Without the banking system in Montenegro, there is no growth and development, given that the Montenegrin financial system is bank-centric and that more than 93% of financial services are provided by banks, announced the Secretary General of the Association of Banks (UBCG), Bratislav Pejaković.
He said that the stability, liquidity and solvency of the banking system is of crucial importance for the population, the economy and the state.
Banking services such as payment transactions, keeping financial surpluses in the form of deposits and granting loans are always there, easily accessible for everyone who meets international creditworthiness standards. People quickly get used to availability. They do not notice the complexity of the functioning of the system and the risks behind the visible and accessible parts – explained Pejaković.
He added that official data from the regulator indicate that banks’ liquidity, solvency and profitability are at a historically high, quality level.
We have the confidence and deposits of non-residents in a significant amount, which indicates a wider confidence outside of Montenegro, as well as a quality setting of the interest rate on deposits. In addition to the capital and assets of the banks themselves, we have a Deposit Protection Fund that guarantees all deposits up to EUR 50,000, and as of this year, a Bank Rehabilitation Fund based on the EU system, which also pays premiums to the commercial banks of Montenegro, has been in operation since this year – said Pejakovic.
He reminded that the conditions under which financial products are available are changing on the market, just as prices are changing, from food products to energy to real estate.
The official inflation for last year in Montenegro was defined as 17%, and the average banking inflation was about 5.85%, where there were companies that borrowed from banks below three percent on an annual basis. This is called a real negative interest rate, because money loses its value in relation to prices, where we had an increase of up to 50% or more in the case of some basic foodstuffs – said Pejaković.
He stated that the average interest rate in the placements of Montenegrin banks is comparable to these facts, which is only 2.7% above EURIBOR as the reference interest rate of the European Central Bank.
Is it a bad result in the financing of the economy and the population in the existing business conditions – geopolitical and post-pandemic, with the existing inflation, diversification and structure of the economy? We will agree that the result is extremely good. Compare that with interest rates in the region, where our banks did not need or were offered any help, as, for example, EU countries had in crisis and pandemic conditions – announced Pejaković.
He believes that we should first look at the interest rates at which the states of the region and beyond are borrowing, and then judge the interest rates in the placements of Montenegrin banks to the economy and the population.
Pejaković said that risk reduction, a more efficient judicial system, protection of creditors, compliance with the law regulating the same matter, as well as constant financial education, would affect the reduction of interest rates, which is obvious to everyone who wants to see it.
However, all the potentials for the contribution of Montenegrin banks to the growth and development of the Montenegrin economy, and thus to the standard of the population, have not been used. What are we missing? We lack quality projects, innovation, real production, stable and predictable long-term business frameworks, say fiscal incentives for new investments. Simply put – quality infrastructure, so that financial support would be even better – explained Pejaković.
He believes that the banking system in Montenegro is the best part of the economy, where all banks are on the Tax Administration’s white list, which means that they fulfill all obligations by paying taxes and contributions on time, that is, they significantly fill the budget decades ago.
The high-quality profit results of the last year are the result of adhering to all international business standards, where the Central Bank (CBCG) proposes, together with the approval of the parliament, adopts and controls the implementation of laws and regulations, by-laws that regulate the business of banks – said Pejaković.
He reminded that the result for last year is also the result of the release of significant reservations for placements that were established during the pandemic period, not only commercial business.
The public should also know that banks in Montenegro were prohibited from paying dividends to shareholders in the previous three years – added Pejaković.
He cited the standard in the area of ​​consumer protection as an example of compliance with the standards and added that the EU standard is also the adopted Law on comparability of fees associated with a consumer payment account, transferring a consumer payment account and for payment with basic services.
By adopting and applying that law, Montenegro fully harmonized the regulatory framework in that area with Directive 2014/92/EC on the comparability of fees associated with payment accounts, switching of payment accounts and access to payment accounts with basic services (Payment Accounts Directive – PAD) – said Pejaković.
The application of that law, according to him, opens up the possibility of better information for consumers, which is a prerequisite for greater protection of their rights, easier comparability of fees for payment services connected to a payment account, increased competitiveness in the market, reduction of costs and administrative difficulties when switching payment accounts and the development of innovations in the field of providing financial services to consumers.
The law opens up the possibility of financial inclusion for consumers who are unable to open a payment account due to their residence or poor financial situation – said Pejaković.