The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
Montenegro is undergoing rapid credit growth in the context of heavy foreign bank presence and euro use. However, the rate of credit expansion is testing the limits of banks' capacity to underwrite loans prudently and maintain adequate buffers. Rapid credit growth is now also posing supervisory challenges, despite relatively strong financial sector regulation and supervision. The recommended policy response is a mix of prudential strengthening required to address risks emanating from rapid credit growth, and measures to address specific vulnerabilities.