Front Matter Page
IMF Country Report No. 16/201
MONTENEGRO: FINANCIAL SECTOR ASSESSMENT PROGRAM: BANKING SUPERVISION AND REGULATION—TECHNICAL NOTE
June 2016
This Technical Note on Banking Supervision and Regulation for Montenegro was prepared by a staff team of the International Monetary Fund and the World Bank. It is based on the information available at the time it was completed in June 2016.
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Front Matter Page
MONTENEGRO: FINANCIAL SECTOR ASSESSMENT PROGRAM
June 2016
TECHNICAL NOTE
BANKING SUPERVISION AND REGULATION
Prepared By
Damodaran Krishnamurti, Finance and Markets Global Practice, World Bank, and Michael Deasy, Monetary and Capital Markets Department, IMF
This Technical Note was prepared in the context of the Financial Sector Assessment Program in Montenegro. It contains technical analysis and detailed information underpinning the FSAP’s findings and recommendations. Further information on the FSAP program can be found at http://www.imf.org/external/np/fsap/fssa.aspx, and http://www.worldbank.org/en/programs/financial-sector-assessment-program.
Contents
EXECUTIVE SUMMARY
INTRODUCTION AND BACKGROUND
FINANCIAL SYSTEM AND SUPERVISORY STRUCTURES
MAIN FINDINGS AND RECOMMENDATIONS
A. Supervisory Framework
B. New Bank Licensing
SUPERVISORY APPROACH AND PRACTICE
A. Supervisory Approach
B. Consolidated Supervision
C. Corrective and Sanctioning Powers of Supervisors
D. Home-Host Relationships
CORPORATE GOVERNANCE
CAPITAL ADEQUACY
RISK MANAGEMENT PROCESS
A. Credit Risk Management
PROBLEM ASSETS, PROVISIONS, AND RESERVES
A. Concentration Risk and Large Exposure Limits
B. Transactions with Related Parties
C. Liquidity Risk
D. Public Disclosure and Transparency
TABLES
1. Main Recommendations
2. Composition of Regulatory Capital and Risk-Weighted Assets
3. Prudential Asset Classification and Provisioning Norms for NPAs
4. Prudential Limits for Large Exposures
5. Banks’ Gross Exposures and Net Exposures Among Large Exposures
6. Prudential Limits for Related-Party Exposures
7. Distribution of Banks’ Aggregate Exposures to All Related Parties
8. Delegation of Powers for Related-Party Transactions
9. Foreign Assets and Liabilities (June 2015)
10. Foreign Currency Assets and Liabilities (June 2015)
Glossary
| AMA |
Advanced Measurement Approach |
| AML |
Anti-money Laundering |
| BCP |
Basel Core Principles |
| CAR |
Capital Adequacy Ratio |
| CBM |
Central Bank of Montenegro |
| CBR |
Central Bank of Russia |
| CRBE |
Central Registry of Business Entities of Montenegro |
| CDA |
Central Depository Agency |
| CRO |
Chief Risk Officers |
| DPD |
Days Past Due |
| DPF |
Deposit Protection Fund |
| CHF |
Swiss franc |
| FSAP |
Financial Sector Assessment Program |
| FSC |
Financial Stability Council |
| ICAAP |
Internal Capital Adequacy Assessment Process |
| IFRS/IAS |
International Financial Reporting Standards/International Accounting Standards |
| LCBM |
Law on the Central Bank of Montenegro |
| LCP |
Liquidity Contingency Plans |
| MOU |
Memorandum of Understanding |
| NPA |
Nonperforming Asset |
| NPL |
Nonperforming loan |
| ROA |
Return on Assets |
| ROE |
Return on Equity |
| RWA |
Risk-Weighted Asset |
| SREP |
Supervisory Review and Evaluation Process |
