70th Meeting of the Central Bank Council
The Council of the Central Bank of Montenegro held its 70th meeting today, chaired by the Governor, Mr. Radoje Žugić.
At today’s session, the Council adopted the fourth set of measures of the Central Bank of Montenegro (CBCG), aimed at mitigating the adverse consequences of the Coronavirus pandemic on the financial system and the real economy. This set of measures, targeting the sectors most affected by the current crisis, is complementary to the third package of measures recently adopted by the Government of Montenegro.
The fourth set of CBM measures includes the following:
1. Moratorium on loan repayment from priority sectors
The first measure stipulates the obligation of banks to grant a moratorium to loan beneficiaries from the tourism sector (this refers to loans to individuals and legal entities and entrepreneurs reported by banks to the CBCG as loans for “accommodation and food services” or loans “for preparing the tourist season”) and the agriculture, forestry and fishing sectors (this refers to loans to individuals and legal entities and entrepreneurs reported by banks to the CBCG as loans for “agriculture, forestry and fishing”).
The right to a moratorium, which can be used in the period from 1 September 2020 to 31 August 2021, is applicable to loan beneficiaries from these mentioned sectors who meet the following two conditions: those who were not past due in loan repayment for more than 90 days on 31 December 2019, and that their loan was not classified as non-performing assets on that day.
The moratorium on loan repayment implies a temporary suspension of all loan payments (principal, interest, default interest, etc.). This implies that the borrower will not pay instalments (principal and interest) during the moratorium. During the moratorium, banks will charge regular, unchanged contracted interest which, according to the decision adopted today, can be settled in one of three ways:
a. repayment of interest during the moratorium, in accordance with the agreed timeline from the loan repayment schedule,
b. repayment of the total amount of accrued but unpaid interest during the moratorium upon expiration of the moratorium,
c. assigning of accrued but unpaid interest during the moratorium to the principal of the debt upon expiration of the
2. Approval and restructuring of loans to users from priority sectors
The second measure allows banks to treat loans approved or restructured to users from the mentioned sectors, in the period from 1 September 2020 to 31 August 2021, as loans from classification category “A”. This incentivises the loan approval and restructuring since banks will not need additional capital on this basis.
Analysing the lending activity of banks, the Council of the CBCG concluded that some banks, during the crisis, approved new loans in the amount that is at the same or higher level compared to the comparable period, while some recorded a decline in lending. Bearing in mind that banks operate in the single market, the Council of the CBCG invited banks that recorded a lending decline to increase their lending activity.
The Council of the CBCG also emphasised the importance of its earlier recommendation to banks to maintain the same fee and tariff policy during the crisis.