The Central Bank of Montenegro raised its countercyclical capital buffer and capital conservation buffer as bank credit expanded 15.3% in 2025 and real-estate prices accelerated. Central bank figures show the move came despite strong capital and low bad-loan levels. The buffers require lenders to hold more capital against future risks and raise the cost of aggressive balance-sheet growth.
Credit growth increased from 13.3% in 2024 and remained in double digits in the first half of 2026. The weighted average lending rate was 6.2% at end-2025, with the expansion accompanied by only a modest decline in borrowing costs.
The capital adequacy ratio rose to 20.2% in 2025, while non-performing loans fell to 2.4% in the first quarter of 2026. Deposit growth recovered to 6.1% in 2025 and ran at about 5% year on year in the first half of 2026.
The policy shift addresses property-market risks, rather than weakness in banks’ current balance sheets. Strong household demand, construction and property investment can reinforce one another, lifting asset prices and import demand at the same time.
A better-capitalised banking system can continue financing investment, while tighter capital requirements make rapid balance-sheet expansion more costly. The next banking cycle will depend on what new lending finances: credit for productive capacity, export services, energy and business investment would strengthen the economy, while lending dominated by mortgages, consumption and property development could deepen current-account imbalances.
