The IMF pointed to the need to create timely plans for a possible recapitalization of banks
The measures of the Central Bank (CBCG) aimed at mitigating the consequences of the pandemic for the population and the economy were timely, adequate and in line with the good practice of other central banks, said the head of the International Monetary Fund (IMF) Mission to Montenegro, Srikant Seshadri.
At the final meeting of the CBM team, led by Governor Radoje Zugic and the IMF mission, led by Seshadri, it was assessed that it is necessary for the CBM, as an institution responsible for preserving the stability of the financial system, to continue closely monitoring the situation on the banking market.
“Especially in the part of possible growth of non-performing loans after the gradual withdrawal of measures, and in light of increased unemployment and weakening of liquidity and solvency of the real sector, so that it can act proactively and anticipatory in case of disturbance materialization,” the statement said.
The CBM said that the IMF Mission, during the previous four days, through several video meetings conducted technical consultations with the CBM and other relevant institutions on the latest economic trends and prospects for the coming period.
Zugic said that they monitor the quality of banks ‘balance sheets on a daily basis and that the current measures of the CBM prevent the rapid spillover of real sector insolvency to banks’ balance sheets.
He said that the banking system with a high solvency ratio at the aggregate level has the potential to absorb the possible growth of non-performing (NPL) loans, which will, above all, depend on the dynamics in the real economy.
In that direction, Žugić emphasized the importance of achieving good results in the upcoming tourist season.
The IMF, on the other hand, expects the implementation of a project to assess the quality of assets from the CBM, the results of which will show whether and to what extent the recapitalization of individual banks is needed.
The IMF pointed out the need for timely creation of plans for possible recapitalization of banks, which is what the CBM is working on.
“Talking about the activities on immunization of the population in Montenegro, the interlocutors agreed that a faster and more mass vaccination would contribute to a faster recovery of the economy,” the statement reads.
Representatives of the CBM thanked the IMF staff for the proposal to amend the Law on the CBM and for providing technical assistance for this ongoing activity.