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07/03/2011

The tenth meeting of the Council of the Central Bank of Montenegro, chaired by the Governor Mr. Radoje Žugić, was held on 7 March 2011.

The Council adopted the Governor’s Report indicating the expected inflation rate to range between 2.3% and 4.3% in this year, a gradual recovery of the real sector and a steady acceleration of economic growth over the year.

The Governor’s Report discusses the implementation of the CBM policy in accordance with the plan. Special attention was dedicated to the financial system stability. The prevailing at this moment is credit risk and the banking system has been gradually stabilising.  Despite the still present crisis, the capital market does not represent a threat nor bears risks to the financial stability.  Bearing in mind the confidentiality nature of this document, the Council made a decision to publish only a summary of the document.

The Council discussed the banking system condition. Deposits, solvency ratio, liquid assets, and the banking system assets show the month-on-month increase in January this year, and the loans to deposits ratio also improved.  However, the matter of concern remains the growth of non-performing assets, as well as unfavourable maturity of loans and deposits in the system.

The Council adopted a set of decisions regarding the monetary policy. The Decision on Open Market Operations prescribes that the purchase of securities may be executed as permanent transaction and repo transaction, the conditions to be fulfilled by banks in order to participate in the open market operations, whereby individual operations are subject to the Council’s decision in accordance with the monetary policy goals and tasks. The Decision on Detailed Conditions for Granting Liquidity Loans to Banks prescribes the possibility of granting intraday, overnight and short-term liquidity loans for the period of 15 days. The Decision prescribes detailed conditions to be fulfilled by banks in order to obtain short-term loans, as well as the lending procedure. The Decision on Granting Last-Resort Financial Assistance prescribes the possibility of providing credit support to banks and financial institutions for the purpose of preventing the jeopardizing of safety and soundness of the banking system if a financial institution fails to provide support from other sources. The implementation of this function stipulates the commitment of a bank to refrain from lending, paying dividends, investing in other legal persons, or increasing its operational costs while using of this assistance. The Guidelines on the Allocation of Funds for the Implementation of Monetary Policy Instruments prescribe that funds that may be used for these purposes are the CBM cash assets, bank reserve requirements up to the amount of allocated assets of the bank in question, and exceptionally, a funds borrowed from international financial institutions or foreign central banks.

In addition, a set of decisions regulating payment system has been adopted. The Decision Amending the Decision on Contents of the Central Registry of Accounts prevents the possibility of avoiding enforced collection, as adopted after the amendments of the Instruction of the Ministry of Justice for the Central Registry operations and registration forms. The amendment of this decision called for the harmonization of decisions on recording accounts for performing payment operations, the structure of transfer execution accounts, and the implementation of enforced collection from the account of the executive debtor. The Decision on the Manner and Procedure for the National Payment System oversight prescribes oversights of those payment system segments that were not regulated before: transfer of duns, interbank settlement, and the issuing and use of electronic payment instruments. A separate decision prescribes the mandatory elements of a payer transfer order. In addition, the Decision on Recording Accounts for Foreign Payment Operations was amended.