Montenegro’s government has approved draft amendments to the Law on Financial Conglomerates, seeking to align supervision of cross-sector financial groups with EU Directive 2002/87/EC. The amendments are part of preparations to close EU negotiating Chapter 9 – Financial Services and must still complete the legislative process before becoming law.
Stronger oversight of financial groups
The EU directive establishes supplementary supervision for groups operating across banking, insurance and investment services. The proposed changes are intended to improve the efficiency and proportionality of supervision while addressing risks that may extend across several regulated entities. Many Montenegrin banks and insurers are owned by larger international financial institutions. Such structures can allow capital, liquidity and risk to move between subsidiaries, meaning these exposures may not be fully visible when individual entities are assessed separately. Supplementary supervision adds a group-level layer to existing banking and insurance oversight. Under the EU framework, regulators examine areas including capital adequacy, risk concentration, intra-group transactions and governance across financial sectors.
Financial sector becoming more integrated
The reform is increasingly relevant as Montenegro’s financial system becomes more connected to regional and European financial groups. Vienna Insurance Group, for example, has expanded its Montenegro operations from life insurance into the non-life segment. Banks are also increasingly involved in investment products, insurance distribution and other financial services.
As financial groups become more complex, regulators require a consolidated view of risks extending across different subsidiaries and business lines. The proposed system would not replace ordinary banking or insurance supervision. Instead, it would provide an additional layer of oversight where a corporate group combines several regulated financial activities.
Wider financial regulatory reforms
The amendments form part of a broader effort to strengthen Montenegro’s financial architecture and bring it closer to EU regulatory standards. Parliament has granted the Central Bank of Montenegro explicit constitutional independence, while banking regulation, consumer credit rules and financial-market supervision are also being progressively aligned with European requirements.
The conglomerate legislation extends that process to groups operating across multiple financial sectors. For financial institutions, the framework could result in greater requirements for data, governance and reporting. Groups may have to provide regulators with more detailed information about internal transactions, capital allocation and risk exposures across subsidiaries.
Implications for banks and insurers
Closer alignment with EU supervisory practices could also provide a more familiar framework for international banks and insurers already subject to consolidated requirements elsewhere in Europe. The reform requires stronger coordination between Montenegro’s financial regulators. Banking, insurance and securities supervision are divided by sector, while financial conglomerates operate across those boundaries.
Effective oversight therefore depends on information sharing and clear identification of the authority responsible for group-level supervision. EU rules are designed partly to prevent situations in which no regulator has a complete view of a financial group. This is particularly relevant during financial stress. A conglomerate may transfer liquidity or capital between subsidiaries under normal conditions, but such transactions can become destabilising when one entity comes under pressure.
Banking sector enters regulatory transition
Montenegro’s banking system is entering this regulatory transition with deposits exceeding €6 billion, high liquidity and most banks remaining profitable. Sector profit in the first half of the year exceeded €60 million, although earnings moderated compared with the previous year. The current conditions give regulators an opportunity to strengthen supervisory frameworks before they are tested by a downturn.
EU accession and financial supervision
EU accession increases the importance of effective financial regulation. Once Montenegro joins the bloc, its financial institutions will operate more deeply within the European supervisory and regulatory architecture. Standards covering capital, resolution, consumer protection and cross-border supervision will therefore need to function effectively before membership. Chapter 9 remains economically important despite the technical nature of many of its requirements. Financial integration can expand access to capital and reduce funding costs, provided investors and European institutions have confidence in domestic supervision.
Montenegro’s banks hold substantial domestic deposits, finance households and businesses and remain closely connected with the property market. Insurance companies manage long-term savings and corporate risks. Supplementary supervision of financial conglomerates provides another mechanism for addressing risks that can extend across institutions and sectors.
Potential relevance to future acquisitions
The framework could also affect future mergers and acquisitions in Montenegro’s financial market. Because the market is relatively small, acquisitions can materially change concentration. An international group expanding across banking, insurance or investment activities may also create exposures that are not immediately visible through individual licence-level data.
A clearer conglomerate regime would give regulators a framework for assessing such structures. The government’s decision advances Montenegro’s alignment with the European financial regulatory system, while the amendments still require parliamentary approval and implementation. Formal closure of Chapter 9 remains an EU-level process.
