CBCG reaction to Predrag Drecun statement
In cases where individuals, knowingly or due to a lack of knowledge and skills, place inaccurate information that may directly or indirectly affect developments in the banking market, as its primary competence, the Central Bank (CBCG) should respond to preserve the soundness of the banking sector and stability and to deny such allegations.
Guest on the Montenegro Radio Television (RTCG) morning show yesterday, Mr Predrag Drecun presented a series of flat and baseless assessments of the work of CBCG and the functioning of banks. Because of this, we are obliged to provide the public with data that realistically reflects the situation of the banking sector and reminds us of the evaluations of our work of the target of the European Commission, the European Central Bank, the World Bank and the International Monetary Fund.
We will first consider the crudest and least substantiated comment that “the CBCG has not preserved the stability of the sector”. Assessments of all relevant international institutions, which anyone involved in financial market analysis should take into consideration, confirms that the CBCG has acted adequately and quickly during the corona crisis, successfully preserving the soundness and stability of the banking system.
Let us recall first of all that, for the first time since the creation of the CBCG, the IMF prepared in February an external analysis of the institution’s control mechanisms. He determined that the The CBCG had strong operational control mechanisms for its key functions. During the April meeting, IMF Department Director for Europe Alfred Kammer praised the governor for “ taking the right steps to build a strong and credible institution“.
In the spring edition of Regular Economic Report on the Western Balkans, the World Bank pointed out that ‘the financial sector has been resilient so far.‘ A recent letter from the World Bank Country Director for Montenegro and Bosnia and Herzegovina to the Governor noted that “the CBCG has implemented a relatively broad set of measures in response to the impact of the pandemic on the economy and the financial sector. ‘
Positive evaluations of the work of the CBCG have come from the highest European addresses. The ECB said that “the key indicators of the financial stability of the banking system are still strong due to their stable situation before the pandemic and recent crisis support measures ”. They further stress that “thanks to the efforts of the CBCG, the banking sector had strong indicators of financial stability before the crisis at the aggregate level”. In addition, the CBCG is one of the few institutions to have received an excellent assessment of progress in the European Commission progress report for 2020. We expect a similar result, based on the already respected recommendations of the European Commission for 2021, this year too. The latest report from the European Commission on the quality of Montenegro’s economic reform program 2021 indicates that the CBCG has taken strong supportive measures to mitigate the impact of the crisis, including deferrals and debt relief, through a moratorium and loan restructuring. He further states that ‘monitoring activities were of high quality, including monitoring the impact of measures‘ and that ‘he didgood progress in strengthening supervision“.
In addition to the ratings mentioned at the most relevant addresses, the data of banking operations confirm that the banking system is healthy and secure. At the end of the first quarter of this year, the solvency ratio stood at 19.3%, almost double the prescribed minimum. CBCG’s previously defined measures to restrict the distribution of realized profits and the emphasis on capital building have greatly contributed to this. All the key elements of the balance sheet have been growing since the start of the year. In the first four months of the current year, banks approved € 318 million in new loans, 32% more than the same period last year.
Deposits continued to grow in 2021 (by 223 million euros from January 1 to May 25, 2021) sign of confidence in the banking system and the supervisor.
Remember also that the CBCG has set up nine packages of measures to mitigate the consequences of the pandemic the previous year. Among others, they were intended to delay and facilitate debt repayment through a moratorium and loan restructuring. We have taken special care to provide direct support to the categories of the population and the economy most seriously affected by the pandemic. Legal entities on the list of threatened activities and those whose total income in 2020 was at least 50% lower than in 2019 can use the moratorium. Individuals – beneficiaries of loans who have terminated their employment and those who did not receive a net salary for three months before the moratorium, as well as those whose salaries were reduced by at least 10% due to the pandemic , can use the moratorium.
As a former banker and current financial analyst, Drecun should know that the required reserve has been reduced due to a CBCG measure. The CBCG knowingly initiated and implemented the measure last May to “inject” an additional 70 million euros in liquidity. With this measure, banks could even more strongly support citizens and businesses whose financial situation has been negatively affected by the corona crisis. This measure, supported by international financial institutions, was implemented by almost all national banks during the corona crisis. In order to provide additional funds to support systemic liquidity, CBCG actively communicated with international partners. It has contracted two repo lines for a maximum amount of 350 million euros with the Bank for International Settlements and the ECB.
In view of the above, it is clear that Mr. Drecun’s claims are unfounded and that his assessments of “CBCG inactivity” and “system vulnerability” are absolutely nonexistent.
Central Bank of Montenegro published this content on May 28, 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unchanged, on 28 May 2021 12:22:09 PM UTC.