Economic analyst Oleg Filipović has expressed support for the idea of establishing the Development Bank of Montenegro (RBCG) if its goal is truly to advance the country’s development. However, he cautions that if the bank’s intentions are different, those will soon become clear. Filipović noted that the path from concept to realization involves numerous steps and uncertainties.
Filipović raised several concerns about the RBCG, especially as lawmakers are set to vote again on its formation on September 12, following President Jakov Milatović’s refusal to sign the initial law. He questioned the process of transforming the Investment and Development Fund (IRF) into RBCG, the qualifications of the personnel involved, the organization of different sectors, the bank’s oversight, and potential impacts on the banking sector’s competition.
“I agree that a bank is needed to lower loan costs and transform the banking sector. Currently, we only have traditional mortgage loans, primarily for public sector workers. There is a lack of proper investment financing and project banking,” Filipović stated.
He emphasized that without a publicly disclosed business plan, it remains unclear how RBCG will secure additional funding beyond the initial 90 million euros from the IRF.
“We only have media reports suggesting that the bank might issue retail bonds to raise between 300 and 500 million euros currently held by commercial banks,” Filipović said.
Given the current banking environment, where money can be “sold” at interest rates around 2%, RBCG would need to offer at least 4% on savings to attract funds, according to Filipović.
“This raises questions about the cost of loans, interest rates, and how other banks will adjust their operations, given their high service fees,” he added.
Filipović believes that RBCG should be regulated by the Central Bank of Montenegro (CBCG), despite being a state bank.
“CBCG must oversee the founding capital, the board of directors, and the business plan because, at this point, we are only speculating,” he said. Filipović also expressed that it would be beneficial if RBCG invested realistically in the economy and affected commercial banks’ pricing, but noted that there are still many unanswered questions.
Opinions on RBCG law
The CBCG Council had approved its opinion on the RBCG law in early August, but it was only recently made public due to growing public interest. The CBCG supports the establishment of RBCG, believing it will stimulate business development by funding developmental and infrastructural projects and protecting exports from non-market risks. However, the CBCG raised concerns about overlapping activities with commercial banks. This opinion was not shared with lawmakers during the initial vote on the law, which was supported by the ruling majority.
The CBCG warned that the proposed RBCG law might give it a privileged position, potentially destabilizing the financial sector. Concerns include the management of deposits, payment transactions, and the appointment of RBCG’s leadership. The absence of deposit protection could threaten financial stability and bank liquidity.
The CBCG suggested its involvement in appointing RBCG’s board members and emphasized the need for professional oversight to protect creditors, depositors, and the state budget. They also stressed the importance of obtaining an opinion from the European Commission to ensure compliance with European standards.
Deposit protection concerns
The Deposit Protection Fund will not cover deposits at RBCG because the law does not include RBCG in the existing deposit protection system. This issue was also highlighted by the CBCG.
“There is concern that depositors, who may not be fully informed, might not distinguish RBCG from other financial institutions and assume their deposits are guaranteed, not realizing that they are not covered by the Deposit Protection Fund,” the CBCG’s opinion states.
Vojin Vlahović, Director of the Deposit Protection Fund, explained that the Deposit Protection Law covers deposits at credit institutions but does not specify the types of deposits under the RBCG proposal. The law suggests state guarantees for RBCG’s obligations, excluding deposits, and proposes government regulation of deposit handling, which should be covered by law. Therefore, RBCG would not be part of the deposit protection system, and the Deposit Protection Fund would not guarantee deposits.
Criticisms and concerns
Nebojša Medojević, President of the Movement for Changes, recently described the RBCG proposal as a “time bomb” for the financial sector, noting that it will handle similar tasks as commercial banks. He found it surprising that no opposition members, CBCG officials, or experts have opposed the law, which he believes was prepared outside Montenegro, possibly by financial speculators associated with Prime Minister Milojko Spajić.
“This ‘monstrous’ bank will be able to collect deposits and invest them in the banking credit market, as well as engage in stock market transactions, company startups, and other financial instruments,” Medojević said.
He criticized the lack of political accountability due to the appointment process for RBCG’s management, suggesting that Spajić could appoint his associates and independent members to the supervisory board and management.
“What makes this ‘monster’ dangerous for the financial system and public finances, as well as deposit safety, is that it will not be subject to the Banking and Credit Institutions Law,” Medojević argued, criticizing the lack of control over its operations.
Medojević believes that RBCG should be restricted from investing in securities not issued by the state, international financial organizations, or the EU, and from investing in risky financial derivatives, especially cryptocurrencies.
“Spajić and his team have acquired an expensive tool to play with taxpayers’ money, without any institutional, political, or personal accountability, and without the usual external control mechanisms,” Medojević concluded.
President Jakov Milatović also raised concerns about the RBCG being equated with commercial banks and its exclusion from the banking system’s oversight. He rejected the law passed by 44 lawmakers, emphasizing the need for an opinion from the European Commission to ensure alignment with European standards.
“I believe this model raises concerns about the safety and protection of depositors’ rights. Additionally, the law does not clearly define crucial issues, such as RBCG’s operational transparency, CBCG’s role in overseeing its operations and reporting, and the appointment of its governing board members. Insufficient CBCG oversight as a regulator does not promote transparency or compliance with domestic and European regulations. This approach could jeopardize the financial stability and effectiveness of the institution. Therefore, I am returning the law for reconsideration and urging the Montenegrin Parliament to carefully review the proposed solution to ensure that RBCG is established based on a law that is transparent and aligned with best European practices,” Milatović concluded.
