The Action for Social Justice (ASP) has urged the Ministry of Finance to consider implementing a maximum interest rate for loans, extending this measure beyond banks to include other lenders like microcredit institutions. This proposal has elicited strong reactions, particularly from Bratislav Pejaković, Secretary General of the Association of Banks of Montenegro, who contends that the issue lies not with banks but with a complex interplay of market conditions, risks, and economic stability.
Pejaković emphasizes that interest rates reflect broader economic health, including political stability and public debt. He warns against populist measures that oversimplify the situation, stressing the need for a deeper understanding of the economic ecosystem to find effective solutions.
He argues that the focus should be on strengthening the economic environment to facilitate lower interest rates in the long run, rather than targeting banks with unfounded criticisms. Pejaković highlights the importance of addressing underlying factors like financial literacy and the necessity of solid business plans when seeking loans.
According to Pejaković, banks in Montenegro operate under strict international standards and are regularly monitored by both national and international regulatory bodies. He asserts that a strong banking system is crucial for economic growth and that banks contribute significantly to the economy, including paying substantial taxes that support public services.
Despite the challenges, Pejaković points out that some businesses have access to loans with rates below the central bank’s base rate. He explains that deposit interest rates currently stand at around 4% annually, a figure that is competitive by regional standards.
The ASP’s recommendation comes as they highlight the excessive profits reported by banks, totaling €230 million in undistributed profits last year. They note that while the average effective interest rate for loans is about 7%, microcredit institutions often charge upwards of 20%, raising concerns about predatory lending practices.
ASP advocates for a reasonable and fair cap on interest rates, suggesting that this regulation should be crafted through collaboration among all stakeholders. They argue that existing legislative efforts, such as proposed laws addressing consumer loan rates, do not adequately protect citizens from high interest rates.
Additionally, ASP calls for greater transparency in the ownership structures of banks, advocating that domestic institutions disclose ultimate owners to enhance accountability and control over the origins of funds.
The discussion highlights the ongoing tension between the need for financial regulation to protect consumers and the importance of maintaining a stable banking environment for economic development.
