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24/12/2020

The Council of the Central Bank of Montenegro held its 83^rd meeting today, chaired by the Governor, Mr Radoje Žugić. Before considering the items on today’s agenda, the Council members verified the two telephone sessions’ decisions from the previous and this week. Due to the situation caused by the pandemic and the need for daily monitoring, the Council members are in constant communication, and such a regime will be valid until further notice.

The Council determined the Central Bank of Montenegro Policy in 2021, which defines the goals for performing the CBCG functions to be conducted during the next year. It also adopted the Financial Plan for 2021, which provides conditions for attaining goals and serving its operations. The financial plan for the next year has been prepared following the principles of rational and responsible business.

The Council passed a Decision on Revoking the license of the microfinance institution “Credit +”. It got acquainted with the bankruptcy procedure of Atlas Bank AD in bankruptcy for the period January-September 2020.

To create preconditions for the application of the Law on Credit Institutions and the Law on Resolution of Credit Institutions, the Council considered and adopted a set of six decisions, namely: on the content and manner of keeping the register of credit institutions, on business with credit institutions’ related parties, on minimum standards for credit institutions’ investments in real estate and fixed assets, on the method of calculating the maximum amount for distribution in credit institutions, on more detailed criteria for determining the credit institutions’ minimum regulatory capital requirement and eligible liabilities, and on the manner of disclosing confidential information on credit institutions in brief or aggregated form.

The Council also adopted the Report on Business Operations and Policy Implementation of the Central Bank of Montenegro for September and October 2020. The reports stated that the institution conducted activities during the observed period under the planned obligations.

The Council discussed Quarterly Report on Banks’ Operations as at 30 September 2020. It concluded that there was a slight y-o-y increase in assets (0.06%), and more intensive growth in loans (5.74%) and capital (4.17%), at the system level during the reporting period. Still, deposits decreased by 6.06%. Although maintained, the banks’ profitability decreased by even 51.33% compared y-o-y, resulting from the net fee income decrease and the impairment charges increase. The non-performing loans ratio (NPL) amounted to 5.61% as at 30 September 2020, which was 0.94 percentage points y-o-y increase.

The Council also adopted the Central Bank of Montenegro Macroeconomic Report for Q3 2020. The Report pointed out that the Coronavirus pandemic caused a decline in economic activity in the country, reduced the collection of budget revenues, and increased budget expenditures. The labour market also recorded negative trends, so the number of employees in the first nine months of the current year recorded an 11.3% y-o-y decline. The pandemic did not harm the foreign direct investments inflow, whose net inflow in January-September 2020 amounted to 345.4 million euros, which is 52.2% more than the same period in 2019.

The Inflation Report for Q3 2020, adopted by the Council, stated that consumer prices increased by 0.4% during the Q3 of this year. The average consumer prices rate (first nine months of 2020 compared y-o-y) was -0.1%, while prices in September compared y-o-y increased by 0.1%. The Report further stated that the model forecasted inflation ranges between -0.8% and 0.2% for the end-2020, with a central tendency of -0.3%. The expert assessment of the CBCG was similar, and it indicates inflation ranges from -0.5% to 0.5% at the year-end, with a zero rate as the central projection.

The Council also adopted the Report on Bank Lending Survey Results for Q3 2020. According to the report, banks expected the standards (criteria for approving loans) concerning interest margins, commissions and fees for the economy and households to ease during the next quarter. Still, there is a possibility of increasing collateral requirements for both sectors.

At the meeting, the Council also discussed other issues under its competence.