Although it officially started operating at the beginning of the year, the Development Bank of Montenegro is still unable to perform payment transactions - one of the key functions stipulated by law. Instead of opening accounts for clients and entering the payment transaction system, this state institution is stuck in a bureaucratic tangle between the Ministry of Finance and the Central Bank of Montenegro (CBCG) and does not have an account for payment transactions with the CBCG.
The Development Bank was created through the transformation of the Investment and Development Fund (IDF) into a bank and, for now, it only carries out lending to the economy, which is what the IDF also did.
Once the payment system is operational, businessmen who wish to do so can do business through Razvojna banka, open their accounts and hold deposits there.
Through the Development Bank, business people will have access to lower interest rates on loans and longer repayment terms, as well as fewer collateral requirements (assets or money that guarantees that the bank will repay the loan), which, as business representatives have claimed in numerous appearances, they have not had with commercial banks.
"Given that the Ministry of Finance is the formal proposer of the Law to which the amendments were submitted, and that the Government defines the directions of economic policy and sets the priorities that the Development Bank implements through financial instruments, we believe that issues related to the scope and manner of operations of the Development Bank, to which the amendments relate, should be referred to the Ministry of Finance," the CBM said.
One of the Government's goals when it comes to the Development Bank is to encourage balanced sustainable economic development, competitiveness and liquidity of the economy, inclusion of vulnerable segments, as well as financing of infrastructure projects. By transforming the IDF into the Development Bank, it is planned to implement additional incentives for the competitiveness of the Montenegrin economy by intensifying access to grants available through EU funds.
Razvojna Banka told "Vijesti" that they had contacted the Central Bank of Montenegro, as their supervisor, to enable the opening of transaction accounts for clients, which are necessary prerequisites for Razvojna Banka to be able to carry out payment transactions, while the Central Bank of Montenegro officially claimed to "Vijesti" that Razvojna Banka had not submitted a request to them to open a payment account.
The Central Bank of Montenegro is silent about the amendments of Jelena Nedović and Čarapić
An additional obstacle was the set of amendments to the Payment Transactions Law adopted in February, proposed by PES MPs Jelena Nedović and Vasilije Čarapić, which exempted Razvojna Banka from that law.
The Central Bank of Montenegro refused to give a statement to "Vijesti" regarding these amendments.
"On August 6, 2024, the Council of the Central Bank of Montenegro expressed its position on the issue of the provision of payment services by the Development Bank as part of its opinion on the Draft Law on the Development Bank. Bearing in mind that the Ministry of Finance is the formal proposer of the Law to which the aforementioned amendments were submitted, and that the Government defines the directions of economic policy and sets the priorities that the Development Bank implements through financial instruments, we believe that issues related to the scope and manner of operations of the Development Bank, to which the amendments relate, should be referred to the Ministry of Finance," the Central Bank of Montenegro said.
In their opinion issued in August last year, the Central Bank of Montenegro pointed out that EU regulations governing the provision of payment services, namely the Payment Services Directive (PSD2), which is a "full harmonization directive" (a directive that member states cannot restrict or introduce provisions different from those established by that directive), explicitly define payment service providers and others cannot be determined.
"This directive does not provide the possibility for payment service providers, or payment transactions, to be entities such as the proposed Development Bank," said last year the Central Bank of Montenegro, headed by Governor Irena Radović.
The payment system, owned and operated by the Central Bank of Montenegro, is the backbone of the payment system in Montenegro to which all other payment infrastructures are connected. Payments through the payment system are executed on transaction accounts opened and maintained by the Central Bank of Montenegro.
When asked by "Vijesti" what the Ministry of Finance's proposal is to solve the problem that has arisen and for the Development Bank to begin performing the payment transaction function from the department headed by Minister Novica Vuković, they did not give a clear answer. Instead, they state that the Government and the Ministry of Finance, in cooperation with the Development Bank, "are considering comparative experiences and trying to find adequate solutions, in accordance with EU regulations and practices, with the aim of establishing the functional operability of the Development Bank, in accordance with the legally prescribed competencies."
"If necessary, changes will be made to the relevant regulations, in accordance with EU regulations," the Ministry of Finance said.
They follow the practice from Croatia
The Ministry of Finance also says that they supported the amendments by Nedović and Čarapić.
"In the part of the work related to the provision of payment services in accordance with a special law, specifically the Law on Payment Services, the deputies, following the example of the Law on Payment Services of Croatia, proposed amendments to the Law on Payment Services, so that the Development Bank would be able to provide payment services as well as the Croatian Bank for Reconstruction and Development. Considering the goal and intention of the proposed amendments, the Ministry of Finance supported them," the Ministry of Finance said.
The Development Bank (RB) said that they contacted the Central Bank of Montenegro regarding the preparation of new regulations relating to their work on January 27th of this year.
"The Law on RB defines that the by-laws for the implementation of this law will be adopted within 12 months from the date of entry into force of this law. The Development Bank expressed its support for active participation in this process, especially considering the importance of the existence of our institution for the Montenegrin economy, but also our specificities in relation to credit institutions, as well as the level and types of risks that RB is willing to take on within the framework of its risk-bearing capacity. As the Law provides for new activities - payment services and deposit acceptance, in the previous period we have had intensive communication with the Central Bank of Montenegro regarding the opening of accounts for payment transactions and the development of regulations for the establishment of payment transactions. In this regard, we have contacted the Central Bank of Montenegro as our supervisor, in order to enable the opening of transaction accounts for our clients, which are necessary preconditions for the Development Bank to be able to carry out payment transactions for its clients and accept deposits in accordance with the by-laws that will be adopted in the coming period," said the Development Bank, adding that "as they are informed, it is necessary for the supreme "The monetary institution shall make certain changes to the rules of operation of the CBCG payment system before opening an account."
Higher loan placement than last year
"Vijesti" asked how the fact that it is not yet in the payment system affects the operations of the Development Bank and whether there are any negative consequences.
"The Development Bank is operating at full capacity within the framework of activities that are normatively regulated, while we await the normative upgrade of the payment and deposit operations activities for which the competent institutions are responsible. In parallel with the transformation of the institution, we are working on lending to the economy, so in the first quarter (January-March) we achieved placements in the total amount of over 46,5 million euros, which is 35% more than in the same period last year. The new management is actively working on the comprehensiveness and improvement of our offer through the optimization of credit lines and processes, the provision of favorable credit conditions, the creation of new products that are aimed, primarily, at supporting local production and vulnerable groups. Therefore, the positive performance of the Development Bank is not endangered and it can be said that lending activity is on an upward trend," said the state-owned bank.
They further pointed out that the Development Bank is not currently operating at the full capacity provided for by the Law, that is, the functions of receiving deposits and performing payment transactions have not been established.
"However, despite this, in the area of active banking operations, i.e. lending, we are working at full capacity, so that the economy's requests for loans constitute a daily and predominant part of our activities, so it is natural that our clients contact us and are interested in the benefits and innovative offer of support to the economy and entrepreneurs. We believe that the competent institutions will adopt by-laws related to deposits and payment transactions within 12 months, which will create the conditions for us to offer a comprehensive banking service to the Montenegrin economy. Of course, we have inquiries from a number of clients who are interested in opening accounts and directing their business through Razvojna banka. On the other hand, the bank's interest is to be as close to clients as possible, offering them a comprehensive banking service in the same way that many development banks in the EU do," they said in Razvojna banka.
Will ask the European Commission regarding the bylaws for deposits
The Central Bank of Montenegro is preparing five by-laws that it is obliged to adopt in accordance with the Law on the Development Bank.
"All acts regulate areas of importance for the supervision of operations and control of the Development Bank. These are acts relating to minimum standards for risk management, capital adequacy, criteria and methods of asset classification and calculation of provisions for potential credit losses, reports submitted to the Central Bank of Montenegro, as well as acts relating to large exposures," the top monetary institution said.
They added that in accordance with the Law on the Development Bank, bylaws for the implementation of the law will be adopted within 12 months from the date of entry into force of the law.
"The law entered into force on October 23, 10, with the Central Bank of Montenegro working intensively on its drafting, with the aim of adopting it before the deadline prescribed by law," the supreme monetary institution stated.
The Central Bank of Montenegro added that it is within the competence of the Government to adopt a sub-legal act regarding the receipt, disposal and protection of deposits.
The Ministry of Finance announces the establishment of a broader working group, composed of representatives of the Ministry of Finance, the Central Bank of Montenegro and other interested parties, which will prepare a draft by-law for deposits.
"The Development Bank will not accept deposits from the public. The bylaw will also be submitted to the European Commission for its opinion, before adoption by the Government," the Ministry of Finance said.
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