64th Meeting of the Financial Stability Council
20/06/2023
The Financial Stability Council held its 64th meeting today, chaired by Radoje Žugić, the CBCG Governor and the Council Chairman. Council members Aleksandar Damjanović, Minister of Finance, Željko Drinčić, President of the Capital Market Authority and Marko Ivanović, President of the Insurance Supervisory Agency Council, attended the meeting.
They discussed the Financial Stability Council’s Annual Report 2022 at today’s meeting. The document pointed out that financial stability was preserved during the previous year, while the risks of its disruption were mostly moderate despite the numerous challenges the Montenegrin economy faced. The financial sector showed resilience, remained stable throughout 2022, and strongly supported the other sectors’ recovery, resulting in a 6.1% economic growth, as MONSTAT’s preliminary data showed. As the financial system’s most significant part, the banking system is stable, profitable, liquid and solvent, with a relatively low level of non-performing loans. The insurance sector strengthened stability slightly, while indicators point to steady positive growth rates of this activity, although still with the apparent dominance of mandatory forms of insurance. The total turnover on the Montenegro Stock Exchange grew in 2022.
The report concluded that the still present risks must be carefully monitored and measures taken to reduce them by strengthening the capacity of fiscal policy and adequate support for structural reforms.
Today, the Council discussed the Information on Financial Stability for Q1 2023. Data for Q1 of the current year point to industrial production growth of 9.5%, retail trade growth of 24.7%, and growth in tourist arrivals (61.9%) and overnight stays (46.3 %). Inflation slowed in Q1, so its rate in April was single-digit and amounted to 8.6%.
Preliminary Ministry of Finance data show that source budget revenues in Q1 2023 increased by 13% compared to the planned ones, i.e. by 31% compared year-on-year.
The banking sector recorded annual growth in liquid assets (23.4%) and deposits (21.2%), yet an annual NPLs (the share of non-performing loans in total loans) decline of 0.9 percentage points. The good performance indicators of banks are a quality basis for supporting micro, small and medium-sized enterprises, which should be even stronger, the members of the Council concluded.
In the insurance sector, during the first three months of 2023, gross invoiced premiums grew by 13.8% compared year-on-year.
According to the Council’s assessment, the systemic risk to financial stability can be characterised as moderate for now, with the presence of specific vulnerabilities, which are predominantly caused by factors from the international environment, in the context of still high uncertainty due to the war in Ukraine, the restrictive monetary policy of the leading central banks and rising interest rates.
At today’s meeting, the Council discussed the draft of the national Fintech strategy 2023-2027, which was prepared by an interdepartmental working group, with the expert help of the consulting Fintech firm Vedanvi from London and the financial support of the European Fund for Southeast Europe (EFSE), and whose adoption is the responsibility of the Government. The Council members expressed their willingness to contribute fully to the strategy’s efficient and effective implementation within their competencies. They also discussed the progress of the working group preparing the Law on Digital Assets (composed of representatives of the CBCG and the Capital Market Authority, with the participation of the Ministry of Finance). The law will be based on transposing relevant EU regulation (MiCA – The Markets in Crypto assets) and will represent a reasonable basis for supervising and regulating digital asset activities, with a particular emphasis on cryptocurrencies.