58th Meeting of the Financial Stability Council
16/05/2022
Today, the Financial Stability Council (FSC) held its 58th meeting chaired by Radoje Žugić, Governor of the Central Bank (CBCG) and Council Chairman. Aleksandar Damjanović, Minister of Finance, 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 today’s meeting, the FSC discussed the Financial Stability Council Report 2021. This document pointed out that financial stability during the previous year was preserved, while the danger of disruption was moderate and stable, with the increased presence of specific risks.
Despite the numerous challenges posed by the coronavirus pandemic, the banking sector maintained liquidity and solvency in 2021 due to the banks’ good pre-pandemic performance and adequate prudential action by the supervisor.
Trends in the capital and insurance markets also had a stable development due to the economy's gradual economic recovery in the previous year. The recovery was particularly evident in the insurance market, which recorded a record amount of total gross insurance premiums of 98.8 million euros in 2021, which was above the pre-crisis premiums level.
Today, the Council also discussed the Information on Financial Stability for Q1 2022. According to the international financial institutions’ expectations, global economic growth in 2022 will slow down significantly due to the situation in Ukraine and relatively strong rising inflation (rising fuel and food prices), which will hit poorer countries the hardest. For Montenegro, the International Monetary Fund projects growth of 3.8% in 2022, which is a significant revision compared to the previous 6%. The World Bank forecasted that the Montenegrin economy’s growth would be 3.6% this year.
Data for Q1 of the current year pointed to an annual industrial output decline of 15.2%, retail trade turnover growth of 30%, and a growing number of tourist arrivals (117.5%) and overnight stays (137.9%). Consumer prices rose sharply in Q1, reaching 9.7% at the end of March.
Trends that characterised the banking sector in Q1 of this year were positive. Banks’ assets and capital increased annually, as did deposits and loans (annual growth of 23.8% and 5.4%, respectively). A moderate increase in NPLs (share of non-performing loans in total loans) was recorded, which amounted to 6.5% at the end of March this year.
In the insurance sector, during the first three months of 2022, gross invoiced premiums increased by 12.8% compared to the same period last year.
The Council concluded that systemic risk can be assessed as moderate for now. Still, the uncertainty caused by rising inflation and the situation in Ukraine could affect the intensification of existing and new vulnerabilities, especially in the real sector, which may be reflected in the fiscal sphere and the banking sector. Therefore, it is necessary to carefully analyse the financial system stability indicators’ trends and design and implement additional monetary, prudential and fiscal measures to reduce risk depending on the situation’s development.