February 2011
Banking Sector Total Bank Assets and Liabilities In October 2010, in the overall assets structure, net loans accounted for the main share,71.2%. This was followed by monetary assets and deposits with depository institutions at 19.8%. Other bank assets accounted for 7.0%, while other assets accounted for the remaining 2.0%.The month-on- month increase recorded monetary assets and deposits with depository institutions (3.2%), loan loss provisions (0.1%), other assets (3.1%) and provisions for assets other than loans (0.9%). In September, when compared with August 2010, an increase was recorded in the following areas: loan loss provisions (2.8%), financial derivatives (33.3%), securities (3.2%), custody operations (4.3%), and provisions for assets other than loans (1.8%). For the same period, in the area of bank liabilities, deposits accounted for the main share of 61.2%, followed by borrowings at 23.9% and total bank capital at 10.1%. The remaining 4.8% were other miscellaneous liabilities. Deposits, borrowings and other liabilities recorded monthly increases, respectively, of 0.2%, 1.1%, and 0.6%. In September, when compared with August, all entries showed a downward trend. Total bank capital amounted to â‚Ź295.2 million at end-October 2010, â‚Ź296.9 million at end-September 2010 and â‚Ź307.6 million at end-August this year.
Deposits Time deposits accounted for the main share of total deposits, around 60.0%. The structure of time deposits shows that deposits with a maturity period ranging from 3 months to 1 year accounted for the main share. This ranged from 29.3% in August to 34.5% in October. Deposits with a maturity period of less than 3 months represented the following percentages of the total share:19.0% - August, 15.1% - September, 13.7% - October. Observed on a sector by sector basis, household deposits still account for the main share of total deposits,50.0%. Graphic 4. Structure of deposits by sectors, period-end, in % 41.4% 40.4% 40.3%
Demand deposits Time deoisits 18.0% 15.1% 13.7%
Up to 3 months From 3 months up to 1 year From 1 to 3 year 1.5% 1.7% 1.8%
Over 3 years
9.8% 10.2% 9.7%
0
8.8% 7.1% 6.7%
Financial institutions Non-financial institutions General Government
58.6% 59.6% 59.7%
29.3% 32.6% 34.5%
34.8% 33.4% 33.2% 6.5% 6.9% 7.0% 48.5% 51.2% 51.7%
Households 1.3% 1.3% 1.2% 0.1% 0.1% 0.2%
Non-profitable organisations Other
20 VIII 10
Graphic 5. Structure of deposits, period-end, in %
IX 10
40
60
0
X 10
20 VIII 10
40 IX 10
60
X 10
Source: Bulletin of Central Bank of Montenegro (November 2010, October 2010, September 2010)
Household Deposits Regarding the maturity structure of household deposits, the main share of 67.0% was made up of time deposits (67.5% - October, 67.0% - September, 67.0% August), whereas demand deposits made up the remaining 32.5% at end-October, 33.0% at end-September and the same again in August.
Loans The loan/deposits ratio amounted to 1.26 in October this year, thus slightly improving in comparison with the previous month (1.27). In September, the loans/deposits ratio improved in comparison with August (1.22). The loans/deposits-plus-borrowings ratio amounted to 0.908 at end-October this year, thus showing an improvement in relation to the previous month when it was 0.916. The loans/deposits-plus-borrowings ratio amounted to 0.892 at end-August. Within the structure of total disbursed loans, corporate and household loans accounted for the main share of 94.0%, whereas the remaining 6.0% was a combination of loans granted to banks, other financial institutions, public owned organizations, nonprofitable organizations and others. Table 1. Lending interest rates, period-end, in % Lending interest rates
Household loans
Loans granted to legal persons
VIII 10
IX 10
X 10
VIII 10
IX 10
X 10
Average nominal lending interest rate
9.73%
9.74%
9.75%
8.46%
8.49%
8.50%
Average lending effective interest rate
10.50%
10.51%
10.50%
9.02%
9.03%
9.02%
Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Guidelines for Implementing Central Bank Policy During 2011 In order to preserve the stability of the banking system as a key element in the financial sector, and in order to maintain financial stability, the Central Bank of Montenegro will strengthen its role in monitoring and supervision. It will, on a continuous basis, adjust the regulatory framework to meet EU regulations and will continue to implement international accounting standards and business principles in this area. The guidelines for carrying out the Central Bank policy for 2011 state that it will promote the strengthening of corporate governance and will strengthen risk management in banks. It was announced that stress testing will be carried out periodically to verify the exposure of banks to risk and to determine any additional needs in the areas of capital or liquidity. The Central Bank of Montenegro will promote the concept of looking ahead during reservations and will implement policies that enhance capital protection. This should significantly increase the resilience of the banking sector to external shocks. Also, according to its guidelines, the Central Bank of Montenegro will introduce a cautious licensing policy and will authorize new shareholders to join the existing banking system on the basis of protecting the interests of bank depositors and creditors. In addition, to enable further cooperation with other countries, an increased level of supervision of banks in Montenegro will be required. This will be achieved through the planning of joint controls and though the exchange data and information in accordance with the signed Memorandum of Cooperation and Exchange of Information. Memorandum on cooperation in the field of banking supervision CBM has so far signed with the Central banks and supervisors of Slovenia, Serbia, Albania, Macedonia, France, Hungary, Croatia, Bosnia, Russia, Greece, Bulgaria and Cyprus.
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