The 2003 Deposit Protection Law established the Deposit Protection Fund, regulated the system for deposit protection and the Fund`s operations. The subsequent amendments in 2005 ensured the alignment with the Directive EC/19/94. Later on, with the adoption of a new Deposit Protection Law in July 2010, deposit protection was largely harmonized with the introduced changes in the principles of deposit protection in the EU and the world.
During the process of accession to the European Union, Montenegro has undertaken, inter alia, the obligation to harmonize its financial legislation with the Directive 2014/49/EU and Directive 2014/59/ EU. This was achieved with the enactment of a package of legal regulations, i.e. by adopting the Law on Credit Institutions, the Law on Resolution of Credit Institutions, the Deposit Protection Law, and amendments to the Bank Bankruptcy and Liquidation Law, which entered into force in early 2020.
On 2 December 2019, the Parliament of Montenegro passed a new Deposit Protection Law that was published in the Official Gazette of Montenegro no. 072/19 as of 26 December 2019, and it entered into force as of 3 January 2020.
The Fund`s mission is to ensure the safety of deposits held in banks and efficient and expedient compensation of guaranteed deposits in case of bankruptcy initiated in any bank operating in Montenegro.
Boosting depositors’ confidence in the Montenegrin banking system and protecting depositors from loss of funds in the event of bank bankruptcy. The Fund achieves these goals with clearly defined obligations to depositors, by promoting public confidence in the deposit protection system, and providing funds for the guaranteed deposit protection.
Main features of the deposit protection system in Montenegro
Deposit protection includes deposits of private individuals and legal entities, residents and non-residents in all banks in Montenegro. All types of deposits opened in the name of the owner are protected, including giro accounts, current accounts, and savings deposits. Exemptions from deposit protection are specified in Article 6 paragraph 2 of the Deposit Protection Law, in accordance with the prevailing norms in the world
In the event of a bank bankruptcy, the Deposit Protection Fund guarantees the compensation of up to 50,000 euros per depositor, regardless of the number and type of deposits in that bank.
The amount to be paid out is determined by deducting a depositor`s due liabilities to the bank from the sum of balances on all accounts that a depositor has with the bank on the day of opening the bankruptcy.
The guaranteed amount is determined as follows:
First, all deposits of one depositor in the bankrupt bank are added up, including any accrued interest (up to the bank bankruptcy date). Then all due liabilities of the depositor to this bank are deducted from the total sum. The resulting balance can be lower, higher or equal to the guaranteed deposit of 50,000 euros. If the resulting balance is less than 50,000 euros, the depositor is paid the total amount available sum up to the amount of the guaranteed deposit. If the balance is equal to or exceeds 50,000 euros, the depositor is paid 50,000 euros, and the remainder from the bankruptcy estate.
Reimbursement of the guaranteed deposit from the Fund’s resources starts no later than 15 business days following the protected event date, i.e. the day of declaration of bank bankruptcy, with the possibility of extending this deadline for another 10 business days at the request of the trustee in bankruptcy.
The Fund will inform the depositors via the media about the procedure for exercising their right to the compensation of guaranteed deposits, as well as about the selected payout bank, and the place and date of commencement of the payout.
All banks licensed by the Central Bank of Montenegro are included in the deposit protection system in Montenegro, including branches of Montenegrin banks operating abroad.
The Deposit Protection Fund is responsible for insuring deposits in banks. In the event of a bank bankruptcy, the Fund guarantees to depositors the compensation of deposits up to the guaranteed amount specified by the law and within the prescribed period.