---

30/11/2017

The Council of the Central Bank of Montenegro held the eighteenth session today, chaired by the Governor Mr Radoje Žugić, PhD.

The Council discussed and adopted the Governor`s Report on Central Bank of Montenegro Business Activities and Policy Implementation for September and October 2017, which concluded that the activities of the Central Bank in this period were carried out in line with the commitments established by the Central Bank of Montenegro Work Programme for 2017.

The Council adopted the Central Bank of Montenegro Financial Plan for 2018, which was prepared on the basis of the implementation of the financial plan for the nine months of 2017 and the projections of expected revenues and expenditures in the next year. The plan provides the necessary conditions for the achievement of the objectives and the performance of the CBCG functions, and it was prepared in accordance with the principles of rational and responsible business activities. In this respect, operating costs were kept at the same level as in 2017. On the other hand, total revenues were planned in an amount that is 8% higher than the plan for 2017.

A set of decisions providing preconditions for the implementation of the International Financial Reporting Standard 9 (IFRS 9) dated 1 January 2018 which evaluate the financial assets and liabilities of banks in a new way have been adopted at today's Council meeting. In that sense, the decisions that regulate credit risk management in banks, bank capital adequacy, bank chart of accounts and the reporting of banks to the CBCG were changed.

In order to harmonize with the amendments to the CBCG Law, the Council also adopted a Decision on detailed conditions for granting loans to banks in case of their liquidity needs. The decision defines the conditions under which the CBCG can grant a liquidity loan to a commercial bank. Apart from the fact that the loan must be secured by the prescribed security and can be used solely for the settlement of the due obligations towards the depositors and other creditors, it is necessary to meet the conditions for the bank to be solvent, and in case of taking daily and overnight loan, it must have used 50% of allocated funds of the reserve requirement to maintain the daily liquidity.

On the day this Decision enters into force, Decision on detailed conditions for granting liquidity loans to banks (Official Gazette of Montenegro, No.15/11), as well as the Decision on granting last-resort financial assistance (Official Gazette of Montenegro, No.15/11), which meets the requirement set out in Negotiating Chapter 17 - Economic and monetary policy, in the part relating to the institutional independence of the central bank and the ban on monetary financing.

In order to comply with the regulations of the European Central Bank, the Council adopted the Decision on payment system reporting to the CBCG. This decision determines obligors, content, method and deadlines for submitting data on payment transactions to the CBCG, which this institution uses for statistical purposes, for monitoring payment transactions, including the use of payment instruments in Montenegro.

The Council also established Guidelines on implementation of international restrictive measures by banks and financial institutions and supervision of the implementation of these measures at today`s session. By establishing these guidelines, the recommendation of the FATF, the international institution in charge of establishing standards in the field of prevention of money laundering and financing of terrorism, is being implemented.

The Council discussed and adopted the Quarterly Report on Banks and MFI`s Operations. It was noted that the activities of the Central Bank during September and October were effected in accordance with the planned obligations established by the Central Bank's Work Program in 2017. The report on banks and MFI`s operations concluded that the business of banks during the third quarter of this year was characterized by the growth of all key balance sheet items - assets, loans and receivables, deposits and equity. Credit activity of banks was intensified, and the share of non-performing loans in total amounted to 7.40% at end-September, representing a decrease of 21.57%, on an annual basis. The solvency ratio was 16.78% at the aggregate level, which is over the regulatory minimum of 10%. High level of liquidity and solvency of the banking sector, along with the mentioned tendencies, contributes to its smooth functioning, thus to preservation and strengthening of financial stability. Banks reported a positive financial result in the amount of 30 million euros during the third quarter.

The Council also discussed other current issues from the domain of its competence at today's session.