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History

The idea of founding the Central Bank of Montenegro (hereinafter: CBCG) emerged at the beginning of 20th century. To wit, Crnogorska banka (Montenegrin Bank) was founded on Cetinje in 1905 with the idea to become a central bank that would assist the development and functioning of the banking industry in Montenegro. It was organised as a joint stock company with the objective to accept capital for capital turnover, to support the development of manufacturing, handicraft, trade and industry by granting loans. However, based on the decree of Prince Nikola of 11 April 1906, instead of Crnogorska banka the Ministry of Finance was authorised to mint nickel and bronze coins in the amount of 200.000 korona. Therefore, 11 April is nowadays celebrated as a CBCG Day, while Montenegro still had to wait for long time to have its central bank.

At the beginning of May 1909, Prince Nikola passed a Decree on the issue of silver coins. The Decree had also included for the first time the name of Montenegro's money – perper. Silver coins appeared for the first time in 1909 in Montenegro, and golden coins appeared in 1910. Montenegro had been using its own currency until the beginning of Austro-Hungarian occupation. Austro-Hungary introduced its own currency – korona – as official currency in Montenegro.

With Montenegro absorption by the Kingdom of Serbs, Croats and Slovenes, the National Bank of the Kingdom of Serbs, Croats and Slovenes became an issuing institution. Perper disappeared through this absorption, and instead, dinar became new currency of the new state. With the amendments made to the Constitution in 1931, the National Bank of the Kingdom of Serbs, Croats and Slovenes became the National Bank of the Kingdom of Yugoslavia which had had 24 branches until the beginning of the World War II. After the capitulation of Yugoslavia on 29 May 1941, occupational forces liquidated the National Bank of the Kingdom of Yugoslavia and Banca d’Italia became issuing bank for Montenegro with Italian Lira as the official currency.

During the war, the Presidency of AVNOJ passed the Law on withdrawal and replacement of occupational banknotes on 5 April 1945. New Yugoslav dinar banknotes were printed in USSR and their introduction in circulation occurred in period from 20 April to 9 July 1945.

National Bank of Federative People’s Republic of Yugoslavia (FNRJ) was established by Decree on 12 October 1946, which opened a large number of branches. A branch of NBY was opened in Titograd (Podgorica nowadays) as the National Bank of Yugoslavia – Head office in Titograd.

The central banking function was federalised by constitutional reform in 1972. A national bank was established in each republic and autonomous provinces comprising together with the National Bank of Yugoslavia a complex system of central banking. The head office in Titograd continued with its activities as the National Bank of Montenegro (NBCG) acting as a legal person. Pursuant to the constitutional reform, the Law on the National Bank of Montenegro was passed in 1977 in Montenegro. Since then, the National Bank of Montenegro has been an independent monetary institution of Montenegro. It carried out monetary and credit and foreign currency policy at the territory of Montenegro observing joint basis of monetary-credit and foreign currency policy which were determined at the federal level. The National Bank of Montenegro had all powers of the central bank except money issue and it represented Montenegro activities abroad. It was managed by the Governor.

The National Bank of Montenegro performed its activities until 1993 when it became again a part of NBY as Main Branch Office of the Republic in Podgorica, not acting as an independent legal person. General Director managed the Main Branch Office of the Republic in Podgorica.

As a result of misuse of monetary policy and the second largest hyperinflation in the world, the Government of Montenegro passed a decision to abandon dinar and assume all powers in the area of monetary policy. Therefore, a decision on introduction of dual currency system was passed on 2 November 1999 where German Mark and dinar were in circulation. When it was estimated that a sufficient amount of German Mark (DEM) was in circulation, a decision on introducing DEM as only means of payment was passed (since 1 January 2001). After the introduction of euro in March 2002, it became only legal tender in Montenegro.

The Central Bank of Montenegro Law was passed in 2000, on the basis of which the Central Bank of Montenegro was established in March 2001 as an independent institution of the Republic of Montenegro responsible for monetary policy, establishment and maintenance of sound banking system and efficient payment system in the Republic. Its independence function was set forth in the Law. The Central Bank of Montenegro does not have an issuing function.

The Council governed by the Central Bank consisting of seven members: President of the Council, Director General and two deputies of the Director General who were at the same time executive officers in the Central Bank. Parliamentary body responsible for elections and appointments proposed executive officers, and three members of the Council not employed by the Central Bank were proposed by the Government of Montenegro. The Central Bank Council was appointed by the Parliament of Montenegro.

Based on the new Constitution of Montenegro (which defined CBCG as constitutional category), new Central Bank of Montenegro was passed in 2010. According to this law, CBCG became responsible for preserving financial system stability, including encouraging and maintaining sound banking system and safe and efficient payment system. Moreover, CBCG contributed to preserving price stability.

Currently, the Central Bank Council governs the Central Bank comprising of seven members: Governor, two Vice-Governors and four members. Members of the Council are appointed by the Parliament of Montenegro: the Governor upon the proposal of the President of Montenegro, Vice-Governors upon the proposal of the Governor and four members upon the proposal of the Parliamentary body responsible for finance.

 

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