CBM policy for 2013
Pursuant to Article 44 paragraph 2 point 1 of the Central Bank of Montenegro Law (OGM 40/10, 46/10), at its meeting held on 28 November 2012, the Council of the Central Bank of Montenegro established the following:
THE CENTRAL BANK OF MONTENEGRO POLICY FOR 2013
I. In line with constitutional responsibilities and statutory obligations and accountability for monetary and financial stability and the banking system functioning, and adhering to the principles of transparency and independence, in 2013, the Central Bank of Montenegro shall:
1. With a view to further enhancing and preserving monetary and financial stability, take all necessary measures within its authority aimed at strengthening confidence in overall financial system, preventive acting and improving safety and soundness of the banking system and minimizing adverse effects on and threats to financial stability. The CBCG will continue to develop monetary policy instruments through reviewing the existing reserve requirements policy and the need to implement other monetary policy instruments. In cooperation with the World Bank, the Government, and the Association of Montenegrin Banks the CBCG will work on drafting and implementing the model for restructuring of non-performing loans. Due attention will be paid to overseeing the implementation of the macroprudential framework with a view to providing its adequate and relevant application. Measures aimed at the financial system strengthening will particularly focus on fostering and preserving a sound banking system. To that end, the CBCG will continuously monitor and analyze the situation in the banking system and, as required, take corrective measures, promote the strengthening of corporate governance and risk management in banks, and further implementation of internationally accepted banking standards and principles.
2. Support economic policy objectives and measures of the Government of Montenegro, in particular those pertaining to intensifying the recovery of the economic system, fostering growth and economic development through systemic development of solutions to structural problems and increasing employment, but to the extent that will not jeopardise the attaining of the CBCG objectives, constitutional responsibilities, and independence.
3. Maintain a sound, efficient and effective payment system and work on improving the regulatory framework for performing payment operations by continuing activities on preparing a new payment system law and relevant secondary legislation harmonized with EU Directives, international standards, principles and best practises in the functioning of modern payment systems and payment operations in general.
4. Manage the international reserve funds in the manner to ensure the safety of investments and undisturbed meeting of Montenegro’s international financial obligations without jeopardizing liquidity, and adequate managing of all risks pertaining to the investment of these funds, as well as analyze new opportunities for investment and increasing income.
5. Actively participate in Montenegro’s EU accession process and work on a further harmonisation of regulations within its authority with the EU Acquis Communautaire, whereby the EU accession shall be treated as one of the strategic priorities and appropriate human and material resources shall be allocated for its realization.
6. Develop the existing and, as required, recruit new human resources with appropriate qualifications, know-how and skills, and personal and professional integrity. Work on its motivation, educational advancement and promotion in order to fully show its working potential and achieve expected results and contribute to the implementation of functions and responsibilities of the Central Bank of Montenegro.
7. Continue, following the transparency standards, ensuring timely, reliable and relevant information within its authority to all relevant entities. We will pay special attention to raising the economic know-how in the society, as well as greater awareness of importance of financial stability and soundness of the banking system to the whole society.
8. With a view to preserving and maintaining historical and cultural numismatic heritage in Montenegro, continue activities on supplementing the money collection, with due attention to completing the collection of the only Montenegrin money – Perper.
9. Adequately develop other areas of importance for the attainment of objectives and the exercising of functions of the Central Bank of Montenegro such as the information system development, international cooperation development, participation in combating counterfeit currency circulation, and the like.
10. Base its functioning on the principles of a socially responsible organisation and be actively involved in a modern society trends.
II. This Policy is published on the website of the Central Bank of Montenegro.
THE CENTRAL BANK OF MONTENEGRO COUNCIL
Ref. no. 0101-4014/38-10
Podgorica, 29 November 2012
Radoje Žugić, m.p.
Pursuant to Article 44 paragraph 2 point 2 of the Central Bank of Montenegro Law (OGM 40/10, 46/10), at its meeting held on 28 November 2012, the Council of the Central Bank of Montenegro established the following:
GUIDELINES FOR THE IMPLEMENTATION OF THE CENTRAL BANK OF MONTENEGRO POLICY FOR 2013
1. With a view to further strengthening and preserving monetary and financial stability, and particularly encouraging and preserving the stability of the banking system, the Central Bank of Montenegro (hereinafter: the CBCG) shall:
a. implement all available measures and instruments to preserve monetary and financial stability;
b. continuously revisit its reserve requirement policy, as an instrument of monetary policy, and, as required, amend the reserve requirement rates and/or base;
c. continuously analyse potential risks and threats to financial stability and, if necessary, work on their diminishing by implementing other monetary policy instruments – open market operations, granting liquidity loans to banks, and exercising the function of the lender of last resort;
d. improve the existing and develop a new statistical base and instruments for monitoring financial stability with a view to properly identifying and assessing potential risks in areas within the CBCG authority;
e. test its Contingency Plan and urge the Financial Stability Council to continuously review the efficiency of solutions under the National Contingency Plan;
f. improve mechanisms for preserving financial stability, i.e. mechanisms for acting in a potential systemic crisis, carry out stress testing and based on their results take appropriate measures aimed at preventive acting, i.e. minimising adverse effects in the event of a crisis;
g. analyse macroeconomic trends in Montenegro and effects from the neighbouring countries, particularly effect on financial stability, and depending on the results, take proper measures within its competence and recommend imposing adequate measures which implementation falls outside the authority of the CBCG, in accordance with its powers bestowed by the Central Bank of Montenegro Law and the Financial Stability Council Law;
h. monitor and analyse the situation in all segments of the financial system with a view to timely identifying all potential causes of instability and the ability of the system to absorb them;
i. intensively cooperate with other financial system regulators in the country in the area of financial system stability, in accordance with the Financial Stability Council Law, as well as with relevant international regulators and other institutions;
j. continuously analyse inflation trends, forecast inflation, and contribute to the attaining and maintaining of price stability;
k. monitor the balance of payment trends and, if necessary and in accordance with its legal powers, take proper measures or recommend imposing measures that are not under the competence of the CBCG;
l. with a view to maintaining stability of the banking system, as the key financial sector element for financial stability maintenance, the CBCG shall:
- work on developing and implementing the model for restructuring non-performing loans together with the World Bank and the Government of Montenegro;
- continue improving the regulatory framework for banks through harmonising regulations with the EU acquis in the process of pre-accession negotiations, as well as harmonising with the business requirements in the international financial market through the implementation of the Basel standards;
- improve the system of monitoring banking operations in line with modern trends in the area of supervision through developing a comprehensive reporting system to the CBCG and the supporting database with indicators prescribed under the Basel III;
- continuously improve the stress testing process of banks with a view to timely determining additional capital requirements and needs for liquid funds in banks;
- continue the policy of prudent licensing, i.e. giving approvals to new shareholders for entering into the banking system, starting from protecting the interests of banks’ depositors and creditors;
- work on the improvement of risk management in banks and risk-based supervision;
- develop systems to affect the strengthening of transparency and market discipline through a comprehensive and ongoing exchange of data between banks and other market participants;
- promote strengthening of corporate governance in banks;
- strengthen mechanisms and procedures necessary for a successful implementation of the process of prevention of money laundering and terrorist financing;
- intensively monitor trends in external financial markets with a view to volatility that may have adverse repercussions to the banking system in Montenegro with a view to preventive acting and creating capital protection of the system from external shocks;
- advance cooperation with other supervisors, with a view to synchronising supervisory activities;
- monitor and implement improvements based on international multilateral agreements and adopted conventions in banking industry.
2. With a view to supporting the Government of Montenegro in achieving its economic policy, to the extent that will not jeopardise the objectives and constitutional responsibilities and independence of the CBCG, the CBCG shall:
a. give recommendations to the Government of Montenegro in a manner that its recommendations, measures and instruments, contribute to economic recovery and increasing the employment in the function of financial stability;
b. participate in creating systemic solutions aimed at minimizing illiquidity of the economy and fostering lending activity, to the extent it would not mean excessive risk taking and jeopardising the banking system stability;
c. monitor and analyse macroeconomic trends in Montenegro, other transitional economies, the European Union and globally, as well as forecasted trends of key macroeconomic variables by relevant international institutions, with a view to forecasting macroeconomic trends in Montenegro;
d. continuously develop macroeconomic model of the Montenegrin economy to forecast macroeconomic developments and analyse efficiency of the monetary policy instruments, whether this be done independently or in cooperation with other institutions in the system;
e. collect, process and publish data on the monetary and balance of payment statistics on regular basis, and other statistical data produced by the CBCG and which represent significant inputs for the creation of economic policy;
f. publish thematic working papers, monographs and other publications covering current macroeconomic and financial issues.
3. With a view to maintaining and improving safe and sound payment system, the CBCG shall:
a. continuously work on maintaining safe and sound CBCG payment system for interbank transactions as the basic payment system infrastructure in Montenegro and its further improvement through the implementation of international standards, principles and best practises in the functioning of modern payment systems and payment operations in general;
b. continue to perform quality and efficient national payment services for the existing and new clients of the CBCG;
c. perform the operations of the depository and banker of state bodies and organisations in a quality and efficient manner, constantly improving cooperation and aligning the regulatory framework with the changes in operations and market conditions, and working on technical improvement of performing these functions, and particularly the function of the fiscal agent regarding the securities issued by the Government of Montenegro;
d. improve existing and establish new correspondent relationship with foreign central and commercial banks and other international financial institutions and organisations;
e. improve the payment system legislation with a view to its harmonization with EU regulations, with a particular focus on drafting a new law and bylaws;
f. monitor international standards, principles and best practices of contemporary payment systems and payment transactions in general, and further implement them;
g. continuously improve the quality of cooperation with the BIS, the IMF, the World Bank and other international financial institutions under the function of executing financial transactions;
h. perform efficient payment system control with a view to providing payment services in line with the legislation;
i. improve the functional model of enforced collection, which the CBCG performs in accordance with provision of the Law on Enforcement and Securing of Claims;
j. perform the payment system oversight function with a view to prevention of systemic risk in the payment system and its effect to financial system stability in general. In this sense, through the implementation of the methodology based on international standards, the CBCG will assess the compliance of the payment system operations with the core principles for the functioning of payment systems, as well report on taken activities and imposed measures;
k. continue with activities on infrastructural equipping and migration of the IT system with a view to increasing security of the payment system functioning.
4. With a view to further improving institutional and other preconditions for managing the international reserves, the CBCG shall:
a. follow a prudent policy of investing international reserves by giving absolute priority to the safety of placements through investing funds primarily in safe instruments such as short-term deposits with central banks in the most advanced countries and first-class commercial banks, as well as into securities of the most favourable rating, safety and liquidity;
b. against the backdrop of extremely low interest rates at the international financial market and unfavourable yield rates on first class securities, make efforts to make as favourable placement of available funds as possible and thus provide full security of investment and successful managing of all types of risk;
c. pursuant to market conditions and investment principles (security, liquidity, profitability), reposition the existing financial instruments in the portfolio and improving already adopted techniques in managing funds and risks of international reserves, with a view to successfully balancing risks of investing and achieved yield;
d. continuously monitor trends and analyse possibilities of investing funds in new financial instruments and diversify investments, primarily following the principles of liquidity and safety, in order to achieve profitability;
e. monitor the situation on the international financial market and timely adjust the policy of investments to the trends at the market.
5. Continuing active participation in the process of Montenegro’s accession to the European Union, and respecting the obligations of Montenegro assumed with the status of a candidate country and the recommendations published by the European Commission, the CBCG shall:
a. continue activities on the harmonisation of the national legislation with the EU acquis governing banking, payment systems, monetary policy and statistics and other areas within the CBCG authority;
b. participate in the working and negotiating structures by appointing representatives of the CBCG to participate in the negotiation team and working groups for the preparation of negotiations for Montenegro’s accession to the EU;
c. give full contribution to the analysis of the compliance of the national legislation with the EU acquis through participation in the screening process for the negotiation chapters involving the CBCG competences;
d. participate in the preparation of the PEP (Pre-Accession Economic Programme), the Progress Report and other documents involving the European integration process;
e. continue activities on institutional capacity building thereby creating preconditions for the future undisturbed functioning of the CBCG within the ESCB and the ECB;
f. improve the existing and establish new forms of cooperation with representatives of central banks in the EU Member States, as well as with representatives of the ECB and other EU institutions through the planning of technical assistance and study visits;
g. improve communication strategy in the area of European integrations through preparation of working studies and other publications which shall present specific aspects of EU accession;
h. participate in the preparation and implementation of projects financed from the EU funds;
i. continue activities on the implementation of obligations defined by the Stabilisation and Association Agreement (SAA), the National Programme for Integration (NPI) and the Action Plans.
6. With a view to further professional development of employees and maintaining adequate structure of human resources able to implement the defined policy, functions and responsibilities of the CBCG, changes resulting from the process of European integration and other changes in the business environment, the CBCG shall:
a. make efforts to always have qualified, trained and highly motivated employees with the know-how appropriate to their job assignments;
b. stimulate employees to permanently improve their knowledge, especially in the areas of monetary policy and financial stability, macroprudential legislation, risk management, knowledge required for the implementation of international standards, EU Directives and good banking practice, as well as other professional knowledge and skills necessary for the carrying out of working processes in the CBCG;
c. develop mechanisms for improving motivation of employees and further affirm the process of rewarding employees for their performance;
d. promote employees who regularly achieve the best performance;
e. recruit, when needed, trainees, volunteers and other categories of staff for the realisation of working processes;
f. pay due attention to training of trainees and employees with short working experience in the CBCG, training of scarce staff, as well as to further improvement and innovation of knowledge of all employees.
7. Following transparency standards, the CBCG shall:
a. timely, continuously and reliably inform both domestic and international public on all aspects of its operations and exercising of its constitutional and legal powers, in the manner understandable to the broadest public;
b. promote the relevant level of economic knowledge in the society, with a view to contributing to better understanding of central banking, the financial system and financial stability in general;
c. continue informing the public in timely manner through press releases, the CBCG website, press conferences and, if needed, interviews, participation in the media broadcasts and the like;
d. pay special attention to informing the staff.
8. With a view to preserving and valuing the historical and cultural numismatic heritage in Montenegro, the CBCG shall:
a. intensify activities on collecting and supplementing money collection, with a particular focus on completing the collection of only Montenegrin money – the perper;
b. present the numismatic values to the domestic and foreign public in the professional manner;
c. promote the Money Museum as the institution of general importance for both wide professional and non-professional public and promote the role and importance of the CBCG in the Montenegrin financial system, euroisation, banking and financial stability and promote the importance of saving via the programmes of financial education, primarily of children and pupils.
9. In order to support the realisation of abovementioned objectives in other business areas, the CBCG shall:
a. work on improving the information system and providing adequate level of its availability and safety, and particularly on improving the ICT infrastructure supporting the payment system (RTGS and DNS), the main banking system (GBS), the enforcement collection system (SPN) and other system services of internal and external users (SIS);
b. work on harmonization with international standards, particularly the standard for information security management ISO/IEC 27001:2005;
c. with a view to developing and improving cooperation with international financial institutions and organizations, central banks and regulatory bodies in other countries, the CBCG shall:
- continue cooperation with the International Monetary Fund (IMF) and members of the World Bank Group, particularly in the part concerning the exchange of information, use of technical assistance, organizing missions of their experts and creating conditions for eventual use of financial support;
- improve cooperation with other international financial and other organisations through direct contacts, participation in the working bodies and assemblies of international organisations, as well as through attending and organizing international conferences and seminars;
- develop cooperation with other central banks and financial regulatory authorities through the implementation of signed agreements, particularly in the area of bank supervision, as well as proposing new forms of cooperation and establishing strategic partnerships;
- affirm active participation of the CBCG officials in meetings, forums, seminars and conferences organised by international organisations.
d. with a view to timely and adequate servicing the needs of banks and other clients for cash in internal payment operations, and the protection of the euro against counterfeiting, the CBCG shall:
- continuously monitor and plan the needs for cash, from the perspective of providing an optimum quantity and the structure of banknotes and coins in circulation;
- initiate the buying of necessary quantities and denominations of banknotes and coins from the correspondent bank, and/or selling of any surplus cash with a view to optimizing costs of cash holding in the vault on a timely basis;
- intensify already established cooperation with relevant international entities engaged on the protection of the euro against counterfeiting – the ECB, EC-OLAF, European Technical and Scientific Centre (ETSC), and domestic public authorities – the Supreme State Prosecutor’s Office and the Police Directorate;
- intensify cooperation with all cash handlers in Montenegro with a view to providing full implementation of legislation passed in the area of the protection of the euro against counterfeiting in line with the EU acquis;
- provide necessary environment and infrastructure for full operations of the newly established centres for the protection of the euro against counterfeiting – the National Counterfeit Centre (NCC), the National Analysis Centre (NAC) and the Coin National Analysis Centre (CNAC);
e. continue activities on risk management in the CBCG through developing and monitoring the internal controls system and operational and reputational risk management systems;
f. work on drafting the Business Continuity Plan of the CBCG.
10. In its operations, the CBCG shall follow the principles of a socially responsible institution, both to its employees and regarding the funds at its disposal, through active participation in the development of a modern society. To that end, the CBCG shall:
a. build its operations on the universal principles of protection of human and labour rights, environmental protection and civil society development;
b. continue, in accordance with its financial possibilities, contributing a portion of its revenues to charity and supporting the development of cultural, historical and other values of the society;
c. continue promoting the UN Global Compact’s ten principles in its operations;
d. contribute to the strengthening of the civil society through public participation in numerous social activities;
e. contribute to the development of the educational system through the participation of the CBCG representatives as guest lecturers in educational institutions, rewarding of the best pupils, graduate students, holders of MSc and PhD degrees and in other ways of mutual interest for the CBCG and educational institutions.
11. These Guidelines shall be published on the website of the Central Bank of Montenegro.
CENTRAL BANK OF MONTENEGRO COUNCIL
Ref. no. 0101-4014/38-11
Podgorica, 29 November 2012