More affordable loans can also be guaranteed by the state

The state guarantee on the basis of which the banks in Montenegro from abroad would provide additional money and a more accessible economy at the moment is a better model than the guarantee fund because its application requires a longer period of time.

This is the estimate from the Central Bank (CBCG).

"The creation of the Guarantee Fund is an idea that makes sense, but its implementation requires a medium term, since this instrument implies the creation of an organization, a management structure, finding sources, creating a risk sharing scheme... The guarantee scheme at this moment represents a more effective instrument of rapid support for the real sector, and especially micro, small and medium-sized businesses", was answered by "Vijesti" from CBCG.

More is expected from banks

The club of SDP deputies proposed that the Government, in cooperation with the CBCG and banks, come up with a proposal for a law on a guarantee scheme for the support of micro, small and medium-sized companies of 200 million euros on more favorable terms, with minimal security funds.

The government is preparing a third package of measures to support citizens and the economy, and Finance Minister Darko Radunović announced that part of it is the banking sector. Banks are expected to provide more money for the economy, and this can also be a state guarantee for providing money.

The CBCG pointed out that in conditions of great uncertainty and asymmetric information, the state has a significant role in providing easier access to additional sources for improving the credit potential of banks.

In 2009, the state gave the banks a guarantee for the withdrawal of money from the European Investment Bank (EIB) in the amount of 91 million euros. Now there is a significant difference compared to that crisis - banks are more liquid than ever, as the CBCG has repeatedly emphasized, and their total profit last year was EUR 50,6 million.

"Just like in 2009 and today, it is good that there is a possibility to provide additional money through the EIB. But the circumstances are not the same. In contrast to 2009, when the illiquidity of banks was pronounced, today the focus is on a blurred assessment of credit risk. The solution to today's situation lies in the combination of this instrument and the provision of state guarantees for strategically important areas of the real economy. That guarantee scheme would encourage increased credit activity, including the provision of credit to a part of small and medium-sized businesses," the supreme monetary institution explained.

The CBCG, headed by Radoje Žugić, expects the banks soon to have a concrete idea about the type of guarantee that would distribute the burden of credit risk in the most efficient way, and is working together with the Ministry of Finance on lobbying to obtain money from international financial institutions.

MF: Carefully design help

The Ministry of Finance said that during the recovery period, it is necessary to create an environment that will give impetus to economic activity and the realization of investments, and that they see a special role for the banking sector, which will provide quality and quick supply of the economy with the necessary money through dedicated loans with the support of the state.

"In this sense, one should be open to all support options. The experience from 2009, when favorable sources of capital were provided for the banking sector, proved to be successful. However, the challenges we face at this time have different assumptions compared to the financial crisis of 2008-2009. year, so it is necessary to carefully design a comprehensive support program that will give the highest degree of effectiveness", said the government department.

They indicate that they are intensively talking with all financial partners about the potential support that can be provided and cooperation models and that through the work of the economic team, the Government will present the additions of the third package of measures to support the economy in the coming period. In mid-April, the Central Bank of Serbia announced that within the new measures it is considering is ensuring efficient access to banks to new EBRD loans from the solidarity package (three billion dollars) and from the International Finance Corporation (IFC), which has 160 billion dollars available.

Erste Bank announced that it signed an arrangement of 30 million euros out of a total of 50 million, which it secured from the EIB, which will direct the economy.

Borrowing with state guarantees more favorable than commercial conditions

The Secretary General of the Association of Banks (UBCG) Bratislav Pejaković responded on this topic that during the period of negotiations for the provision of additional money it is not appropriate to talk about the amounts and conditions, as well as that there is money for further support to the economy and that the banks respond to this request in accordance with the standards of business.

"We have an announcement from two banks that they have already provided around 80 million new through several tranches to various foundations for the economy and the population," said Pejaković to "Vijesta".

He adds that additional money for the needs of the state and economy is being negotiated with several addresses: World Bank, IMF, EIB, EC, European Bank for Reconstruction and Development, Development Bank of the Council of Europe...

"The price, maturity, general terms of borrowing with state guarantees are incomparably more favorable than commercial terms," ​​said Pejaković.

He reminded that there is great global pressure on international institutions and that the EU itself is conducting discussions on financing models.

"The EU has various aid lines, from a fund for forced vacations to long-term lines to help the economy. Montenegro has prepared itself well for the challenge of the pandemic... We also expect a concrete, in accordance with the needs of the moment, reaction of the EU, which should not be absent, and it has been declaratively announced. We expect favorable credit lines, which in terms of price and grace period would respond to the optimum support for the economy in Montenegro", Pejaković pointed out.

There are 13 banks operating in Montenegro, and there is a request to open a new one.