Governor of the CBCG meets the Minister of Finance and the bankers
12/05/2020
The team of the Central Bank of Montenegro (CBCG) led by Governor, Mr. Radoje Žugić, met today with the Minister of Finance, Mr. Darko Radunović, the representatives of all commercial banks and the Association of Montenegrin Banks.
During the meeting, the CBCG presented a new set of measures to mitigate the adverse effects of the pandemic, as well as the new pending government initiatives supporting the private sector, were also presented. Moreover, the interlocutors summarised the results of banks and institutions’ efforts to provide new adequate amounts and maturities of funds as support.
Governor Žugić presented the activities, decisions and contribution of the set of measures recently adopted by the CBCG. Given the need to increase the banking sector’s lending potential, the CBCG reduced the reserve requirement rate by 2 percentage points thus releasing some 70 million euros that would increase the lending potential of the Montenegrin banks. At the same time, by reducing the cost of withdrawing liquidity from the reserve requirement by amending the Decision on Detailed Conditions for Lending to Banks from 12% to 6%, the CBCG provided more affordable possible use of these funds in case of liquidity needs. The third quality measure refers to the flexible treatment of loan restructuring in banks’ balance sheets. For clients who document the turnover decline caused by the pandemic, banks are allowed to treat these loans as new loans, while we are discussing the possibility of an additional grace period after the existing moratorium. Moreover, banks are allowed to increase the exposure to one person and/or a group of related parties over the statutory exposure limits up to 25 percent of bank’s own funds, with the prior CBCG approval.
Analysing the existing effects of the moratorium, the CBCG informed the banks that the proposal for the next moratorium phase would include an individual approach and that it would disable non-payment for those debtors with not-jeopardised financial capacity.
Minister of Finance Darko Radunović pointed out the necessity of timely activities and the quality of existing measures. He emphasised that just as the health system in a small country such as Montenegro has made a global feat in combating COVID-19, thus significant economic recovery results can be achieved with dedicated and proper coordination of all system participants. He announced the expected success of the negotiations in providing additional long-term funds to the financial system through the State. Moreover, he underlined the importance of a more efficient allocation of funds in the sectors where these funds were most needed (small and medium enterprises, production, imports substitution, tourism, etc.) and where the invested funds would give the highest effect.
Bankers provided an overview of individual activities and suggestions for more decisive action. They also presented the effect of previous activities on banks’ balance sheet positions and future lending activity. Through a proactive approach, banks provided a new 80 million euros of lending, while parent banks provided excessive sources of liquidity for their Montenegrin subsidiaries. Using intensive communication, the CBCG opened its door for more intensive cooperation of banks with international financial institutions (IFC, EBRD, etc.).
Since the crisis, the banks’ activity can be quantified with 143 million euros of new loans and over 5,648 credit sub-accounts. Only in the first week of May, banks approved some 23 million euros of loans, recording almost a last year’s level despite reduced demand. Finally, the liquid position of banks and deposits were assessed sound while the proposed measures contributed to the system’s further stability.