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31/03/2020

The Central Bank of Montenegro (CBCG) and the Council of the Central Bank of Montenegro that meets constantly, monitor the coronavirus epidemic situation development to view its impact on economic flows, analyse market developments, and study comparative systems. The intention is to support “healthy” companies and those having the potential to sustain their business, to minimise the adverse impact of the coronavirus epidemic on the country’s economic activity.

The CBCG keeps constant communication with all relevant stakeholders and, together with commercial banks, works actively on finding ways to resolve the problems caused by the current crisis. At the moment, a significant advantage is a fact that Montenegro’s banking system is highly liquid and capable of providing the necessary credit support to citizens and the economy. If the crisis persists requiring the need to “pump” new liquidity, the CBCG has the resources that can be used for this purpose.

At the today meeting, the Council of the Central Bank of Montenegro adopted the Decision amending the Decision on interim measures to mitigate adverse effects of the new Coronavirus disease on the financial system.

This Decision adds on two additional measures aimed at providing incentives to the economic activity and preserving the stability and security of Montenegro’s banking system in the context of risks arising from the coronavirus epidemic.

The first measure temporarily prohibits banks from paying dividends to shareholders, except in the form of bank shares. Therefore, dividend distribution is allowed only by transforming them into equity. This measure will increase the capitalisation level of the Montenegrin banking system and ensure its full preparedness for potential challenges.

The second measure allows banks, through the granting of loans or otherwise, to increase exposures to one person or group of related parties beyond the prescribed exposure limits (25% of the bank’s own funds), with the Central Bank’s prior approval. In addition to the request for approval, a bank will provide the CBCG with the information on exposure increase reasons, including the overdraft amount and the period within which the bank will reduce the exposure to the previously prescribed limits. This measure will facilitate the acquisition of additional financial resources for the portion of the borrowers affected by the current crisis and provide an incentive to continue their business.

We note that these are temporary measures, which length will depend on the further situation and the banks’ financial condition monitored intensively and daily. In parallel, depending on further developments, we will be considering the need to introduce new measures.