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17/10/2022

In its latest Montenegro 2022 Report, the European Commission has recognized and given positive reviews of the activities initiated and implemented by the CBCG that aim at preserving financial stability and aligning the domestic regulatory framework with EU directives.

As indicated in the report, “the banking sector proved to be resilient and the financial sector stability has overall been maintained.“ It goes on further with the statement that “the balance sheets of domestic banks recorded significant growth” as a result of the temporary support measures that the CBCG had introduced with a view to preserving the liquidity and solvency of domestic banks. 

The report also indicates that the results of the AQR exercise confirmed the stability and strong position of the domestic banking system at the onset of the COVID-19 crisis. 

As for assessments regarding Chapter 9, it is stated that there was a “good progress in the area of bank and financial conglomerates” and that last year`s recommendations in the banking area were met to a substantial degree. 

In the previous period, the CBCG had intensive regulatory activities. With the adoption of the Law on Credit Institutions and the Law on Resolution of Credit Institutions, as well as most of their implementing regulations, have brought the legal framework closer to the current EU rules. By establishing the Resolution Fund and adopting resolution plans for all credit institutions in Montenegro, the Central Bank of Montenegro has provided mechanisms that will have a positive effect on the financial stability and long-term sustainability of Montenegro`s banking system. In this way, the CBCG has aligned its actions with those of the central banks in the European Union.

The EC report also points out that the legal framework on payment systems was further aligned with the EU acquis. 

Within Chapter 32 – Financial control, the report highlights that the country has the necessary structures for technical analysis and classification of counterfeit money. In November 2021, the CBCG Council amended the Decision on authenticity and fitness checking and recirculation of euro banknotes and coins, and the report highlights that the amended decision is “fully harmonised with the relevant decision of the European Central Bank (ECB).”

The CBCG is continuously committed to fulfilling the assumed obligations from the negotiation process and implementing the recommendations from the EC`s annual reports. To that end, after the end of the period covered in the report, it has implemented numerous regulatory and institutional activities within its authority. To wit, the Law on Amendments to the Payment System Law, which is aligned with the PSD2 directive, was adopted at the end of September this year, which means that we have already fulfilled this year's recommendation of the EC regarding Chapter 4. This law enables the requirements for internal payment transactions in Montenegro to be equated with the payment transaction requirements in the EU Member States, and its adoption is a prerequisite for the start of negotiations for Montenegro`s accession to SEPA. In January next year, the CBCG will initiate with the Government of Montenegro the creation of a national body that will open negotiations with the European Payments Council for Montenegro`s entry into SEPA.

By the end of this year, the CBCG will prepare amendments to the Law on the Resolution of Credit Institutions, which will be harmonised with the latest Recovery and Resolution Directive (RRD), which will bring the domestic legislation governing the resolution of credit institutions fully in line with EU legislation. Also, by the end of the first quarter of 2023, the CBCG will prepare amendments to the Law on Credit Institutions that will transpose provisions of the latest directives governing the pursuit of business of credit institutions, thus providing for the fulfilment of the Chapter 9 recommendation for this year. In addition to the above activities, at the end of the current month, the CBCG will sign an agreement with the Single Resolution Board (SRB), the resolution body of the European banking union, which will ensure the exchange of information and cooperation in the field of resolution planning and implementation for banks and financial conglomerates operating on a cross-border basis.

After the adoption and implementation of the aforesaid systemic laws, the CBCG, in cooperation with the EBA, has initiated the procedure for assessing the equivalence of Montenegro’s regulatory and supervisory framework for credit institutions with EU rules.

The CBCG is actively committed to the negotiation process in order to achieve the country`s strategic goal of EU membership which implies, inter alia, the membership of the Central Bank of Montenegro in the European System of Central Banks. Moreover, representatives of the CBCG participate in the work of ten working groups for the preparation and management of Montenegro`s EU accession negotiations, three of which they lead (Chapter 4 - Free movement of capital, Chapter 9 - Financial services, and Chapter 17 - Economic and monetary union).