320 million in concessions until repayment

From June 2020, ending in January of this year, commercial banks restructured loans worth around 320 million euros, i.e., in that amount, they enabled clients who have financial difficulties due to the coronavirus pandemic to return approved loans on more favorable terms than the contracted ones.

These are the data that "Vijesti" received from the Central Bank of Montenegro (CBCG), which decided at the end of last year that the measure that enables credit restructuring for citizens who, as a result of the negative impact of the pandemic, have lost their employment, reduced their earnings by more than 10 percent or were not paid their net salary for more than three months before submitting the request for restructuring.

Useful relief

"The measure to restructure loans granted to citizens, which was introduced by the latest decision on temporary measures to mitigate the negative effects of the epidemic of the infectious disease covid-19 on the financial system, represents a combination of previously prescribed measures, adapted to the latest circumstances. It was established on the basis of an assessment of the continued presence of negative consequences of the pandemic on certain categories of citizen borrowers, i.e. the need for further protection of certain categories of the population that are most affected by the effects of the epidemic. Given that this measure has been in effect since January 1, its duration will depend on the results of the analysis of the data received from the banks in the following period. In January, banks restructured only 23 lots of loans for 21 natural persons in the total amount of 384 thousand euros", said the CBCG.

CBCG, as they say, is developing a strategy for further response to the consequences of the pandemic based on data received from banks and following the general situation in the country in all segments where the pandemic had a negative impact.

"The decision on the duration of certain measures was mostly influenced by the effects that the prescribed measures had on certain target groups and other circumstances. Loan restructuring is one of the tools that banks use when their clients have problems repaying their debt. In practice, it has been shown that the granting of benefits in the sense of reducing the amount of the monthly installment or extending the loan repayment period are possibilities, that is, ways of restructuring that give the most effective results. Therefore, credit restructuring was introduced among the first measures to mitigate the negative effects of the pandemic. According to the data provided by the banks, restructuring has been gaining importance since June 2020, when banks restructured 208 lots of loans for 169 debtors in the total amount of EUR 99,5 million, and in March 2021, banks restructured a total of 1.081 lots of loans. , that is, they approved relief for 928 clients in the total amount of 220 million", they pointed out in the supreme monetary institution.

The CBCG also decided to extend for one year the measure related to the approval of unsecured cash loans after an analysis of trends in unsecured cash loans had been previously carried out. This measure was introduced in January 2020 and was scheduled for two years.

The CBCG explained that based on the analysis of cross-sectional data at the end of October this year, they did an analysis that showed that the measure should be extended with a certain correction.

Restriction due to "Europe Now"

"The analysis showed that as a result of this measure, in a period of two years, total cash loans decreased by 15,38 percent, which resulted in a decrease in the share of this type of loan in total gross loans from 25,25 percent as of the end of December 2019. to 20,29 percent at the end of October last year. When it comes to the share of cash unsecured loans in total gross loans with a remaining repayment period of over six years for the observed period, a drop of 2,29 percentage points is recorded, and for loans over eight years, the drop amounts to 3,11 percentage points. The analysis showed that the three banks in the system still have the total amount of cash non-purpose unsecured loans and loans secured by a promissory note with a remaining repayment period of more than six years, greater than 50 percent of the bank's own funds," explained the CBCG.

The supreme monetary institution said that this measure produced results, but the risk of concentration of cash unsecured loans in total loans, as well as their amount in relation to the level of own funds at individual banks, still requires an extension of its application in a modified form.

"Amendments have enabled all banks that have a level of bad loans (NPL) in this segment of loans below the defined level, to be able to approve cash loans or contract an extension of the repayment term from the basic contract with terms longer than the terms defined by the decision by two years. In this way, banks are given an incentive to improve the practice of loan approval and collection, so that they can extend the deadlines for loan approval to clients for an additional two years. The consequence of this measure is that certain banks can approve unsecured cash loans with a maturity of up to ten years," said the CBCG.

It was estimated that this period is more than enough for this type of loan, given that there are already suitable products in the banks' product range for approvals with longer maturity periods.

"The extension of the measure also makes sense due to the fact that the expected growth in demand for this type of product, after a significant increase in the creditworthiness of bank clients, as a result of the application of the Europe Now program, could result in the uncontrolled growth of this segment of loans, i.e. the devaluation of loan approval standards", they pointed out in CBCG.

The analysis of the impact of dividend payments to shareholders on bank capital is planned

The CBCG announces that it will analyze the impact of partial or full dividend payments to bank shareholders on the capital adequacy of banks.

The dividend ban was extended at the end of last year.

The CBCG reminds that the introduction of this measure was aimed at protecting and increasing the level of capitalization of the banking system in the country, in order to ensure adequate resistance of banks to the potential negative effects of the pandemic.

"From January 1, 2022, a new regulatory framework, based on the Law on Credit Institutions, will apply. That law introduced the latest standards of banking operations, so banks, in the previous period, had to harmonize their operations with the new requirements. After submitting the first monthly report on banks' operations in accordance with the new regulation, we will analyze the impact of partial or full approval of dividend payments on the capital adequacy of all banks, in the context of their compliance with new regulatory requirements, as well as resistance to possible disturbances that may arise in the future." , said the supreme monetary institution.