Positive effects of implementing the Law on Voluntary Financial Restructuring of Debts
23/10/2017
The meeting of the CBCG Governor with the chief executive directors of banks operating in Montenegro was held today.
The meeting was organized with the aim to review the effects of loan restructuring pursuant to the Law on Amendments to the Law on Voluntary Financial Restructuring of Debts towards Financial Institutions, after the adoption of its amendments in June this year.
Representatives of banks presented the results of the implementation of the Law on Amendments to the Law on Voluntary Financial Restructuring of Debts towards Financial Institutions, achieved over the past four months since their adoption. At the system level, inclusive 20 October, nine restructuring contracts were signed in the amount of EUR 10.2 million, of which the largest part (97.4%) refers to loans to legal entities, while the remaining 2.6% refers to loans from natural persons. In addition to the agreements concluded so far, and based on the signed agreements on the consent to enter the restructuring process, it is expected that the restructuring contracts will be signed in an additionally significant amount in the upcoming period.
Based on the data presented, the participants at the meeting concluded that the implementation of the Law on Amendments to the Law on Voluntary Financial Restructuring of Debts towards Financial Institutions had significant effects in a relatively short time period. Governor Žugić assessed the banks` commitment to improving the process of voluntary debt restructuring as positive, mentioning, in particular, that "reducing the level of non-performing loans contributes to the improvement of the quality of banking assets, faster recovery of borrowers and, ultimately, the stronger growth of credit activity and thus more dynamic economic growth."
It is expected that implementation of this law will have significant effects in the upcoming period, emphasizing that this issue, given the limited validity of the law, will be in the focus of the CBCG and all other banks. An invitation was also sent to all borrowers to use the possibilities of restructuring their loans in accordance with the Law.
The current improvement of the regulations and the implementation of the EU standards conditioned by the accession process of Montenegro to the EU was also discussed at the meeting, stressing that these activities will not jeopardize the profitability of banks or the banking sector stability. The obligation of banks to introduce international financial reporting standards (IFRS9) as of 1 January 2018 was discussed and announced that banks with a need for additional capital due to the implementation of these standards will have a period of four years to reach the required level of capital. The need to further improve the banking practice in certain banks was also highlighted.
The present agreed that the practice of frequent meetings and intensive communication between the CBCG and the banks is extremely useful, and that the cooperation of all participants contributes to a better functioning of the overall system.