The Central Bank of Montenegro passed the new Decision on Bank Reserve Requirements to be held with the Central Bank of Montenegro (“Official Gazette of Montenegro no. 9/07), according to which banks calculate reserve requirement as of the first calculating period in 2008.  

According to the Decision, the banks shall calculate reserve requirement on the following deposit funds:

1)     deposits by public sector, regardless of maturity,

2)     sight deposits by other sectors,

3)     time deposits by other sectors which maturity, on the days for the reserve requirement calculation, is less than 180 days,

4)     time deposits which maturity, on the days for calculation for the reserve requirement calculation, is more than 180 days but less than two years.   

Exceptionally, the banks shall not calculate reserve requirment on sight deposits recorded on Acc. 2300 (Sub accounts 2305-2318) – Sight Deposits from Banks and other Financial Institutions: Acc. 2305 – State-Owned Local Banks – Non Interest bearing; Acc. 2306 – State-Owned Local Banks – Interest bearing; Acc. 2307 – Privately-Owned Local Banks – Non Interest bearing; Acc. 2308 – Privately-Owned Local Banks – Interest bearing as defined in the Chart of Accounts for banks and time deposits with maturity over two years.  

The new Decision prescribes different reserve ratios: 19% for deposits by public sector regardless of maturity, sight deposits by other sectors and time deposits by other sectors, which maturity, on the days for the reserve requirement calculation, is less than 180 days; and 2% ratio on time deposits by other sectors which maturity, on the days for the reserve requirement calculation, is over 180 days but less than two years. 

The banks shall perform calculation and submit reports to the Central Bank of Montenegro on a weekly basis, and depositing into or withdrawing from the reserve requirement accounts in the country or into the CBM accounts abroad shall be performed on Wednesdays.

The Central Bank shall pay interest to the banks, on 50% of  the bank reserve requirement deposited, at the interest rate of 1% per annum. The banks may use up to 50% of their reserve requirement deposits interest free, to maintain their daily liquidity, if they return the used amount on the same day *

If the bank fails to return the used amount of reserve requirement on the same day, it shall pay 11% p.a. interest rate, and 12% p.a. interest rate on the amount of the difference between the prescribed and deposited reserve requirement.

* With the aim of preventing certain negatives effects of the world financial crisis and protecting the banking sector in Montenegro, the Law on Measures for Protecting Banking System (“Official Gazette of Montenegro” no. 64/08) was adopted. According to the Law, the Council of the Central Bank of Montenegro adopted the Decision on Bank Reserve Requirement to be Held with the Central Bank of Montenegro for the Period Longer Than One Day (“Official Gazette of Montenegro” no. 65/08). According to the Decision, the CBM may approve to the bank which has problems in maintaining its liquidity as a consequence of the world financial crisis, to use up to 50% or reserve requirement, up to seven business days in a month at most, at the rate of 5% p.a. This Decision will be implemented until 31 Dec 2009

Diagram showing deposits and reserve requirement allocated in 2007

November 2008: 

Deposited reserve requirement funds of the banks as at 30 November 2008 amounted to EUR 229.3 million, out of which 50.4% has been deposited in the reserve requirement account in the country and 49.6% in the accounts of the Central Bank abroad.  

The average balance of deposits that make the base for the reserve requirement calculation amounted to EUR 1,621.8 million in November. Sight deposits and time deposits by public sector make 12.4 %, sight deposits by other sectors make 37.2%, time deposits by other sectors with maturity up to 180 days make 22.9% while time deposits which maturity, on the days for reserve requirement calculation, is over 180 days and less than two years make 27.5%.   

For the same period, the average state of deposits which do not make up the base for the reserve requirement calculation amounted to EUR 436.6 million, out of which 99.4% related to time deposits which maturity, on the days for the reserve requirement calculation, is more than two years and 0.6% related to sight deposits that do not make the base for the reserve requirement calculation.

October 2008: 

Deposited reserve requirement funds of the banks as at 31 October 2008 amounted to EUR 234.8 million, out of which 47.9% has been deposited in the reserve requirement account in the country and 52.1% in the accounts of the Central Bank abroad.  

The average balance of deposits that make the base for the reserve requirement calculation amounted to EUR 1,766.4 million in October. Sight deposits and time deposits by public sector make 11.7 %, sight deposits by other sectors make 38.6%, time deposits by other sectors with maturity up to 180 days make 25.9% while time deposits which maturity, on the days for reserve requirement calculation, is over 180 days and less than two years make 23.8%.   

For the same period, the average state of deposits which do not make up the base for the reserve requirement calculation amounted to EUR 446.8 million, out of which 99.1% related to time deposits which maturity, on the days for the reserve requirement calculation, is more than two years and 0.9% related to sight deposits that do not make the base for the reserve requirement calculation.

September  2008: 

Deposited reserve requirement funds of the banks as at 30 September 2008 amounted to EUR 287,6 million, out of which 47,2% has been deposited in the reserve requirement account in the country, 52,8% in the accounts of the Central Bank abroad.  

The average state of deposits that make the base for the reserve requirement calculation amounted to EUR 1.897,4 million in September. Sight deposits and time deposits by public sector make 11,4 %, sight deposits by other sectors make 39,7%, time deposits by other sectors with maturity up to 180 days make 28,4% while time deposits which maturity, on the days for reserve requirement calculation, is over 180 days and less than two years make 20,5%.   

For the same period, the average state of deposits which do not make up the base for the reserve requirement calculation amounted to EUR 443,2 million, out of which 99,3% related to time deposits which maturity, on the days for the reserve requirement calculation, is more than two years and 0,7% related to sight deposits that do not make the base for the reserve requirement calculation.