Eleven commercial banks have paid a total of 7,51 million euros in regular contributions to the Resolution Fund since its establishment to date.
This was officially announced to "Vijesti" by the Central Bank (CBCG), which pointed out that the banking system is highly capitalized and liquid, and that there is no need to use that money.
Money from the Sanitation Fund is intended, among other things, to help banks if they face problems in their operations.
The formation of the fund is defined by the Law on the Rehabilitation of Credit Institutions (Banks), the implementation of which, together with the new Law on Credit Institutions, began on January 1, 2022. These two laws were adopted by parliament at the end of 2019, and a one-year deadline was then set for their implementation.
However, the implementation was postponed for another year because the Central Bank of Montenegro and commercial banks focused on resolving the problems caused by the coronavirus pandemic and completing the banks' asset quality review (AQR) project.
According to the law, the Recovery Fund must contain money worth one percent of guaranteed deposits, for a period of ten years (until July 31.7.2031, XNUMX). Banks pay the money in once a year.
For this year, payment of 2,26 million
"For the payment in 2025, the Central Bank of Montenegro has calculated 2,26 million euros. Banks are obliged to pay the regular contribution for the current year by June 30.06.2025, XNUMX," said Luka Gojnić, Director of the Directorate for the Rehabilitation of Credit Institutions at the Central Bank of Montenegro.
"The news asked, based on the current state of deposits in banks, how much more money banks need to deposit to reach the legal limit for the Sanitation Fund."
“In accordance with the Law on the Resolution of Credit Institutions, the target level of funds in the Resolution Fund is at least 1% of the amount of guaranteed deposits of all credit institutions, as determined on the basis of the annual audited financial statements for the previous year. In this specific case, the target amount of funds that need to be collected in the period of 10 years from the entry into force of this Law, i.e. until 31. 7. 2031, is 1% of guaranteed deposits. In accordance with the data published in the annual report on the work of the Deposit Protection Fund, guaranteed deposits as of 31. 12. 2024 amounted to 2.259.905.000 euros. Assuming that the dynamics of collecting funds intended for guaranteed deposits remains unchanged, the total amount of funds that need to be collected in the Resolution Fund by 31. 7. 2031 should amount to 22,6 million euros. If the amount of guaranteed deposits changes, the amount required for the Resolution Fund will also change, in order to achieve "the target amount prescribed by the Law on the Rehabilitation of Credit Institutions," Gojnić explained.
According to him, the Resolution Fund is used exclusively in accordance with the Law on the Resolution of Credit Institutions, in cases where there is a justified need to implement resolution measures on a bank that has been determined to be failing or likely to fail, and where it is not possible to achieve the resolution objectives through standard procedures such as bankruptcy, without jeopardizing financial stability and the protection of the public interest.
"The Resolution Fund represents the so-called second line of protection within a broader framework for preserving financial stability, which is based on a strong and continuous supervisory function, as well as preventive mechanisms. Among the key elements of this approach are the resolution plans that the Central Bank of Montenegro regularly prepares and updates for each individual bank. These plans are a strategic document that defines in advance the instruments, steps and modalities of resolution that can be applied if the situation referred to in Article 34 of the Law occurs - i.e. if it is assessed that the bank is failing or is likely to fail, and that resolution is in the public interest. At this moment, the banking system of Montenegro is capital-strong and highly liquid, and there is no objective need to activate the Resolution Fund. However, if the financial situation of one or more credit institutions were to deteriorate, the Central Bank of Montenegro would, in accordance with its legal powers, consider the possibilities and modalities of using the fund's assets in order to ensure the stability of the system and protect the public interest," explained Gojnić.
He stated that the use of the Resolution Fund's money depends on the assessment of the fulfillment of the conditions from Article 34 of the Law (that the bank is failing or likely to fail), the assessment that the implementation of the resolution is in the public interest, the unavailability of alternative measures that would enable an orderly exit from the market without harming the stability of the system, and the possibility of supporting the application of appropriate resolution instruments through the fund (reduction of liabilities, conversion, sale of parts of the bank, transfer to a temporary institution, etc.).
Law harmonized with EU directives
Gojnić said that the legal framework in the area of credit institution resolution is fully aligned with the EU Acquis.
“Namely, the Law on the Resolution of Credit Institutions has been further aligned with Directive (EU) 2019/879 (BRRD II), which amends Directive 2014/59/EU, with the aim of strengthening the capacity to absorb losses and recapitalise credit institutions and investment firms, improving the operational application of resolution instruments, and strengthening the competences of resolution authorities. Also, with the aim of further alignment with the applicable European Union regulations in the field of bankruptcy and resolution, the Central Bank of Montenegro has been working on amendments to the Law on Bankruptcy and Liquidation. These amendments align it with Directive (EU) 2017/2399, which relates to the ranking of unsecured debt instruments in the hierarchy of claims in bankruptcy proceedings. A more precise arrangement of the order of priorities in bankruptcy contributes to improving the efficiency of the resolution of credit institutions. Aligning the order of priorities with the BRRD II Directive and amendments to the Resolution Law enables the full application of resolution measures and instruments provided for by law. These reforms directly contribute to strengthening "...the resilience of the financial system, as well as increased legal certainty for investors, thanks to a clearer definition of bankruptcy ranks for unsecured liabilities. This achieves a higher level of transparency in the identification and assessment of investment risks," Gojnić pointed out, adding that in parallel with the adoption of the aforementioned amendments to the law, the corresponding secondary legislation was also adopted, thus achieving full compliance with the BRRD II framework.
He said that the Central Bank of Montenegro will continue to carefully monitor all changes in relevant EU legislation and, accordingly, take measures to timely harmonize the domestic regulatory framework, in order to ensure its full compliance with EU standards and best practices.
The money must be kept in a separate account
By law, the CBCG must keep the Sanitation Fund money in a separate account, as well as manage its assets separately from its assets and liabilities.
The money from the Rehabilitation Fund will be able to be used, among other things, for providing guarantees for assets or liabilities of the bank under rehabilitation, purchasing assets of the bank under rehabilitation, paying fees for managing the fund...
The method of calculating regular contributions is determined by the Decision on a more detailed method of calculating regular contributions paid by banks to the Resolution Fund, whereby the Central Bank of Montenegro determines the annual contributions paid by each bank, proportional to their risk profile based on data submitted by banks.
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