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21/03/2023

Regarding the problems Silicon Valley Bank (SVB) and Credit Suisse Bank are facing, we inform you that, at present, SVB’s bankruptcy and Credit Suisse Bank’s instability cannot impact the stability of any bank in Montenegro and its entire banking system.

The CBCG is carefully monitoring the situation, although the possibility that the problems with these banks will affect Montenegro’s banking system is limited considering all the ratios.

Primarily, the vulnerabilities of ailing European and American banks are individual and of different causes. The Swiss Bank is a systemically important institution, thus government assistance in recovery is expected. We note that only one Montenegrin bank has a marginal exposure to Credit Suisse Bank of less than 5,000 euros. Thus, the mentioned bank’s instability cannot either impact the stability of any bank in Montenegro or the entire banking system.

On the other hand, the collapse of the US SVB bank pointed to banks’ possible systemic vulnerability, while we note that the US supervision regime differs from Montenegro. SVB was in the so-called IV category for which milder liquidity standards apply, and a more significant part of assets was not valued according to market standards.

We note that the standards banks in Montenegro must meet concerning capital and liquidity are much stricter. Our country’s banking system is sound, highly liquid and solvent. All key business indicators significantly exceed the statutory minimum. According to the latest available data, the solvency ratio was 19.32% and liquid assets amount to over 1.8 billion euros, an extremely high level for a small market such as Montenegrin.

The CBCG acts proactively and has taken additional precautionary measures to exclude all potential risks despite sound banking solvency ratios. Namely, our Supervision Department is currently carrying out an analysis in the banking system and the IMF was asked to analyse the potential risk of transmission from the US market to the Montenegrin banking system.

Globally, however, a significant challenge is the potential decline in confidence in banks, so the coming months will show whether more banks with vulnerabilities would emerge. The last week’s decision of the European Central Bank (ECB) to increase the reference interest rate rather than to pursue a monetary easing policy is a clear signal that this leading European financial institution does not expect a crisis in the banking sector.