---

09/03/2011

The Financial Stability Council held its third regular meeting. It was chaired by the CBM Governor, Mr. Radoje Žugić, and attended by the Council members Mr. Milorad Katnić, the Minister of Finance and Mr. Zoran Đikanović, the President of the Securities and Exchange Commission.

The minutes of the second meeting of the Financial Stability Council were adopted at the meeting, as was the proposal of Amended Decision on giving consent to the list of persons responsible for the delivery of data and information to the Financial Stability Council.

The Council was informed on the application of the International Accounting Standards with regard to the treatment of impairment of financial assets as discussed regarding the application of the accounting standard 39.

The application of IAS 39, which is very complex in its contents, has become highly important against the backdrop of the global recession which effects have led to the reduced value of the economic entities’ portfolio. The main concern with regard to the accounting standards, which has been even deepened by the crisis, refers to the recognition and measurement of financial instruments – financial assets, financial liabilities and some contracts on purchase/sale of non-financial assets. The value of financial instruments varies depending on market developments (interest rates, prices of securities, prices of goods, exchange rates, price indices, creditworthiness and the like). After the initial recognition of the financial assets value, an economic entity measures its financial assets at fair value, without deductions for transactions costs that may occur during a sale or some other way of alienation.

The Council reviewed the aforesaid information and assessed that this issue would not lead to the systemic risk or affect financial stability.

An initiative was proposed at the meeting with regard to drafting an analysis to serve as the basis for a proposal of the institutional positioning of the financial system regulators. This issue will be addressed in the future in more detail so that the financial sector would continue to be an efficient development driver of economic growth of Montenegro.