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Library Financial Sector Assessment

Financial Sector Assessment

Financial Sector Assessment

Resource information

Date of publication
April 2016
Resource Language
ISBN / Resource ID
oai:openknowledge.worldbank.org:10986/24123

The Montenegrin economy has yet to
recover from the collapse of the lending boom in 2008. The
financial crisis hit asset quality, weakening banks’
portfolios. The legacy of pre-crisis rapid increase in
indebtedness is adding to banking sector vulnerabilities.
The crisis triggered a prolonged period of balance sheet
deleveraging, which has translated into a near uninterrupted
credit contraction. Slow economic growth and gaps in the
legal framework have hampered banks’ efforts to reduce the
overhang of nonperforming loans (NPLs). The CBM-managed
payment and settlement systems are generally efficient. Some
adjustments are needed to minimize any residual liquidity
risks, such as facilitating the automatic transfer of
balances from the reserves account to the settlement
account. The CBM oversight function should be strengthened
through the formulation of an oversight policy framework
along with improvements to interdepartmental communication
and exchange of information. The growth of the financial
sector has contributed to greater access to finance for
individuals and SMEs, but a number of weaknesses in the
regulatory and enabling environment need to be addressed.

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World Bank
International Monetary Fund

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