CBM policy for 2012
Pursuant to Article 44 paragraph 2 point 1 of the Central Bank Law (OGM 40/10, 46/10), at its meeting held on 29 November 2011, the Council of the Central Bank of Montenegro established the following:
CENTRAL BANK OF MONTENEGRO POLICY FOR 2012
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 2012, the Central Bank of Montenegro shall:
With a view to further enhancing and preserving monetary and financial stability, take all necessary measures within its authority to strengthen confidence in overall financial system and minimize adverse effects and threats to financial stability. Special attention will be devoted to the drafting of the national contingency plan and a separate law aimed at financial stability preservation. Measures aimed at the financial system strengthening will particularly focus on encouraging and preserving a sound banking system. To that end, 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 further implementation of internationally accepted banking standards and principles.
Support economic policy objectives and measures of the Government of Montenegro, in particular those pertaining to the economic growth and development, employment and living standards, but to the extent that will not jeopardise the attaining of objectives, constitutional responsibilities, and independence of the Central Bank of Montenegro.
Maintain, as an important segment of financial stability, a sound and efficient national payment system and improve it further by proposing amendments to legislation, harmonization with EU regulations, the implementation of international standards, principles and best practises in the functioning of modern payment systems and payment system transactions in general.
Manage international reserve funds in the manner to ensure the safety of investments and undisturbed fulfilment of Montenegro’s international financial obligations, without jeopardizing liquidity and efficiently performing its fiscal agent function, as well as analyze new opportunities for investment and increasing income.
Actively participate in Montenegro’s EU accession process and work on further harmonisation of regulations within its authority with the EU acquis communautaire. The EU accession shall be treated as one of the strategic priorities and appropriate human and material resources shall be allocated for this purpose.
Develop organisation with highly motivated staff having professional qualifications and skills meeting the requirements of job positions and objectives and functions of the Central Bank of Montenegro;
In its work, follow the highest transparency requirements and seek to ensure timely, reliable and relevant information to be communicated to all interested target groups. In particular, the principle of two-way communication shall be followed both in public relations and internal communication of the Central Bank of Montenegro.
Pay particular attention to other areas of importance for the attainment of objectives, the exercising of functions and constitutional responsibilities of the Central Bank of Montenegro such as information system development, international cooperation development, participate in combating counterfeit circulation and the like.
Function on the principle of socially responsible organisation and be actively involved in a modern society trends.
II. This Policy shall be published on the website of the Central Bank of Montenegro.
CENTRAL BANK OF MONTENEGRO COUNCIL
Ref. no. 0101-4014/21-3-2010
Podgorica, 29 November 2011
Radoje Žugić, signed
Pursuant to Article 44 paragraph 2 point 2 of the Central Bank Law (OGM 40/10, 46/10), at its meeting held on 29 November 2011, the Council of the Central Bank of Montenegro, established the following:
GUIDELINES FOR CARRYING OUT CENTRAL BANK POLICY FOR 2012
1. With a view to further enhancing and preserving monetary and financial stability, and particularly to encouraging and preserving a sound banking system, the Central Bank of Montenegro (hereinafter: the CBM) shall:
a. implement all available measures and instruments to preserve monetary stability;
b. continuously review its reserve requirement policy, as an instrument of monetary policy and make necessary amendments, if necessary;
c. continuously analyse potential risks and threats to financial stability and consider the need for implementing other monetary policy instruments - open market operations, for liquidity facility, and the lender-of-last resort lending;
d. develop statistical base and instruments for financial stability monitoring, including development of early warning indicators for potential systemic financial crisis, assess potential risks in areas within the CBM authority on an ongoing basis;
e. test its Contingency Plan and participate, within the Financial Stability Council, in the drafting of the national contingency plan;
f. advance mechanisms for financial stability maintenance, i.e. actions in case of a potential systemic crisis, carry out stress testing which results would give rise to appropriate measures aimed at mitigating negative impact of the potential crisis to the maximum extent possible;
g. prepare a proposal of the Financial Stability Law in the form of a lex specialis and aimed at minimizing the consequences of a potentially jeopardized financial stability;
h. analyse the impact of domestic and regional macroeconomic trends on Montenegro, in particular, the impact on financial stability, and depending on the results, take adequate measures within its authority and recommend imposing of adequate measures which implementation is outside its authority yet it was bestowed on it under the Financial Stability Council Law;
i. monitor and analyse situation in all segments of the financial system with a view to timely identification of all potential causes of instability and ability of the system to absorb them;
j. Intensively cooperate with other financial system regulators in the area of financial system stability and in accordance with the Financial Stability Council Law, as well as with other international regulators and institutions within the same area;
k. Continuously analyse inflation trends, forecast inflation, and contribute to the attaining and maintaining of price stability;
l. monitor the balance of payment trends and take adequate measures, if necessary, in accordance with its legal powers;
m. with a view to maintaining banking system stability, as the key financial sector element for financial stability maintenance, the CBM shall:
- improve the regulatory framework with a view to its harmonisation with EU regulation, Base II and Basel III standards, as well as continue with the implementation of the International Accounting Standards and accounting principles, in parallel with the promotion of the corporate governance strengthening;
- work on the improvement of risk management in banks and risk-based supervision, establishment of stronger connection between capital requirements and risk exposure of banks, and follow countercyclical capital protection to improve the banks` resilience to negative shocks;
- develop systems to affect the strengthening of transparency and market discipline through a comprehensive and ongoing exchange of data between banks and other market participants;
- strengthen mechanisms and procedures necessary for a successful implementation of the process of prevention of money laundering based on the professional education of staff, improvement of the supervision system and best practices of central banks and international institutions involved in this process;
- continuously monitor the indicators of asset quality, in particular loans, and pass measures, if required, to curb excessive risk appetite that could jeopardize financial stability;
- perform regular stress tests aimed at evaluating the level of risk taking by banks, identifying weaknesses and their effect on the system as a whole, as well as determining potential additional capital and liquidity requirements at the individual bank level;
- due to apparent volatility of external financial markets, continue with intensive monitoring of their trends with a view to ensuring preventive actions and the creation of capital protection of the system from external shocks;
- pursue prudent supervision policy for new banks entering the existing banking system, primarily considering the protection of interests of bank depositors and creditors;
- continuously monitor the level and dynamics of interest rates, improve calculation methodologies for lending and deposit interest rates, and bolster fair competition in the banking sector and other activities aimed at reducing interest rates;
- advance cooperation with other supervisors, in particular with home supervisors of banks which subsidiaries operate in Montenegro, particularly on the basis of concluded MoUs, with a view to synchronising supervisory activities at both national and global level;
- monitor and implement improvements based on international multilateral agreements and adopted conventions.
n. Continue activities related to the CBM backup site project;
2. With a view to supporting the Government of Montenegro in achieving its economic policy, to the extent that will not jeopardise the CBM`s objectives and constitutional responsibilities, the CBM shall:
a. endeavour to contribute, through its measures and instruments, to economic growth, employment, and living standards, provided that these do not jeopardise accomplishing of the financial stability;
b. encourage banks' lending activity through its measures, instruments, regulatory framework amendments and communication with the Association of Montenegrin banks, to the extent that will not mean excessive risk taking and jeopardising of the banking system stability;
c. monitor and analyse macroeconomic trends in Montenegro, transitional economies and the global economy, expectations for upcoming periods, and forecast future movements of the key macroeconomic indicators in Montenegro;
d. develop a new macroeconomic model of the Montenegrin economy to forecast macroeconomic developments and analyse efficiency of the monetary policy instruments, whether this be done independently or in cooperation with other institutions in the system;
e. collect, process and publish data on monetary and balance of payment statistics on regular basis, and other statistical data produced by the CBM and which represent significant inputs for creation of economic policy;
f. publish thematic working papers, monographs and other publications covering current macroeconomic and financial issues.
3. With a view to maintaining and improving safe and sound national payment system, the CBM shall:
a. continuously work on improving safety and soundness of the CBM payment system for interbank transactions as the basic payment system infrastructure in Montenegro and its further improvement;
b. perform quality and efficient national payment services for the existing and new Central Bank clients;
c. improve the national payment system legislation with a view to its harmonization with EU regulations, with a particular focus on drafting a new law regulating payment services and payment system;
d. monitor international standards, principles and best practices of contemporary payment systems and payment transactions in general, and further implement them;
e. perform efficient payment system control with a view to providing payment services in line with the legislation;
f. improve the legislation and functional model of enforced collection, which the CBM performs in accordance with provision of the new Law on Enforcement and Security;
g. develop the payment system oversight function with a view to ensuring safety and efficiency of the payment systems;
h. continuously monitor payment system operations through the collection and analysis of relevant data and information received from the payment system operators and participants and, pursuant to the Core Principles for Payment System Functioning, propose measures for improving payment systems in Montenegro.
4. With a view to performing activities for an efficient and quality managing of the international reserves and risks related to the process of investing funds and their continuous improvement by adhering to the principles of safety and liquidity, as well as efficient performing of the fiscal agent function, the CBM shall:
a. conduct prudent investment policy for international reserves by giving absolute priority to the safety of placements. Consequently, the funds will be primarily invested into safe instruments such as short-term deposits with central banks in the most advanced countries and first-class commercial banks, as well as into government bonds of the most favourable rating, safety and liquidity in the market;
b. engage in repositioning of the existing financial instruments in the portfolio adhering thereby to the principles of liquidity and safety, and promote already adopted techniques in asset and risk management related to international reserves to accomplish better balancing of investment risk and return;
c. continuously analyse possibilities of investing funds in other financial instruments and diversify investments and aimed at achieving higher return, primarily taking into consideration the principles of liquidity and safety;
d. service international financial obligations of Montenegro in timely fashion as led by the principle of good banking practice, standards and EU regulations, in parallel with the maintaining and developing of quality business cooperation with foreign partners;
e. work on further modernization of the fiscal agent operations as well as actively advise the Government on the public debt management;
f. provide sufficient quantity of cash in euros for the internal payment operations, both euro banknotes and coins, as well as timely sell cash holdings abroad yet simultaneously ensuring optimal stocks in relevant vaults;
g. permanently improve the existing and establish new correspondent relationship with foreign central and commercial banks and other international financial institutions in order to improve international payment system operations.
h. intensify activities on harmonizing the international payment system legislation with the EU legislation.
5. With a view to actively participating in the process of Montenegro`s accession to the European Union, and considering the “candidate country” status and the recommendations published by the European Commission, as a participant in this process the CBM shall:
a. continue activities on the harmonisation of the local legislation with the EU acquis communautaire in the area of banking, payment systems, monetary policy and statistics and other areas within the CBM authority;
b. participate in the working and negotiating structures established with a view to efficiently negotiate on the EU membership. Therefore, the CBM experts shall participate in the negotiation teams in the chapters related to the CBM scope of work;
c. participate in the preparation of the PEP (Pre-Accession Economic Programme);
d. continue activities on institutional capacity building thereby creating preconditions for the future undisturbed functioning of the CBM within the ESCB and the ECB;
e. improve the existing and establish new forms of cooperation with representatives of central banks in the EU Member States, as well as with representatives of the ECB and other EU institutions through planning of technical assistance and study visits;
f. improve communication strategy in the area of European integrations through preparation of working studies and other publications which shall present specific aspects of EU accession;
g. participate in the preparation and implementation of projects financed from the EU funds;
h. continue activities on the implementation of obligations defined by the Stabilisation and Association Agreement (SAA), the National Programme for Integrations (NPI) and the Action Plan for the implementation of recommendations contained in the European Commission Opinion.
6. With a view to continuing professional training and education of employees to ensure qualified, trained and highly motivated employees with the skills corresponding to the job posts and the needs of performing defined policy at all times, in accordance with its funding possibilities, the CBM shall:
a. make efforts to have qualified, trained and highly motivated employees at all times, with the knowledge corresponding to their job requirements;
b. encourage employees to continuously improve the existing knowledge, particularly by following contemporary trends in monetary policy and financial stability, macro-prudential regulations and know-how needed for the implementation of international standards, the EU directives and sound banking practices;
c. develop mechanism to improve the motivation of employees, accomplishing of better results and provide adequate rewards for the achieved results;
d. pay special attention to professional advancement of employees with fewer years of service, the training of deficit personnel, as well as timely plan the replacement of employees to be retired.
7. In its operations, the CBM shall follow the policy of the highest transparency standards and remain open both to the public and its employees. In that respect, the CBM shall:
a. pay special attention to thoroughly and fully inform domestic and international public on its operations, results, imposed measures and reasons thereof, as well as on expectations in the coming period;
b. timely, continuously and reliably inform the public, and communicate information in the manner understandable to the public,
c. contribute to the raising of the level of awareness and economic knowledge in the society, as well as better understanding of the importance of financial stability and soundness of the banking system for the entire society;
d. use regular and periodical publications, press conferences, press releases, its website, interviews of employees, participation in conferences and the like as the public communication channels;
e. pay special attention to informing the staff.
8. In order to support its objectives and constitutional responsibilities, the CBM shall:
a. work on improving the information system, in order to provide adequate level of its availability and safety, especially the infrastructure of the information system through the migration of the system for the national payment system support to a new systemic and technical platform and the migration of the support system as the support to the main banking application;
b. with a view to adequate risk management, develop and supervise the internal control system and the system of operational and reputational risk management, as well as the policy and strategy for operational and reputational risk management. Activities on preparing the Central Bank’s Business Continuity Plan and the backup site will be intensified;
c. with a view to developing and improving cooperation with international financial institutions and organizations, central banks of other countries and regulatory bodies:
- continue cooperation with the International Monetary Fund (IMF) and members of the World Bank Group, particularly in the part concerning the exchange of information, use of technical assistance and organizing missions of their experts;
- enhance cooperation with other international financial and other organisations through direct contacts, participation in the working bodies and assemblies of international organisations, as well as through attending and organizing international conferences and seminars;
- develop cooperation with other central banks and financial regulatory authorities, through the implementation of signed agreements, particularly in the banking supervision area, as well as proposing new forms of cooperation and establishing strategic partnerships;
- continue with activities on regulating the Montenegro’s membership in the Bank for International Settlements.
- ensure active participation of the Central Bank officials in meetings, forums, seminars and conferences organised by international organisations.
d. With a view to performing the authentication and/or timely detection and prevention of uttering of counterfeit money into the legal payment system channels:
- continue with improving and intensifying the cooperation with relevant public authorities, central banks and specialized international institutions through establishing direct contacts, collection and exchange of information and continue with the implementation of signed agreement with the ECB and the OLAF;
- perform activities on the implementation of the decision regulating handling of suspect euro notes and coins as well as other activities for the protection of Euro against counterfeiting;
- perform activities on modernizing the equipment for the technical analysis of counterfeit coins;
- perform activities on establishing functions of national counterfeit centres pursuant to the enacted decision;
- pay due attention to negotiations with the ECB aimed at signing a bilateral agreement for getting access to the Counterfeit Monitoring System (CMS), as well as to cooperation and reporting to the European Technical and Scientific Centre – ETSC.
9. In its operations, the CBM shall follow the principles of a socially responsible institution, both to its employees and to the funds at its disposal, through active participation in the development of a modern society. To that end, the CBM shall:
a. build its operations on the universal principles of protection of human and labour rights, environmental protection and civil society development;
b. continue, in accordance with its financial possibilities, to allocate a portion of its revenues to participate in charity events and support the development of cultural, historical and other values of the society;
c. continue to promote in its operations the UN Global Compact’s ten principles;
d. contribute to the strengthening of the civil society through public participation in numerous social activities;
e. establish the Money Museum of the CBM, which will contain specific conceptual and thematic material from Montenegro, as both cultural and historical values. Moreover, it shall continuously increase the current numismatic exhibition of the CBM, establish cooperation with other central banks, publishing houses, scientific institution, collectors, and scientists;
f. contribute to the development of the educational system through the participation of CBM representatives as guest lecturers in educational institutions, rewarding of the best graduated students, holders of MSc, and PhD degrees and in other ways of mutual interest for the CBM and educational institutions;
g. initiate an international scientific journal covering monetary policy, central banking and the related areas with a view to promoting monetary policy and theory.
10. These Guidelines shall be published on the website of the Central Bank of Montenegro.
CENTRAL BANK OF MONTENEGRO COUNCIL
Ref. no. 0101- 4014/21-4-2010
Podgorica, 29 November 2011
Radoje Žugić, signed.