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Insights into Montenegro’s banking sector: Mandatory reserve overview

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As per data from the Central Bank of Montenegro (CBCG), the mandatory reserve held by banks stood at €288.25 million at the end of February.

Out of this total, 71.09 percent was kept in reserve accounts domestically, while 28.91 percent was held in CBCG accounts abroad.

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In January, the average total deposits in banks, which form the basis for calculating the mandatory reserve, amounted to €5.28 billion. Of this sum, demand deposits constituted 84.12 percent, with the remaining 15.88 percent being time deposits.

Montenegrin banks adhere to CBCG’s directive regarding the mandatory reserve. This directive sets forth a system for computing the mandatory reserve, applying a 5.5 percent rate to demand deposits and deposits with a term of up to one year, and a 4.5 percent rate to deposits with terms exceeding one year.

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For deposits with terms over one year but with the option of early withdrawal within one year, a 5.5 percent rate is applied.

Since January 2018, the base for calculating the mandatory reserve has encompassed both time and demand deposits, excluding those of central banks.

CBCG remunerates banks with a monthly fee calculated at the €STR (Euro Short-Term Rate) minus ten basis points annually on 50 percent of the allocated mandatory reserve, ensuring it does not fall below zero.

Banks have the option to utilize up to 50 percent of the mandatory reserve for meeting daily liquidity requirements, on the condition that the amount utilized is returned on the same day without incurring interest.

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