Financial Stability Council Meeting Held
13/12/2019
The Financial Stability Council (FSC) held its 48th meeting today, chaired by Mr. Radoje Žugić, the Governor of the Central Bank and the Chairman of the Council. All other members of the Council attended the meeting: Mr. Darko Radunović, Minister of Finance, Mr. Uroš Andrijašević, President of the Council of the Insurance Supervision Agency, and Mr. Zoran Đikanović, President of the Capital Market Commission. Upon invitation, Mr. Predrag Marković, the Director of the Deposit Protection Fund attends the FSC meetings.
At today’s meeting, the FSC discussed the Financial Stability Information Q3 2019. Discussing the domestic macroeconomic environment, the FSC concluded that industrial production recorded the 8.1% y-o-y drop in the first nine months of 2019. Positive trends were recorded in tourism (the number of tourist arrivals and overnights recorded respective y-o-y increases of 16.4% and 9.5% in the first nine months of 2019) and construction (y-o-y increase of 8.7% in the first nine months of 2019).
Preliminary data from the Ministry of Finance show that the original budget revenues for the nine months of 2019 were higher than planned by 2.7%, while budget expenditures were 9.4% lower than planned. These trends resulted in the budget deficit of 38.4 million euros at the end-September 2019, i.e. 0.8% of the estimated annual GDP.
They pointed out that an important event in Q3 2019 was the issue of domestic Eurobonds at the international market and noted that that this was a very successful transaction that would result in reducing the Government’s interest liabilities by the specific amount. In addition, the interest rate of 2.55%, the lowest since Montenegro has been offering its bonds at the international market, and the other contractual terms point to a positive perception of international investors when it comes to medium-term growth risks in Montenegro.
Concerning the banking sector, the total capital of banks stood at 594.2 million euros as at Q3 2019 was, representing a quarterly growth of 4%. The Financial Stability Information points out that the solvency ratio of all banks was at a satisfactory level, and that deposits grew by 7.8% or 254.1 million euros in Q3 2019. The share of non-performing loans and receivables in total loans and receivables was 4.7% at the end of Q3 2019, which is quarterly decline of 0.1 percentage points.
Based on an impact analysis of all these factors on the overall economic stability, with particular emphasis on the financial system stability, the FSC concluded that financial system stability at the end of Q3 2019 was slightly higher than in the same period of 2018.
At today’s meeting, the FSC discussed the Information on the Technical Assistance Project for the Development of Financial Education with a proposal for the upcoming activities. The Information presented the IMF technical assistance project in which Montenegro participates, which is implemented with the financial support of the Dutch Ministry of Finance, and coordinated by the Organization for Economic Co-operation and Development (OECD). The FSC members supported the preparation of financial education development programme, given that financial stability and financial literacy are closely correlated. Raising the level of awareness of each individual, through well-designed financial education programs, indirectly contributes to financial stability in the country. It was agreed to give high priority to this issue in the future activities of institutions relevant to financial education.
Through the material received from the Real Estate Administration, the FSC was informed on the start of activities on establishing the register of traded real estates, which was an earlier recommendation of this body. The FSC members supported the future activities of the Administration in this direction.
The members of the Council also discussed other issues under its competence.