The Council of the Central Bank (CBCG) today recommended caution when making a decision on government borrowing on the domestic market. At the session of the CBCG Council, chaired by Governor Radoje Žugić, it was stated that the banking sector is stable and characterized by good business indicators.
“In light of the announced possibility of issuing government bonds on the domestic market, the Council recommended that a detailed analysis of the impact on the banking system be prepared before making such a decision.” Namely, the issue of bonds on the domestic market could cause an outflow of deposits from banks, which would affect their liquidity position, that is, the availability of funds that banks place towards the population and the economy”, assessed the members of the Council.
Bearing in mind the need to preserve financial stability, the mentioned risks, as they believe, should be looked at carefully and be cautious when making a decision on borrowing by the state on the domestic market. In order to fulfill the CBCG’s obligation to determine the countercyclical buffer rate for the territory of Montenegro on a quarterly basis, which stems from the Law on Credit Institutions, the Council adopted the Decision on the countercyclical capital buffer rate for the second quarter of this year.
“Based on the results of the previously conducted analysis of relevant trends in the banking sector and the overall economy, the Decision determined that the rate of the countercyclical capital buffer for the second quarter of this year will be zero percent,” the announcement specifies.
In accordance with the aforementioned Law, the CBCG has the obligation to conduct a review procedure at least once a year to determine “other systemically important credit institutions” (OSV), as well as the buffer rate that they are obliged to maintain.
“As a result of the procedure carried out, decisions were made which established that credit institutions, which until now were determined as OSV, still retained this status, and this year they were joined by another credit institution, now determined as OSV for the first time “, the statement added.
In the report on the monitoring of payment systems for last year, which was discussed today at the Council, it was stated that the payment system of the Central Bank of Montenegro worked smoothly in the previous year, and that 12.5 million transactions were made, worth EUR 18.3 billion, which is 9.9 percent more than in 2021. The council also adopted the report on the operations and policy implementation of the CBCG for December last year and discussed other issues within its jurisdiction.