The Montenegrin banking system is stable, solvent, liquid and well-capitalized, with all banks on the tax authority’s “white list,” meaning they fulfill their obligations to the state on time, according to the Secretary General of the Banking Association of Montenegro (UBCG), Bratislav Pejaković.
He noted continuous growth in the deposit base, resulting in an annual increase in the banking system’s balance sheet. However, while profitability is evident locally, it still remains below the EU average.
Pejaković emphasized that the banking sector works to ensure optimal conditions for serving clients, including the public, businesses, and state institutions, in a challenging environment with both internal and external risks. He also pointed out the excessive regulation in European banking, which reduces the overall funds for investment and competitiveness compared to the United States and China.
On a domestic level, Pejaković stressed the importance of an investment-friendly environment, political stability, predictable business conditions, digitalization, and reduced administrative burdens to ensure long-term development and prosperity, which should be defined through the anticipated Law on Strategic Investments.
He also addressed the need to boost productivity, industry structure, and stimulate innovation and new job creation in the real economy.
Pejaković raised concerns about inefficient regulations on debt recovery and consumer protection laws that are misaligned with financial services laws. He also highlighted the impact of tax discipline and unpaid taxes on interest rates and the overall business environment.
The banking sector’s growth is reflected in the increase in deposits, which now account for 78% of national GDP and surpass public debt by 45%. Since 2011, the banking system has seen a rise in the balance sheet from 2.8 billion euros to 7 billion euros, with capital rising from 305 million euros to 914 million euros. Bank profits are expected to exceed 170 million euros.
Pejaković emphasized that banks’ profitability comes from both domestic and international activities, including investments in foreign securities and European Central Bank bonds. He also highlighted the 14% growth in credit activity, with new loans amounting to 1.6 billion euros, showing dynamic investments in the economy and consumer spending.
Banks have successfully reduced non-performing loans (NPLs) to 3.8%, the lowest in 15 years, and the solvency ratio is at 19.8%, well above the legal minimum of 8%.
Regarding interest rates, he supported the Central Bank Governor’s proposal to continue lowering interest rates in 2025, noting that ECB monetary policies, including lower EURIBOR rates, will positively affect Montenegrin banks.
Additionally, Pejaković discussed the importance of the SEPA initiative and its benefits for the Montenegrin banking system, enabling faster, cheaper, and secure euro transactions. He highlighted the technical challenges of implementing ISO 20022 standards, including the complex process of connecting to SEPA’s clearing mechanisms.
Finally, Pejaković expressed optimism about the sale of Hipotekarna Banka shares to Agri Europe Cyprus, seeing it as a positive sign that investors recognize Montenegro’s economic potential, which could lead to further investments and innovations in the banking sector.
