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27/10/2023

"The estimated GDP growth in H1 was 6.6%, mainly due to positive trends in tourism, industrial production, forestry and trade sectors and most types of transport", pointed out the Macroeconomic Report of the Central Bank of Montenegro Q2 2023, which the Council of the Central Bank of Montenegro adopted at today's meeting chaired by Governor Radoje Žugić. The Report also noted that inflation slowed in H1 this year, while the foreign trade deficit deteriorated due to the increased import.

For nine months of the current year, banking operations data show that all key balance sheet positions grew year-on-year, i.e., bank assets were 11.08% higher, capital 31.84%, loans 8.92% and deposits 11.24%. The liquid assets' share in total assets was over 25%, while non-performing loans continued to trend down and accounted for 5.03% of total loans at the end of this September. The capital adequacy ratio at the system level was 20.71%, with the continued profitable operation of banks.

The Council also discussed the Analysis of Housing Loans to Natural Persons, which the CBCG prepared to assess trends in this important segment of banks' portfolios. The CBCG analysed the housing loans' trend and quality and the trend of interest rates for these loans. The Analysis showed that the share of housing loans to natural persons with a variable interest rate in the total housing loans to natural persons recorded a significant decrease from 35.08% to 9.90% from 30 June 2022 to 31 August  2023. The Analysis also assessed the quality of housing loans as good. Still, despite the housing loans growth in the reported period by 17%, the nominal amount of non-quality housing loans decreased by 26%. It reduced the share of non-performing housing loans in their total portfolio from 3.12% to 1.98%. All the abovementioned favourable trends point to the stability of this banking portfolio segment. Despite the economic crisis and rising interest rates, the quality of housing loans to natural persons is improving. It mainly results from timely recommendations of the CBCG requiring banks to prepare client protection programmes enabling the transition from a variable to a fixed interest rate without costs. Timeliness in the supervisor's actions and excellent communication with the banks resulted in stability in the housing loans segment, which does not currently threaten financial stability and does not require further measures.

The Council adopted the Report on the External Quality Assessment of the CBCG Internal Audit for 2023. The external assessment of the CBCG's internal audit quality was carried out by the De Nederlandsche Bank team that visited the CBCG this May and had a direct insight into the CBCG internal audit organisation, procedures, activities and relevant policies. The final stage of this process is the recent awarding of the Certificate of General Internal Audit Compliance of the CBCG with the internal audit's International Professional Practices Framework (IPPF) and the Code of Ethics of the Institute of Internal Auditors (IIA), which confirmed the full independence of internal audit within the CBCG following international standards and best practice.

Since one bank expressed interest in participating in the international payments clearing system with Serbia and Bosnia and Herzegovina, the Council of the CBCG adopted the Decision on the Participation of the Central Bank of Montenegro and Banks in the International Payments Clearing. Namely, the earlier decision was made under the Central Bank of Montenegro Law that ceased to be valid, so it was necessary to adopt a new decision.

At today's meeting, the Council was informed of the Report on the progress of the bankruptcy proceedings in Atlas banka AD Podgorica in bankruptcy for January-June 2023. It also discussed other issues within its competence.