Council of the Central Bank of Montenegro held its 52nd session
14/10/2019
The Council of the Central Bank of Montenegro (CBCG) held its 52nd meeting chaired by the Governor, Mr. Radoje Žugić.
At today`s session, the Council discussed and adopted the Report on the Central Bank of Montenegro Business Activities and Policy Implementation for June and July 2019 indicating that activities of the Central Bank during these reporting periods were implemented in line with planned commitments stated in the Central Bank Work Programme for 2019.
The Council adopted a decision on macroprudential measures with the aim of maintaining stability of the financial system and sustainable financing of individuals. This decision defines the obligation of banks (starting from 1 January 2020) when granting retail cash loans whose repayment period exceeds eight years to require that the loan is fully secured by quality collateral (fiduciary duty or mortgage, pledge on movable property or financial instruments, guarantees/counter guarantees, and other eligible security instruments that can be used to mitigate credit risk). Also, banks with high exposure to retail cash loans with a residual maturity of more than six years (over 50% of a bank`s own funds) may grant retail cash loans with a repayment period of more than six years, provided that the loan is secured with quality collateral.
These macroprudential measures shall remain in effect for a period of two years following the application date of the aforesaid decision.
The Council also considered the Quarterly Report on Banks' Performance as at 30 June 2019, with the Information on the Implementation of Operational Objectives, which indicates that the key balance sheet positions of all 13 banks during Q2 2019 recorded increase, both compared year-on-year and in relation to end- 2018.
Another report that was discussed and adopted is the Report on Performance of MFIs and Leasing Companies as at 30 June 2019, indicating that the microcredit sector recorded the quarter-on-quarter growth in Q2 in total assets and liabilities and credits of 1.3% and 3.4%, respectively, together with a minor interest rate decline of 0.12 percentage points. As for the business of leasing companies, this sector remained stable over the second quarter, recording a positive financial result and growth in assets, receivables, and capital.
For the first time today, the Council discussed the Report on Performance of the Investment and Development Fund of Montenegro as at 30 June 2019 given the meeting of the legal requirement for the Fund to be included in regular mandatory reporting to the CBCG. The report indicates that the IDF`s business was characterized by increase in the key balance sheet positions: assets, loans, and receivables, as well as equity, and stating that the quarter-on-quarter increase in total assets, loans, and liquid assets in Q2 2019 reached 9.8%, 6.1%, and 32%, respectively.
The Council also adopted the Macroeconomic Report of the Central Bank of Montenegro for Q2 2019. According to preliminary MONSTAT data, real economic growth in Q1 2019 was 3%, with positive developments and increased activities being recorded in construction, trade, tourism, and most types of transport in Q2. The Council commended the uptrend in FDI inflow and employment recorded in Q2 2019.
The Council also adopted the Inflation Report for Q2 2019, which indicates that the quarter-on-quarter decline in consumer prices amounted to 0.4%, mostly due to a decline in the prices under the categories clothing and footwear, and housing, water, electricity, gas and other fuels. The report also suggests that growth in economic activity in 2019 will have anti-inflationary effect. The model forecast indicates (with 90% probability) that the CPI inflation would range between 0.3% and 1.5% in December 2019, with the central projection of 0.9%. The CBCG expert estimate is similar to the model forecast and projects that the 2019 inflation will range between 0.3% and 1.3%.
Finally, the Council adopted the Report on Bank Lending Survey Results for Q2 2019. The survey results indicate that in this period, as compared to the previous quarter, credit standards for the corporates eased, while credit standards for households remained unchanged. The survey results show that demand for both corporate and household loans continued growing. Demand for corporate loans was driven by the need to finance working capital and capital investments, whereas the main factors of growth in household demand involve the need for refinancing existing debts and the purchase of durables.
The Council also discussed other current issues within its competence.