The Central Bank of Montenegro (CBCG) has made notable progress in maintaining and enhancing financial stability. The annual report highlights substantial institutional and regulatory reforms undertaken in the previous year.

As per the report, which was approved by the Council of the Central Bank of Montenegro today, the year was characterized by significant advancements toward aligning with the principles of the European System of Central Banks.

The report indicates that despite domestic and external challenges, the banking sector experienced positive developments, such as a 7.7 percent increase in assets, a 13.3 percent rise in loans, an 8.6 percent boost in capital, and a 6.7 percent growth in deposits.

“At the close of last year, the ratio of non-performing loans and receivables to total loans and receivables stood at 3.5 percent, marking the lowest level in the past 15 years,” the statement noted.

The session underscored strategic initiatives aimed at modernizing the system, including Montenegro’s entry into the SEPA area in November, which laid the framework for faster, cheaper, and more secure payment transactions for citizens and businesses.

“We particularly emphasized the importance of ongoing efforts to develop the national instant payment system through the TIPS clone project, ensuring a high level of professionalism and dedication,” stated the Central Bank of Montenegro.

The Council members also highlighted the significance of regulatory efforts conducted over the past year to align domestic regulations with the EU acquis, particularly in key areas affecting the financial sector’s operations.

Additionally, the development of the Financial Sector Roadmap towards Sustainable Finance and the Guidelines for ESG Risks in Credit Institutions was notably stressed, along with the adoption of the first comprehensive Strategic Plan for the Central Bank of Montenegro covering 2025-2028, which aims to enhance financial stability, digital transformation, EU integration, and human resource development.

The report provides an overview of the CBCG’s supervisory activities from the past year, identifying potential risks and implementing preventive measures to safeguard financial stability.

Moreover, the report highlighted the Central Bank of Montenegro’s successful financial operations, leading to a net profit of 12.2 million euros, nearly five million of which were transferred to the state budget. It was also noted that for the fourth consecutive year, the independent auditor found no recommendations on the financial operations of the Central Bank of Montenegro.

The Council particularly recognized the importance of activities conducted by the Central Bank of Montenegro focused on enhancing transparency, financial education, inclusion, and social responsibility, contributing significantly to the overall development and sustainability of the financial system.

The session also reviewed the report on last year’s financial system stability, which stated that systemic risks remained moderate at the end of the year.

“While economic growth has slowed, financial stability has been upheld, with risks stemming from the global geopolitical landscape slightly heightened, as well as cyclical risks related to the real estate market. Risks from the fiscal domain, as measured by public debt and its repayments, are considered moderate,” the Central Bank of Montenegro stated.

The Council also adopted a report on price stability for the previous year, indicating a continuation of the trend of slowing inflation.

According to Monstat data, consumer prices were on average 3.3 percent higher last year compared to the same period in 2023.

“The rise in the average annual inflation rate was primarily driven by price increases in the categories of housing, water, electricity, gas, and other fuels, clothing and footwear, food and non-alcoholic beverages, as well as restaurants and hotels. The Central Bank of Montenegro anticipates inflation this year will range from 1.6 percent to 3.6 percent, with a central projection of 2.6 percent,” they stated.

The Council also approved the Decision on Credit Institutions’ Capital Adequacy, which implements harmonization with amendments to the Law on Credit Institutions and European Union regulations.

This decision transposes provisions of the CRR III regulation – a new European regulation further strengthening capital requirements and risk management in the banking sector – into the national regulatory framework, representing an essential step in the CBCG’s ongoing pursuit of full equivalence with EU regulatory standards.

“The implementation of the Decision, set to begin on January 1st of next year, is expected to enhance the resilience of the banking sector and align it with contemporary European supervisory benchmarks,” the statement concluded.

During today’s session, a license was granted to the microcredit financial institution Flex Credit from Podgorica.

The Council also reviewed and approved the report on operations and implementation of the Central Bank of Montenegro’s policy from March to April, the quarterly report on banks and financial service providers for the first quarter, as well as the report on the results from the survey on bank lending activity for the same period, alongside other relevant materials within its scope.

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