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Montenegro’s banking: Understanding mandatory reserve regulations

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As of the end of March, the Central Bank of Montenegro (CBCG) reported that banks maintained a mandatory reserve totaling 286.05 million euros.

Of this amount, 70.87 percent was allocated to reserves held in domestic bank accounts, while 29.13 percent was designated for CBCG accounts abroad.

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In February, the average balance of total bank deposits—used as the basis for calculating the mandatory reserve—reached 5.25 billion euros. Among these deposits, 83.57 percent were in demand deposits, with the remaining 16.43 percent in time deposits.

Banks in Montenegro adhere to the CBCG’s directive regarding mandatory reserves. This entails applying a 5.5 percent rate to the portion of the base consisting of demand deposits and deposits with maturities of up to one year. For deposits with maturities exceeding one year, a rate of 4.5 percent is applied.

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In instances where deposits with maturities exceeding one year have a clause allowing early withdrawal within one year, a rate of 5.5 percent is applied.

Since January 2018, the mandatory reserve base has comprised time and demand deposits, excluding those held by central banks.

Furthermore, the CBCG reimburses banks for 50 percent of the mandatory reserves, subject to a monthly fee calculated based on the €STR (Euro Short-Term Rate) minus ten basis points annually. However, this rate cannot fall below zero.

Banks have the option to utilize up to 50 percent of the mandatory reserves, interest-free, to manage daily liquidity requirements, provided the amount withdrawn is returned on the same day.

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