The CBM Council adopts the eighth package of anti-crisis measures


The Council of the Central Bank of Montenegro held its 95th meeting today, chaired by Governor Radoje Žugić.

Today, the Council adopted the Decision amending the Decision on interim measures to mitigate the negative impact of the communicable disease COVID-19 epidemic on the financial system. The amendment to the existing decision expanded the scope of loan beneficiaries who may use the moratorium until 31 December 2021. It includes natural persons employed to whom employers have not paid net wages more than three months due to the negative pandemic’s impact before submitting a request under this decision. This measure was adopted communicating with the Ministry of Finance and Social Welfare and the Ministry of Economic Development.

The other amendment refers to limiting the duration of the previously determined measure of exceeding the prescribed exposure limits for banks until 30 June 2021. This proposal aligns with the IMF’s recommendations for the phasing out of regulatory and supervisory measures.

At today’s session, the Council discussed and adopted the Financial Statements of the Central Bank of Montenegro for 2020, with the Independent Auditor’s Report.

Based on the Financial Statements for 2020 data, the Council concluded that the CBCG actively and continuously implemented internal economy measures and rationalised all administrative and operating costs categories. As a result of such a policy, revenues grew, and expenditures declined compared to 2019. In 2020, the CBCG generated a net profit of 5.1 million euros. It has been the largest net profit over the last ten years. It is essential to point out that it was achieved with the unchanged pricing policy for CBCG services.

According to the adopted Decision on allocating the CBCG’s profit for 2020, the Council decided to distribute a part of the profit as the budget of Montenegro’s revenue and the remaining part as the increase of the CBCG share capital. It will contribute to the state budget’s liquidity and further strengthen the CBCG’s capital position.

The objectivity of the CBCG operations’ reported results is confirmed in the favourable opinion of the independent external auditor, a renowned international auditor Deloitte. It reads: “The financial statements provide a true and fair view of the Bank’s financial position as at 31 December 2020, the operating result, and cash flows for the year then ended following International Financial Reporting Standards.”

Today, the Council also discussed and adopted the Central Bank of Montenegro Annual Report for 2020, the Annual Financial Stability Report 2020, and the Annual Price Stability Report for 2020.

Discussing the mentioned reports, the Council stated that the CBCG activities in 2020 were aimed at preserving the financial system stability, especially during the coronavirus crisis conditions. Consequently, the CBCG continuously supervised the banking system during 2020 while conducting significant activities on harmonising domestic regulations with acquis communautaire.

Despite the strong negative pandemic impact, owing to the timely response and balanced packages of CBCG measures, the banking system in Montenegro maintained stability and preserved business. It also made a significant contribution to mitigating the crisis effects on citizens and the economy. The Council assessed that banks are a stable economic system’s segment, reflected in the stability of deposits, relatively high liquidity and good capitalisation. Profitability at the system level decreased by 54% at the end of 2020 compared to the end of 2019.

The coronavirus pandemic re-actualised the non-performing loans problem recording an increase from 4.72% at the end-2019 to 5.47% at the end-2020. It shows further growth prospects, especially after the CBCG measures withdrawal and due to poor macroeconomic indicators.

Concerning inflation trend, the CBCG model forecast for the end-2021 projected inflation to range between 1.1% and 2.6% with a 1.8% central tendency. The CBCG expert forecast is similar and projects inflation in the range between 0.75% and 2.75%.

Today, the Council discussed and adopted the Decision supplementing the Decision on the detailed method of calculating regular credit institutions’ contributions to the Resolution Fund and the Decision on the detailed method of valuing assets and liabilities before taking resolution measures or reducing or converting relevant capital instruments. The obligation to make these decisions stems from the Law on the Resolution of Credit Institutions. It is used to harmonise national legislation with the acquis communautaire.

At today’s meeting, the Council also discussed other current issues under its competence.