The banking sector in Montenegro is completely privatized. There are fourteen banks operating in the country, and all of them are in private ownership; two are locally owned while the others are subsidiaries of international banks (including Austrian and Slovenian).
A new set of laws has been adopted and some of existing laws were amended to improve regulation of the banking sector, to provide a higher level of depositor safety and to increase trust in the banking sector itself. The Law on the Protection of Deposits aligns local legislation for protecting deposits with European standards. In accordance with the law, a fund for protecting deposits has been established. Deposits are guaranteed up to 50,000 euros.
Beginning March 2016, Montenegro issued bonds worth €300 million in the international capital market in cooperation with Citibank, Deutsche Bank, Societe Generale and Erste Bank. The value of the issued bonds was €300 million, with an interest rate of 5.75 percent, due in 2021. The issue has provided the funds necessary to repay liabilities related to bonds issued in 2011 with a 7.25 percent coupon which matured in 2016. In May 2014, Montenegro issued 280 million euros in bonds, paying a 5.375 percent return. The bonds, which will mature in 2019, helped the country raise nearly 200 million euros in much-needed operating capital while extending and refinancing some of its older debt offerings. The Eurobond transactions achieved wider diversification among fund owners, including significant interest from U.S. fund managers.
Banking operations grew in 2015. Deposits and capital continued to grow, and there was a mild recovery of credit activity. The banking sector was solvent and liquid but still had a high share of non-performing loans (12.4 percent). The balance of deposits increased by 9.3 percent in 2015 to 3.5 million euros. A majority of bank assets are loans (65.2 percent), while the highest share of liabilities are deposits (75.5 percent). At the end of December, total bank loans equaled 2,386 million euros, an increase of 0.7percent over last year. Banking credit capacity increased by 20.1 percent in 2015 to 962.7 million euros. Implementing the Law on Mutual Financial Restructuring of Debts should help to decrease the volume of non-performing loans.
In December 2015, assets deposited in banks amounted to 2,625 million euros or a 13.7 percent increase compared to the end of 2014. The most significant portion of deposits came from individuals, which amounted to 1,439.8 million euros, or 54.9 percent of total deposits, 8.1percent higher than the previous year. On the other hand, the amount of corporate deposits in December 2015 amounted to 921.5 million euros or 35.1 percent of total bank deposits.
The Euro has been officially used in Montenegro since 2002. Montenegro is one of a few countries that does not belong to the Euro zone but uses the Euro as its official currency, without any formal agreement. Since its authority is limited in monetary policies, the Central Bank has focused on control of the banking system and maintenance of the payment system. It acts as the state fiscal agent and monitors monetary policy.
The Central Bank also regulates the process of bank establishment. A bank is founded as a joint-stock company and acquires the status of a legal entity by registering in the court register. An application for registration in the court register must be submitted within 60 days of the date of the bank being licensed.
During the last couple of years, Montenegro has experienced a stabilization of the banking sector and the gradual development of the capital market, thereby restoring consumer confidence in banks. Credit cards and bank cards are used in most shops and restaurants.