Banks’ strong contribution to mitigating the pandemic consequences

Banks' strong contribution to mitigating the pandemic consequences

04/01/2021

The Governor of the Central Bank of Montenegro (CBCG), Radoje Žugić, and his team held a meeting with representatives of all commercial banks and the Association of Montenegrin Banks today.

At the meeting, they discussed the current situation in Montenegro's banking market. 'Owing to improved business parameters, which were much better than before the 2008 crisis, banks showed a high degree of resilience to the Coronavirus pandemic crisis,' said Governor Žugić. It was stated that the banking system is stable, liquid, solvent and well-capitalised. However, there was a slight increase in bad loans and a significant decline in the banking system's profitability resulting from the Corona crisis.

The banking sector's contribution to mitigating the Coronavirus pandemic's economic consequences on citizens and the economy was emphasised. Banks have very effectively implemented all five sets of measures prepared by the CBCG during 2020 and significantly eased the most affected part of the economy and the population. This is best confirmed with 60% of the total gross loans granted to the tourism, agriculture, forestry and fisheries sectors that have been restructured or are in a one-year moratorium. Two banks in the system have restructured over 80% of their loans to the tourism and agriculture sectors. Banks also supported the economy and citizens through their lending activity. Thus, from the beginning of the pandemic (mid-March) to end-October last year, they approved loans to legal entities of almost 400 million euros, only 6.9% less than compared y-o-y. Amid the declining loans demand, the active moratorium accounting at present to 9% of the total portfolio, cash flows disruptions and a substantial economic downturn, the credit support has confirmed banks' significant commitment in resolving real sector illiquidity.

At the meeting, they also discussed the application of the Law on Credit Institutions and the Law on Resolution of Credit Institutions and extensive accompanying bylaws (a total of 38 decisions). It was agreed to maintain even more frequent communication between regulators and banks in the coming period to harmonise banks' operations with the mentioned systemic laws.

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