Press release on the AQR carried out in Montenegro

Press release on the AQR carried out in Montenegro


The first ARQ carried out outside the EU according to the ECB’s methodology confirmed the stability of the banking sector in Montenegro

In line with the recommendations of the 2016 FSAP mission, the Central Bank of Montenegro (CBCG) launched the Asset Quality Review (AQR) process of the entire banking sector in cooperation with independent external audit firms. . The AQR was carried out in the 13 banks present in the Montenegrin market, using the financial data of the banks available as of December 31, 2019. The AQR was carried out according to the methodology based on the “Manual of quality review of Phase 2 assets’ of the European Central Bank (ECB). from June 2018, adapted to the local institutional and legal framework and to the specificities of the market.

The AQR in Montenegro was carried out from March 2020 to September 2021. This period was marked by the challenges caused by the coronavirus pandemic, the measures taken to combat the adverse consequences for the population and the economy of Montenegro, and the merger of CKB Banka and Podgorička Banka, most at the same time a deep integration of banks in the Montenegrin market.

The AQR exercise has been carried out in Europe since 2014 as the first part of so-called global assessments aimed at ensuring that banks are sufficiently capitalized and able to withstand macroeconomic and financial shocks. In addition, the AQR examines the general readiness of banks, the quality of relevant documentation, the infrastructure and the various functions of the bank.

AQR exercise in Montenegro characterizes an extremely high level of assets of the banks examined

By virtue of its characteristics, AQR is a prudential exercise that was not previously practiced in the local banking system. Recognized by many criteria, it has the character of a very complex and complete procedure:

  • The procedure included the 13 banks present in the Montenegrin market;

  • The selection of credit exposures that were the subject of the AQR analysis enabled high coverage (84.43%) of risk-weighted assets at the banking sector level;

  • 3 independent audit firms and 12 external assessment firms (engaged in the implementation of AQR in individual banks), many employees of CBCG and employees of banks subject to AQR were engaged to March 2020 to September 2021 in various activities concerning the AQR;

  • More than 90 individual receivables portfolios were reviewed, for a book value of 3,737 million euros at the reference date;

  • The auditors individually examined the loan files of more than 2,700 debtors;

  • Over 2,800 residential and commercial properties have been (re) appraised, or their current estimated market value has been analyzed according to AQR criteria.

The main consultant of CBCG for the management support of the AQR project was the audit and consultancy company EY Serbia, Bosnia and Herzegovina and Montenegro, with the support and cooperation of the EY teams from Croatia, Czech Republic and Germany. At the same time, external auditors carried out the independent review of the quality of banks’ assets. AQR auditors were selected in accordance with the Guidelines for the Selection of AQR Auditors and Evaluators and with the consent of the CBCG. These are the teams of the following audit and audit consultancy firms: PWC, KPMG and TPA.

The results of the AQR exercise confirmed the stability of Montenegro’s banking sector, satisfying the asset quality and capital adequacy of the local banking system.

The main objectives of the AQR exercise were to:

  • confirmation of the stability of Montenegro’s banking system;

  • removing doubts about the quality of banks’ assets by applying a single and prudently established methodology, including performing a (re) valuation of collateral in accordance with internationally recognized valuation standards;

  • provide a basis for improved regulation and supervision, particularly with regard to International Financial Reporting Standards (IFRS) (such as improving the application of IFRS 9).

The total effect of the AQR on the impact on the amount of capital at the level of the banking market amounts to 40.3 million euros, leading to a decrease in the average solvency ratio of 1.57 percentage points . The average solvency ratio at the banking sector level after AQR adjustment was 16.2%, well above the legal minimum of 10%.

Banking sector indicator

Prerequisite AQR

After AQR


Solvency ratio



-1.6 pages

Bank capital (in millions of euros)




Given that the net effect of the determined adjustments on the capital of the covered banks resulted in an insignificant decrease in the solvency ratio, the AQR confirmed the adequacy of the capital of the local banking system. There is also an ongoing analysis and development of capital preservation measures that would be applied at the level of individual banks if necessary.

As of June 30, 2021, the banking system was stable, well capitalized, very liquid and profitable. The banks’ own funds amount to 534.9 million euros and are 78.6 million euros higher on the reference date for the implementation of the AQR. This means that the growth in banks’ equity more than offset the adjustment made during the AQR (40.3 million euros). During the period under review, the growth in banks’ equity is mainly due to the temporary measures adopted by the CBCG which limited the payment of dividends to shareholders.

Banks will be required to implement the results of the AQR by the end of the year at the latest. In view of the proactive measures taken by the banks after the completion of the AQR that we have been informed of, we expect all banks to operate within the capital limits defined by law after the implementation of the results. of the AQR.


Central Bank of Montenegro published this content on September 15, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on September 15, 2021 11:01:05 AM UTC.

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