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Reserve requirement

According to the Article 18 of the Central Bank of Montenegro Law (“Official Gazette of Montenegro“ no. 40/10, 46/10 and 06/13) and based on the provisions of the Decision on Bank Reserve Requirement to be held with the Central Bank of Montenegro (“Official Gazette of Montenegro“ no.73/15), applied as of 1 January 2016, the Central Bank of Montenegro prescribed the obligation for the banks to calculate, allocate and maintain reserve requirement by applying the ratio of 9.5% on the portion of base comprising of sight deposits and deposits with maturity up to one year, while ratio of 8.5% shall be applied on the portion of base comprising of deposits with maturity over one year. The ratio of 9.5% shall be applied on deposits with maturity over one year which have clause on possibility of cancelling the deposit in the period shorter than one year.

The banks shall calculate and submit to the Central Bank the reports in the prescribed forms on a weekly basis. Depositing into or withdrawing from the reserve requirement account in the country or the CBM accounts abroad shall be performed on Wednesdays and cannot be allocated or maintained in other forms.

The Central Bank shall pay interest to the banks on 50% of the total allocated bank reserve requirement on a monthly basis, until the eighth day in a month for the previous month, at EONIA (Euro Over Night Index Average) rate minus 10 basis points annually, provided that the rate could not be less than zero.

Exceptionally, up to 31 December 2016, the banks may allocate up to 25% of reserve requirement and maintain in form of Treasury bills issued by Montenegro. The Central Bank shall pay interest to the banks on the amount representing the difference between the 50% of the overall allocated reserve requirement and the amount appropriated in the form of Treasury bills, and on 25% of the appropriated reserve requirement at most.

The banks which, as of the implementation date of the Decision, allocated and maintained more than 25% of reserve requirement in form of Treasury bills, may continue maintaining those T-bills as a reserve requirement share, up to their maturity.

The banks which, as at 31 December 2016, allocated and maintained reserve requirement in form of Treasury bills, may continue maintaining those T-bills as a reserve requirement share up to their maturity, by 30 June 2017 at the latest.

The banks may use up to 50% of their reserve requirement deposits interest-free to maintain their daily liquidity, provided that 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 and on the amount of the difference between the prescribed and less allocated reserve requirement stemming from the wrong calculation or it fails to allocate reserve requirement by the defined deadline, it shall pay remuneration as per rate established in the special Central Bank regulation.

Calculated and allocated reserve requirement funds of the banks with the Central Bank as at 31 March 2016 amounted to EUR 245.5 million, out of which 54.5% was deposited in the reserve requirement account in the country, 26.0% in the CBM accounts abroad and 19.5% in the form of Government T-bills.

The average amount of total deposits by banks amounted to EUR 2,626.1 million at end-March 2016, which was EUR 38.4 million more than the average amount of deposits at end-February 2016. Of overall deposits, sight deposits make 50.7% while time deposits make 49.3%.

 

 

 

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