CBM policy for 2018
Pursuant to Article 44 paragraph 2 item 2 of the Central Bank of Montenegro Law (OGM 40/10, 46/10, 6/13), at its meeting held on 30 October 2017, the Council of the Central Bank of Montenegro adopted the following
CENTRAL BANK OF MONTENEGRO POLICY IN 2018
I. In line with its 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 2018, the Central Bank of Montenegro (CBCG) will:
with a view to strengthening the complete financial system, improving stability and soundness of the banking sector, timely identification and minimizing adverse effects and risks, follow the policy of monetary and financial stability based on taking all necessary activities and using all available instruments and measures within its competence. With a view to fostering and preserving monetary stability, it will pursue the reserve requirement policy based on the assessment of effectiveness and efficiency of the applicable solutions and - if required - implement other monetary policy instruments, and analyse and forecast inflation trends in the country. With a view to further promoting and preserving of the financial stability, it will improve indicators assessing the financial stability and combating systemic risks, develop macro-prudential policy instruments, and improve the framework for acting during a financial crisis. With the aim of fostering and maintaining the financial system stability, it will continue to monitor and analyse the situation in the banking sector, test the banking sector’s resilience to potential shocks from macro-economic environment, and, if necessary, take corrective actions, promote the strengthening of corporate governance. It will also work on improving risk management process in banks, and continue the implementation of the relevant internationally accepted standards and principles in this area. It will continue to harmonise its regulatory framework and statistics with the acquis communautaire and/or obligations arising from reporting to the European Central Bank (ECB).
support the pursuit of the economic policy of the Government of Montenegro to the extent that will not jeopardize the attainment of its objectives, constitutional responsibilities, and independence;
maintain a sound, efficient, and operating payment operations and improve it through aligning with the new acquis communautaire, the implementation of international standards, principles and best practices in the functioning of the contemporary payment systems and payment operations in general. It will improve the quality of providing payment operations services and efficiently supervise the provision of payment operations. Moreover, it will improve the quality of payment systems in Montenegro through the implementation and continuous development of payment operations monitoring functions;
implement activities aimed at maintaining the system of efficient and quality managing of international reserves in the situation of low and/or negative interest rates at the international financial market. It will provide quality performing of the task of depositor, banker and fiscal agents of public authorities and institutions, constantly monitoring the needs and requirements. It will perform international payment operations in an efficient and quality manner, with its continuous improving through the monitoring and implementation of international standards. It will continue to undisturbedly supply the necessary quantities and denomination structure of cash, as well as to protect euro from counterfeiting;
continue with active participation in Montenegro’s EU negotiation process, strengthening cooperation with the ECB, the European Commission (EC) and other relevant European Union (EU) institutions, and on intensifying cooperation with central banks and other international financial institutions and organisations;
continue to improve its staffing structure and invest into the education of its staff with a view to acquiring qualifications, skills, and know-how necessary for the pursuit of the CBCG functions;
adhering to the highest transparency standards, continue providing with timely, reliable and relevant information about all aspects of its operations. In its operations, the CBCG will promote the two-way communication, both in the relations with the public and in the internal communication. It will support raising awareness and economic knowledge in the society, with a view to improving better understanding of central banking, the importance of the financial stability, and banking system soundness. It will pay special attention to intensifying projects in financial education and financial inclusion.
with a view to preserving, protecting, and maintaining the historical and cultural numismatic heritage in Montenegro, take activities on collecting and supplementing the collection of money and other numismatic material, with a particular emphasis on completing the collection of the only Montenegrin money – the Perper;
continue to develop other areas of importance for the attainment of its objectives and the exercising of its functions, such as the information system development, improving operational risk management systems, information safety, business continuity, and the like;
base its functioning on the principle of a socially responsible institution and be an active participant in modern society trends.
II. This Policy shall be published on the website of the CBCG.
CENTRAL BANK OF MONTENEGRO COUNCIL
Dec. no. 0101-8888-2/2017
Podgorica, 30 October 2017
Pursuant to Article 44 paragraph 2 item 1 of the Central Bank of Montenegro Law (OGM 40/10, 46/10 and 6/13), at its meeting held on 25 November 2016, the Council of the Central Bank of Montenegro adopted the following
GUIDELINES FOR THE IMPLEMENTATION OF
THE CENTRAL BANK OF MONTENEGRO POLICY IN 2018
1. With a view to fostering and preserving monetary and financial stability, and particularly fostering and preserving the banking system stability, the Central Bank of Montenegro (CBCG) will:
a. take necessary activities and apply all available measures and instruments of monetary and prudential policies in line with the law;
b. continuously revisit its reserve requirement policy as the most important monetary policy instrument, and, if necessary, amend reserve requirement rates and/or base coverage;
c. continuously analyse potential risks and threats to financial stability with a view to their identification and minimising their effects through the implementation of other monetary policy instruments;
d. develop macro-prudential policy instruments;
e. monitor and analyse the situation in all segments of the financial system with a view to timely determining all potential causes of system’s instability and system’s ability to absorb them;
f. analyse the impact of macroeconomic trends in the country and of the region on financial stability in Montenegro and, if needed, take adequate measures within its authority and recommend taking adequate measures outside the competences of the CBCG authority, in accordance with its powers bestowed by the Law Amending the Central Bank of Montenegro Law, the Financial Stability Council Law, and the Law Amending the Law on Foreign Current and Capital Transactions;
g. improve the statistical basis and indicators for monitoring financial stability with a view adequate identifying and assessing potential risks in the areas under the CBCG competence;
h. carry out macro stress tests aimed at testing the banking system resilience to potential macro shocks;
i. comply the solutions of the Contingency Plan under the CBCG competence with the amended regulatory framework and initiate the amending of the National Contingency Plan;
j. intensively cooperate with other financial system regulators in the country and with relevant international regulators and other institutions in the area of financial system stability issues;
k. further develop the system of direct reporting of companies to the CBCG with a view to improving the quality of data and efficient implementation of international standards;
l. monitor and analyse inflation trending in the country and conduct its forecasting;
m. with a view to maintaining banking system stability as the key financial sector element, the CBCG will:
- continue following the policy of prudent licensing of new banks and approvals to changes in the shareholding structures of the existing banks, starting from the protection of the interests of banks’ depositors and creditors, and licencing of other financial services providers licenced by the CBCG;
- work on improving risk management in banks and risk-based supervision;
- continuously improve stress testing process in banks and apply it in practice with a view to timely determining additional capital and liquidity needs in banks;
- in accordance with the legislation, supervise the compliance of the application of regulations governing consumer credits by banks and micro-credit institutions;
- continue cooperating with international institutions in the area of combating money laundering and terrorist financing, in parallel with the strengthening of mechanisms and procedures necessary for successful implementation of this process;
- intensively monitor the international financial market trends, particularly considering market volatilities that may have negative repercussions to the banking system in Montenegro, in order to ensure preventive actions and create an adequate capital buffer system as a safeguard against external shocks;
- develop cooperation with supervisors of foreign parent banking groups of subsidiaries operating in Montenegro, as well as with the key international financial institutions such as the World Bank, the Europena Bank for Reconstruction and Development (EBRD), the ECB, and the European Banking Authority (EBA) with a view to synchronising supervisory activities;
- monitor and implement improvements based on international multilateral agreements and adopted conventions in banking.
2. With a view to supporting the Government of Montenegro in pursuing its economic policy to the extent that will not jeopardise its objectives and constitutional responsibilities and independence, the CBCG will:
a. support the economic policy of the Government of Montenegro, so that its activities, measures and instruments contribute to economic recovery, increased employment and competitiveness, in the function of maintaining financial stability and fostering economic growth and development;
b. monitor and analyse macroeconomic indicators in Montenegro, countries of the region, the EU and globally, with a view to creating reliable macroeconomic forecasts;
c. continuously develop a macroeconomic model for the Montenegrin economy to monitor and forecast macroeconomic developments;
d. for the purpose of compiling monetary and financial statistics in line with ESA2010 methodology and ECB regulations, develop a new system of banks’ reporting to the CBCG. Moreover, it will create a database for compilation of financial accounts based on the development of a new system of banks’ reporting to the CBCG;
e. regularly collect, process and publish statistical data produced by the CBCG and which represent significant inputs for creating economic policy;
f. publish thematic working papers and other publications dealing with the current macroeconomic and financial issues.
3. With a view to maintaining and improving sound, efficient, and operating payment operations, the CBCG will:
a. continuously work on maintaining a sound and efficient CBCG payment system, being the basic payment system infrastructure in Montenegro, and on its further improvement through the implementation of international standards, principles and best practises in the functioning of modern payment systems and payment system transactions in general;
b. continue performing quality and efficient national payment system services both for the current and new CBCG clients;
c. harmonise payment system’s regulatory framework with the new EU legislation and international standards;
d. carry out efficient payment system supervision with a view to ensuring payment services delivery in line with applicable regulations;
e. carry out the prudent policy of issuing licensing for payment system operations and of issuing licences to electronic money institutions;
f. continuously improve the functional model of enforced collection that the CBCG carries out in accordance with provision of the Law Amending the Law on Enforcement and Securing of Claims;
g. further develop the function of supervising payment systems starting from the implementation of international standards;
4. With a view to maintaining the system of efficient and quality management of international reserves in the setting characterised by negative interest rates at the international financial market, and to further improving institutional and other prerequisites for monitoring the management of international reserves, improving the carrying out of tasks of depository and banker for the government bodies and organisations, providing the necessary quantities and the denomination structure of cash, and the protection of euro from counterfeiting, the CBCG will:
a. continue to reposition the financial instruments in the portfolio, and invest the funds into safe and liquid instruments bearing in mind the profitability of the placement;
b. permanently monitor the situation in the international financial market and the funds’ investment policy, and through tactical allocation, i.e. timely adjust to trends at that market;
c. following the principles of liquidity and safety, consider the repositioning of the existing financial instruments in the portfolio with functional separation of risk management and the managing of funds and international reserves, with the view of more successful balancing of investment risks and the achieved gains;
d. assess the possibilities of investing funds in new financial instruments and strategies, primarily following the principle of safety in order to improve the diversification of investment and potentially gain higher returns;
e. continuously monitor and analyse the financial position and rating of banks, both existing and potential partners, and timely channel funds to entities providing a higher degree of investment’s security and simultaneous earning higher return;
f. acting as fiscal agent, continue working on improving the CBCG auction platform for pursuing the auction of Treasury bills issued by Montenegro with a view to raising quality of the service;
g. perform the foreign payment operation tasks in a quality and efficient manner and constantly work on their further improving by monitoring and the implementation of international standards and principles crucial for functioning of contemporary payment systems;
h. constantly improve the existing, and establish new correspondent relations with foreign central and commercial banks and other international financial institutions and organisations monitoring the situation at the international market;
i. permanently monitor the balance and movement of cash in the CBCG Vault and banks’ vaults;
j. on the basis of relevant indicators, analyse and plan the cash needs, and plan the optimum quantity and the denomination structure of cash necessary for regular and timely supply of the CBCG clients;
k. with a view to optimising costs of holding cash in vault, timely initiate the buying of necessary quantities and denominations of banknotes and coins from the foreign correspondent bank and/or selling of any surplus cash to the correspondent bank abroad, and perform replacement of torn and damaged banknotes.
l. manage cash in foreign currency in an efficient manner;
m. regarding the protection of euro from counterfeiting:
- continue cooperation with foreign entities engaged in the protection of euro from counterfeiting, through permanent exchange of information (correspondence and reporting), and participation on seminars and trainings;
- provide necessary infrastructure for the needs of operations of national centres for the protection of euro from counterfeiting;;
- continue cooperation with the Police Administration and the Supreme State Prosecutor’s Office, through the promotion of business cooperation and timely exchange of data, information, and providing mutual assistance in preventing counterfeiting of money;
- continue cooperation with all cash handlers in Montenegro, with a view to providing full application of adopted legislation in the area of protection of euro from counterfeiting, harmonised with the EU/ECB acquis communautaire.
5. Through active participation in the process of Montenegro’s EU accession and respecting the obligations taken through the Negotiation Chapters, and with a view to improving the cooperation with international financial institutions and other central banks, the CBCG will:
a. continue activities on harmonising legislation with the EU acquis communautaire in the areas governing CBCG operations, banking, and providing other financial services within the CBCG authority. In that context, it will:
- undertake activities and measures laid down by the Law Amending the Banking Law, which implemented the EU BRRD Directive, through enhanced banking supervision in order to identify early warning indicators for deteriorated financial position of banks;
- within the Twinning Programme, prepare the new Banking Law, which will be harmonised with the new set of acquis communautaire regarding the capital requirements of credit institutions (Basle III) and prepare implementing legislation, with a view to implementing of Basle III that introduces new capital standards and liquidity standards aimed at strengthening banks’ capital base.
- prepare and adopt all the implementing legislation arising from the Draft Law on Financial Leasing, Factoring, Purchase of Receivables, Micro-Lending and Credit-Guarantee Operations and create organizational and staffing requirements for performing the activities thereof;
- adopt the implementing legislation for the implementation of the Bank Resolution Law, and create organizational and staffing requirements for performing the activities thereof;
- establish the Resolution Fund according to provisions of the Bank Resolution Law;
- implement the new international reporting standard IFRS 9;
- actively participate in the preparation of new Law on the supplementary supervision of financial conglomerates;
- continue activities on creating the reporting system of monetary-credit institutions, which will provide compliance of monetary and financial statistics in the areas of balance of payments and interest rates statistics;
- start activities on creating the reporting system of monetary-credit institutions and of other institutions for the needs of compiling financial accounts;
- on the basis of signed Memoranda of Cooperation with the EBA, central banks of the region and other banking sector supervisors and regulators in the EU Member States, work on the strengthening of cooperation and exchange of information, with a view to better analysis of potential risk and their effect on the banking system;
b. continue active participation of the CBCG representatives in the negotiating structures and working groups and within the CBCG authority.
c. continue regular activities on the fulfilling of obligations from the Stabilisation and Association Agreement (SAA), and the Montenegro’s Programme of Accession to the European Union 2018-2020;
d. participate in the coordination and preparation of the national Economic Reform Programme (ERP), that is annually submitted to the European Commission with a view to assessing macro-economic situation and structural reforms measures;
e. maintain a regular dialogue with the ECB in the context of a regular annual assessment of the medium-term policies and priorities of the candidate countries;
f. on the basis of the signed agreement with the EBA, central banks of the region and other international institutions, continue activities on improving the cooperation and exchange of information concerning banking system supervision;
g. participate in the preparation of documentation and the implementation of EU funded projects funded, with the view to improving and harmonizing the regulatory, institutional and operational framework with the ESCB standards;
h. coordinate communication and the fulfillment of obligations arising from membership in the IMF and the role of the state of Montenegro’s fiscal agent in that international financial institution;
i. monitor activities, coordinate communication, and promote cooperation with the World Bank Group, the EBRD, the European Investment Bank and other international organizations, especially in the areas of relevance to the CBCG;
j. continue the fulfilment of the recommendations of the Financial Sector Assessment Program (FSAP) for Montenegro, carried out by experts of the IMF and the World Bank in 2015;
k. work on further international promotion of the CBCG through the coordination and organisation of international events and seminars, organisation of working and/or study visits, and the participation of the CBCG high officials in international meetings and conferences;
l. undertake activities arising from the membership of the CBCG in the Governors' Club of the Central Asia, Black Sea Region and Balkan Countries;
m. participate in the work of the Irving Fisher Committee on Central Bank Statistics under BIS.
n. improve, coordinate and implement bilateral technical cooperation with the central banks of the region, the central banks of the ESCB, the EU institutions, and other international financial institutions and organizations;
o. continue activities on institutional and administrative capacity building with a view to creating conditions for the future undisturbed functioning of the CBCG within the ESCB.
6. With a view to improving an adequate structure of administrative capacities for implementing the defined policy, international standards and good business practice, as well as the implementation of changes resulting from the European integration process and other changes in the business environment, the CBCG will pay due attention to further professionalization of its employees through:
a. participation of employees on seminars and workshops in the country and abroad, with a view to improving the professional knowledge;
b. education of employees with a view to acquiring of higher academic titles and vocational knowledge for performing specific tasks;
c. organising regional and international seminars, workshops and/or conferences, where employees will have the opportunity to exchange knowledge and experience with the representatives of other peer institutions in relevant areas;
7. Adhering to the highest transparency standards, the operations of the CBCG will be transparent, following two-way communication approach both in the relations with its employees and the public. It shall pay due attention to improving the level and quality of financial literacy through financial education projects. To that end, the CBCG will:
a. timely, clearly and reliably inform both domestic and international public on all aspects of its operations and on pursuing its constitutional and statutory accountabilities, in the manner comprehensible to the audience;
b. prepare press releases, press conferences, interviews of management and employees, issue regular and periodical publications, update the CBCG website, and the like;
c. affirm the equal treatment principle in communication with the media;
d. continue to implement financial education projects, such as the “Savings Week” and the “Finance Week”, for the purpose of financial literacy in the area of banking and finance;
e. initiate the drafting of the National Financial Education Strategy aimed at raising general financial literacy.
8. With a view to preserving, protecting and maintaining the historical and cultural numismatic heritage in Montenegro, the CBCG will:
a. carry out activities on collecting museum material for the purpose of completing the numismatic collection, primarily the collection of the Montenegrin money, the Perper, and other historical material and documents related to the issuing of the Montenegrin money;
b. present the numismatic collection and other exhibits to the domestic and foreign public in a professional manner;
c. promote the Money Museum as the institution of cultural and historical importance and an institution significant for educating the public and promoting the role and importance of the CBCG in the Montenegrin financial system;
d. develop cooperation with central banks, other museums, cultural, scientific, and educational institutions in the country and abroad, with a view to improving the practice in similar activities performed by the aforesaid entities.
9. As a support to the attainment of the stated objectives in other business areas that are important for exercising the functions under its competences, the CBCG will:
a. continuously improve the information system and ensure an adequate level of its availability and safety, and particularly the ICT infrastructure supporting the Payment System of the CBCG (RTGS and DNS), the Main Banking System (MBS), the debt collection enforcement system (DCES), as well as other systemic services of internal and external users;
b. work on improving the operational risk management system in the CBCG and its harmonisation with the framework applicable in the ESCB;
c. constantly improve information security in the CBCG, in line with the ISO/IEC 27001 standard and good practice in this area;
d. continue activities on establishing the business continuity management system in the CBCG, in line with ISO 22301 and good practice in this area;
10. The CBCG will continue following the principles of a socially responsible institution, both regarding its employees and the society as a whole, and it will base its operations on the universal principles of protection of human rights, labour right, environmental protection, and combating corruption. To that end, the CBCG will:
a. endeavour to promote and apply in its operations ten universal principles of the protection of human and labour rights, environmental protection, and combating corruption defined in the United Nations Global Compact;
b. continue promoting and raising the level of economic knowledge through integration in the educational system to be achieved with the participation of the CBCG representatives as guest lecturers at universities, organisation and providing assistance in economic research, rewarding of the best pupils and students, graduate students, holders of MSc and PhD degrees in banking and monetary policy and theory;
c. with an efficient use of resources, implementation of good practices, and creation of good working atmosphere, create conditions for better quality in the exercising of the CBCG functions and realization of working processes, better motivation and engagement of employees, and the reduction of operating costs;
d. in accordance with its financial possibilities, continue contributing a portion of its revenues to charity and support of the development of cultural, historical and other values of the society, and contribute to the strengthening of civil society through public participation in numerous social activities and events.
11. These Guidelines shall be published on the CBCG website.
CENTRAL BANK OF MONTENEGRO COUNCIL
Dec. no. 0101-8888-3/2017
Podgorica, 30 October 2017