in September. It resulted from rising food prices (4.8%) and fuels (transport growth of 8.9%). Recently revised MONSTAT data show an increasing number of employees - the average number of employees was 202,921 in October this year, or 22.3% more than in October 2020. The number of unemployed in October 2021 was 55,241, which is an increase of 23.3% compared to last October.
According to preliminary Ministry of Finance and Social Welfare data, the budget deficit for the first nine months of 2021 amounted to 1.4% of the estimated GDP.
Banking sector’s operations ratios in the first nine months of 2021 point to growth in capital and assets that reached a historical high in September this year (5.16 billion euros).
Banks’ lending activity was intensive in the third quarter of this year. Thus, the level of total loans amounted to 3.5 billion euros in the first nine months of 2021, which is 9% more than in September last year. Total newly approved loans on 30 September 2021 amounted to 759.3 million euros, or an increase of 22.4% compared to the same period the previous year. Banks continued to support the economic recovery strongly, as confirmed by the fact that 391.9 million new loans were approved to the economy in the first nine months of this year, which is 15.9% more than in the same period in 2020. At the end of Q3 this year, deposits amounted to 3.99 billion euros, 20.9% more than in September 2020.
The share of non-performing loans and receivables in total loans and receivables amounted to 5.62% at the end of September this year, which was 0.1 percentage points less than at the end of September 2020. After applying the Asset Quality Review (AQR) results, the level of NPLs increased by only 0.03 percentage points and stood at 5.65% at the end of October this year. After applying the AQR application, the aggregate solvency ratio at the end of this October was 18.13%.
The Director of the Deposit Insurance Fund informed the Council members that this institution had so far paid 92.8% of the total liabilities to depositors of bankrupt banks (Atlas and IBM). The Fund has the funds at the level guaranteeing the security of deposits in Montenegrin banks.
The Council concluded that the financial system’s stability at the end of Q3 2021 had improved both compared to the end of the previous quarter and compared year-on-year. Indeed, the risks present must be continuously monitored to react proactively, if necessary, to preserve the achieved stability.