The Council of the Central Bank (CBCG) today adopted rehabilitation plans for all credit institutions in Montenegro.
The CBCG explained that, in accordance with the Law on the Rehabilitation of Credit Institutions, the rehabilitation plan is a comprehensive document that describes in detail the preferred rehabilitation strategy for a specific credit institution, including the instruments that will be used in the rehabilitation.
"Along with the rehabilitation plans, decisions on the minimum requirement for regulatory capital and qualified liabilities (MREL) were also adopted, which all credit institutions are obliged to maintain on an individual basis at a minimum level determined by the Central Bank of Serbia," the announcement states.
By adopting rehabilitation plans, as well as determining MREL requirements in accordance with the Law on Rehabilitation of Credit Institutions, the CBCG ensures that credit institutions have sufficient capacity to cover possible losses and recapitalization, i.e. the minimum amount of regulatory capital and qualified liabilities that can be credibly and feasibly reduced or converted into capital.
"At the same time, in order to provide funds for the implementation of rehabilitation instruments and rehabilitation powers, the Rehabilitation Fund was established, and the first payment of the regular annual contribution to that fund will be made by credit institutions no later than July 31 of this year," stated the CBCG.
As explained, the rehabilitation plans and the Rehabilitation Fund, as new mechanisms of the CBCG, during the potential rehabilitation will have a significant positive effect on the financial stability and long-term sustainability of the Montenegrin banking system.
"By creating rehabilitation plans and starting to pay contributions to the Rehabilitation Fund, the Central Bank of Serbia has aligned its operations with central banks in the European Union (EU) in this segment," the statement added.
The CBCG reminded that according to the new Law on the Rehabilitation of Credit Institutions, the burden of rehabilitation is first borne by the shareholders of the credit institution undergoing rehabilitation.
When applying remedial instruments or exercising remedial powers, the CBCG starts from the remedial objectives.
These are, among others, ensuring continuity in the performance of key functions of the credit institution, avoiding a significant negative impact on the stability of the financial system, protection of depositors who have guaranteed deposits, as well as protection of funds and other assets of other clients.
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