CBM policy for 2011
Pursuant to Article 44 paragraph 2 point 1 of the Central Bank Law (OGM 40/10, 46/10), the Council of the Central Bank of Montenegro, at its meeting held on 30 November 2010, established the following:
CENTRAL BANK OF MONTENEGRO POLICY FOR 2011
I. In line with the constitutional obligations and statutory authorities and accountability for monetary and financial stability and the banking system functioning, and adhering to the principles of transparency and independence, in 2011 the Central Bank of Montenegro (CBM) shall:
1. Continue, with a view to further enhancing and preserving monetary and financial stability, to develop monetary instruments and take all other necessary actions under its authority to strengthen confidence in overall financial system. It shall pay special attention to encouraging and preserving sound banking system. In that respect, it shall continuously monitor and analyze situation in the banking system and, if needed, take corrective measures, promote the strengthening of corporate governance and risk management in banks, and continue implementing internationally accepted banking standards and principles;
2. provide full support to the Government of Montenegro in accomplishing economic policy, particularly for the purpose of boosting economic growth and development to the extent that will not jeopardise attaining of objectives and constitutional responsibilities of the Central Bank of Montenegro;
3. maintain, as an important part of financial stability, a sound and efficient national payment system and further improve it through the implementation of international standards, principles and best practises for the functioning of modern payment systems and payment system transactions in general;
4. manage international reserves, with the main objective to ensure the safety of investments and undisturbed fulfilment of Montenegro’s international financial obligations, without jeopardizing liquidity, as well as further analyzing new investment opportunities and increasing income;
5. Actively participate in Montenegro’s EU accession process and work on further harmonisation of regulations under its authority. It shall continue cooperation with international financial institutions and international organisations, which scope of activities are connected with the attaining of objectives and exercising of functions of the Central Bank of Montenegro, and the central banks, and other international institutions responsible for the banking supervision;
6. develop organisation with highly motivated staff having professional qualifications that correspond to work processes in the Central Bank of Montenegro;
7. carry out policy with high level of transparency and actively communicate with all interested target groups;
8. function on the principle of socially responsible organisation and be actively involved in development of modern society.
II. This Policy shall be published on the website of the Central Bank of Montenegro.
THE CENTRAL BANK OF MONTENEGRO COUNCIL
Ref. no. 0101-4041/4-6-2010
Podgorica, 30 November 2010
Radoje Žugić, M.Sc. , sgd.
Pursuant to Article 44 paragraph 2 point 2 of the Central Bank Law (OGM 40/10, 46/10), the Council of the Central Bank of Montenegro, at its meeting held on 30 November 2010, established the following:
GUIDELINES FOR CARRYING OUT CENTRAL BANK POLICY FOR 2011
1. With a view to further enhancing and preserving monetary and financial stability, and particularly to encouraging and preserving sound banking system, the Central Bank of Montenegro (CBM) shall:
a. Implement all available measures and instruments to preserve monetary stability;
b. Continuously review reserve requirement policy, as an instrument of monetary policy and, if needed, make necessary amendments;
c. Develop a framework for the implementation of the open market operations, for the pursue of the function of a lender of last resort, and if needed, other monetary policy instruments;
d. Develop instruments for financial stability monitoring as well as for the assessment of potential risks within its authority, and actively prepare for crisis management, particularly through the adoption of CBM contingency action plan;
e. Analyse impact of domestic and regional macroeconomic developments on Montenegro, in particular, the impact on the financial stability. Depending on the assessment, the CBM shall impose adequate measures within its authority and recommend imposing of adequate measures which implementation is not within its authority;
f. Intensively cooperate with other financial system regulators within the responsibility for financial system stability;
g. Continuously analyse inflation trends, forecast inflation, and contribute to reaching and maintaining of the prices stability;
h. Monitor and analyse situation in all parts of the financial system with a view to determining all potential causes of instability in a timely manner and ability of the system to absorb them;
i. Monitor balance of payment trends and, if needed, undertake adequate measures, in accordance with its legal authorization;
j. With a view to maintaining banking system stability, as a key element of the financial sector for financial stability maintenance, the CBM shall:
- Strengthen prudential oversight and supervisory capacities, continuously harmonise regulatory framework with the EU regulations, and further implement international accounting standards and principles in this area, enhance corporate governance and improve banks' capacities for risks management;
- perform periodically stress testing with a view to controlling banks' exposure to risks and identifying requirement for additional capital and liquid funds;
- Promote forward looking concept in provisioning and carry out policy of countercyclical capital protection, which will improve resistance of the banking sector to external shocks;
- Pursue policy of prudent licensing, i.e. granting approvals to new shareholders for entering the existing banking system, primarily bearing in mind protection of interests of banks' depositors and creditors;
- Intensify cooperation with supervisors of the parent banks operating in Montenegro, particularly through planning joint examinations, exchange of data and information in accordance with the signed Memoranda of Understanding and exchange of information through supervisory colleges, with a view to synchronising supervisory activities at national and global level;
- Monitor and implement improvements based on international multilateral agreements and adopted conventions;
k. Initiate activities related to the CBM backup location project;
l. Continue activities on improvement of procedures and expanding scope of examinations concerning prevention of money laundering and terrorist financing, as well as training of employees for these tasks.
2. With a view to supporting the Government of Montenegro in achieving economic policy, to the extent that will not jeopardise attaining of the Central Bank of Montenegro objectives and constitutional responsibilities, the CBM shall:
a. Make efforts to contribute, through its measures and instruments, to boosting of economic growth and development, to the extent that will not jeopardise accomplishing of the financial stability;
b. encourage banks' lending activities through its measures, instruments, regulatory framework amendments and cooperation with the Association of Montenegrin banks, to the extent that will not mean excessive taking of risks and jeopardise stability of the banking system;
c. Monitor and analyse macroeconomic trends in Montenegro, in transitional economies and in global economy and provide adequate recommendations to the Government of Montenegro;
d. Create a new macroeconomic model of the Montenegrin economy for forecasting macroeconomic developments and analysing efficiency of monetary policy instruments;
e. Collect, process and publish data on monetary and balance of payment statistics on regular basis, and other statistical data produced by the CBM, which represent significant inputs for creation of economic policy;
f. Publish work studies covering current macroeconomic and financial problems.
3. With a view to maintaining and improving safe and sound domestic payment system, the CBM shall:
a. Work continuously on maintenance of achieved level of safety and soundness of CBM payment system for performing interbank transfer of assets as the basic payment system infrastructure in Montenegro and its further improvement;
b. Improve availability of the payment system transactions through the implementation of new systems for data storing and archiving, and replacement of production system supporting domestic payment system transactions;
c. Monitor payment system transactions to provide safe and sound payment transactions;
d. Create assumptions for the improvement of regulatory framework for the domestic payment system aimed at its harmonization with the EU regulations, paying special attention to the implementation of the Regulation (EC) No 1781/2006, in a part regulating domestic payment system transactions;
e. Monitor international standards, principles and best practice of contemporary payment systems and payment transactions in general, and further implement them;
f. Improve enforced collection from the accounts of banks' executive debtors, which the CBM performs in accordance with provision of the Law regulating enforcement procedure;
g. Participate in realisation of the project for creation of monetary fines and violation registries in Montenegro.
4. With a view to further improving international reserves management, the CBM shall:
a. Engage in repositioning of the existing financial instruments in portfolio respecting the principles of liquidity and safety, and promote techniques already adopted in asset and risks management of international reserves to accomplish better risk to return ratio;
b. Permanently monitor the situation at international financial market and after normalisation of relations and conditions at that market, re-establish cooperation with the commercial banks where a portion of available funds will be placed;
c. review possibilities of investing funds in other financial instruments aimed at increasing profit, taking primarily into consideration principles of liquidity and safety;
d. Continuously review the need for cash and plan the optimum amount of banknotes and coins for regular supply of CBM clients and for the reduction of costs of keeping cash in its vaults;
e. Update secondary legislation and create mechanisms for carrying out international reserves management policy;
f. Permanently improve the existing and establish new correspondent relationship with foreign central and commercial banks and other international financial institutions and organizations.
5. With a view to actively participating in the process of Montenegro accession to the European Union, and particularly after receiving the European Commission’s positive opinion for EU candidate status, and with a view to improving cooperation with the international financial institutions, central banks and other organizations, the CBM shall:
a. continue activities on the harmonisation of local legislation with the EU acquis communautaire in the area of banking sector, payment systems, monetary policy and statistics and other areas under the CBM authority;
b. prepare materials containing plan for harmonisation of legislation where CBM is involved, in order to create consistent set of measures, which shall contribute to the faster membership to EU, with the lowest adjustment costs;
c. participate in the working and negotiating structures established for the purpose of efficient negotiating of EU membership;
d. continue activities on establishing preconditions for the future undisturbed functioning of the CBM within the ESCB (European System of Central Banks);
e. Continue the cooperation with the International Monetary Fund (IMF) and members of the World Bank Group, through the participation in the work of these institutions, particularly in the part concerning exchange of information and use of financial assistance;
f. enhance cooperation with other international financial and other organisations through the participation in the working bodies of those international organisations, as well as through participation in international conferences and seminars;
g. develop cooperation with other central banks and foreign institutions responsible for the banking supervision, through implementation of agreements and memoranda, particularly in the banking supervision area, as well as proposing new forms of cooperation;
h. ensure active participation of Central Bank experts at the international organisations’ meetings, forums, seminars and conferences concerning global financial stability and central banking area;
i. Continue activities on regulating CBM membership in the Bank for International Settlements.
6. With a view to continuing professional training and education of employees in accordance with their job requirements, as well as their adequate motivation and the affirmation of human resources, as the key business success factor, the CBM shall:
a. make efforts to constantly have qualified, trained and highly motivated employees with the knowledge corresponding to their job requirements;
b. develop mechanism to stimulate employees, accomplish better results and provide adequate rewards for the achieved results,
c. prepare the development and staff planning strategy, as well as work on introducing new professional standards;
d. pay special attention to professional advancement of employees having small number of years of service, as well as advancement for acquiring special knowledge in the financial stability area,
e. encourage employees to continuously improve the existing knowledge, particularly through monitoring contemporary trends in the monetary policy and financial stability, as well as to career advancement.
7. With a view to following the highest transparency standards, paying special attention to establishing and continuing communication within the system, as well as to informing the public on all aspects of CBM activities, and pursuing its constitutional and legal responsibilities, the CBM shall:
a. inform domestic and international public on its operations timely, continuously and reliably, in the manner understandable to ordinary public,
b. when informing, pay special attention to the activities, objectives and results of the bank activities through press releases, on the website, issuing publications, appearances at the media and in other manner,
c. promote financial stability and enhance economic knowledge in society to contribute to better understanding of the central banking, financial system and financial stability in general.
d. pay special attention to informing the staff.
8. With a view to behaving as the socially responsible institution both to its employees and to its available funds, through active participation in the development of civil society, the CBM shall:
a. Base its operations on universal principles of human and working rights, environment protection and developing civil society;
b. in accordance with its financial possibilities, allocate a portion of its revenues to inclusion in humanitarian activities and support in the development of cultural, historical and other values of society,
c. continue to promote ten principles of global agreement of United Nations in Montenegro in its operations,
d. contribute to strengthening the civil society through public participation in numerous social and society activities
e. start activities on establishing the numismatics cabinet of the CBM (the Money Museum), which will contain specific material from certain area of Montenegro that is processed in a conceptual and thematic manner, and which will have cultural and historical values;
f. contribute to the development of educational system through the participation of CBM representatives as guest lecturers in educational institutions, rewarding the best graduated students, holders of M.A, and PhD degrees and in other ways of mutual interest for CBM and educational institutions.
9. These Guidelines shall be published on the website of the Central Bank of Montenegro.
THE CENTRAL BANK OF MONTENEGRO COUNCIL
Ref. no. 0101-4041/4-7-2010
Podgorica, 30 November 2010
Radoje Žugić, M.Sc. , sgd.