PODGORICA (Montenegro), December 28 (SeeNews) – Montenegro's central bank said it is making 34 million euro ($49 million) available to banks by relaxing its provisioning regulations in a bid to boost lending to the economy.
The adopted measures address requirements that commercial banks have identified as barriers to increasing lending to the economy and will not have a negative impact on the stability of the banking sector, the central bank said on its website last week.
As a measure aimed at boosting lending the central bank has scrapped its requirement that banks should set aside provisions on good loans classified in the top A category. For all loans classified in the riskier B category banks will have to set aside 3.0% provisions, while prior to the change the B category had two groups of loans – one requiring 3.0% provisions, and riskier ones, for which 8.0% provisions were required.
The central bank also said commercial banks would be allowed to disregard the negative financial result for the current year of a credit seeker when evaluating its creditworthiness, as the global crisis has adversely impacted the businesses of many Montenegrin firms in 2009. Banks will be able to decide whether to extend a loan for a development project by estimating the project’s potential profitability and not the borrower's track record, which should stimulate new loans approval.
Another change in regulations concerns debt restructuring options, which will be now available for loans which are late up to 180 days, twice longer than the 90-day period before the change.
The central bank said it has pumped some 145 million euro in the Montenegrin banking system through various measures this year, or 4.5% of the country's estimated 2009 gross domestic product.
Eleven commercial banks were active in Montenegro at the end of September.
($=0.6942 euro)