Inadequate international competitiveness is the main cause of systemic vulnerabilities, and the level of public debt still represents a risk for the stability of the financial system, the Council of the Central Bank assessed at today's session.
The Council considered the Report on the Stability of the Financial System in 2017, and concluded that the level of systemic risks, which affect the stability of the financial system, can be assessed as moderate, with the presence of financial challenges at the individual level, the CBCG announced.
It was pointed out that the banking sector is currently the most stable segment of the economic system, which is reflected to a significant extent in the stability of business indicators and asset quality, as well as the tendency of deposits, which increased to 2017 billion euros during 3,27 (which is the highest level historically). and make up by far the largest part of banks' liabilities (78,1 percent).
"Over the course of 2017, banks' total liquid assets increased by 13,9 percent, to 1,06 billion euros. Their participation in relation to assets and deposits also increased, to 25,3 and 32,7 percent, and is still at a high level Those liquid assets, in the context of structural limitations to the growth of the Montenegrin economy, are currently the best safety reserve for banks against the risk of asset quality deterioration and/or deposit outflow," the Report states.
It was established that the level of bad loans, although in a significant decline, is still the leading systemic challenge of the banking sector. The share of bad loans, although reduced from 2017 to 10,3 percent in 7,3, is still relatively high, which negatively affects banks' risk appetite, i.e. the level of credit activity and lending conditions.
The report on price stability for 2017 was also considered and it was concluded that the previous year was marked by positive annual inflation rates, which is primarily a consequence of the rise in oil prices on the world market, as well as higher prices of certain food products. In December, annual inflation measured by consumer prices was 1,9 percent, while inflation measured by the harmonized index of consumer prices (HICP) was 2,9 percent. The average growth of consumer prices in 2017 was 2,4 percent.
"A comparative analysis shows that there are similar trends when it comes to the region and the eurozone. Annual inflation in all countries of the region was positive, namely in Serbia (3%), Macedonia (2,4%), Slovenia (1,9% ), Albania (1,8%), Croatia (1,3%) and Bosnia and Herzegovina (1,2%). In the eurozone, the annual inflation rate in December 2017 was 1,4% and was by 0,3, 2016 pp higher than the annual rate from December XNUMX," the announcement stated.
The survey of the Central Bank showed that the majority of banks and businessmen expect that in 2018 inflation will be in the range of 1,5% to 3%. According to the expert assessment of the Central Bank, inflation at the end of 2018 will be in the range of 1,9% to 3,9%.
In the Report on the operations of microcredit financial institutions (MFI) in the first quarter of 2018, it was pointed out that this sector is characterized by stability, growth of key balance sheet positions of assets, loans and receivables and capital and improvement of almost all indicators of asset quality. The financial result of the MFI sector, which consists of 7 companies, is positive at the system level. In the first quarter of the current year, compared to December 2017, there was a 2,66 percent increase in the total balance, a 3,83 percent increase in total loans and receivables, and a 12,22 percent increase in restructured loans and receivables. On the other hand, the MFI sector recorded a slight decline in interest rates.
Today, the Council considered and adopted the Framework for conducting macroprudential policy. This document defines the mandate of the CBCG for conducting macroprudential policy, as well as its basic and transitional goals, potential indicators, and instruments for reaching the set goals. The adoption of this document, as announced, further directs the actions of the CBCG in the event of the materialization of systemic risks that may threaten financial stability in Montenegro.
The Council considered and adopted the reports on operations and policy implementation of the Central Bank for February, March and April 2018, in which it was stated that the activities of the Central Bank during this period were carried out in accordance with the planned obligations established by the Work Program of the Central Bank in 2018 . It was assessed that the positive trends from the previous year continued in 2018, thanks to which the financial system, which is dominated by banks, was significantly improved.
In the Annual Report on the work of the Central Bank of Montenegro in 2017, it was stated that the Montenegrin economy achieved growth in 2017 compared to 2016. According to Monstat's preliminary data, annual real GDP growth based on quarterly estimates was 4,4 percent.
In the part of the Annual Report that refers to the implementation of the CBCG policy, it was assessed that the activities of this institution in 2017 were aimed at preserving the stability of the financial system by encouraging and maintaining a healthy banking system and safe and efficient payment transactions. Consequently, during 2017, the banking system was continuously controlled by the supervision of the CBCG, and at the same time significant activities were carried out in the plan of harmonizing domestic regulations with EU regulations. The Council assessed that the operations of the Central Bank were based on high standards of transparency and principles of social responsibility.
When it comes to the financial operations of the CBCG, a net profit of 2017 million euros was realized in 2,73.
Adopt the proposed decision on the credit register
At today's session of the Council, the Proposal for a Decision on the Credit Register was also adopted, the main goal of which is to improve this service of the CBCG.
"With the entry into force of the Decision, from January 2019, the conditions will be created for a significant improvement in the content, availability and quality of data of the Credit Register. Also, from January of the following year, leasing, factoring and receivables purchase companies will be obliged to report for the purposes of the Credit Register, which significantly increases the existing database on the indebtedness of legal entities in the financial sector. It was concluded that the upcoming improvements will contribute to a better and more reliable assessment of the risk of individual debtors by the banks," stated the CBCG.
The Council also adopted the Annual Report on the work of the Deposit Protection Fund for 2017 and considered other ongoing issues within its jurisdiction.
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