If life-insurance policy fails to enable the bank the possibility of collecting the loan in case of a default, then the bank can’t grant cash loan with the repayment period longer than eight years, representatives of the Central Bank said when asked if the policy would be acceptable guarantee on the borrowings.
Central Bank of Montenegro has introduced macro-prudential measures stipulating that banks are obliged to request that cash credits with repayment period longer than eight years are completely secured by a high-quality collateral before they are granted by the bank.
CB representatives said that a policy, as a guarantee, must meet a set of requirements.
“High-quality collateral includes, among other things, life-insurance policy that meets the requirements stipulated in the decision, such as: the policy shall be issued by the insurance agency, subject to adequate supervision, the policy shall be vinculated and shall have purchase value enabling the bank to collect claims based on the purchase value”, explained the CB representatives.
Representatives of Association of Banks said that policies would be acceptable under specific conditions.
“Insurance policies will definitely be acceptable; for longer periods banks with high exposure will be imposed limitations. Apart from the means of securing used so far, banks will be required to reinforce their placements by collateral”, says Secretary General of the Association, Mr Bratislav Pejaković.
Elaborating on the latest CB decision, he says that, starting from January, banks will be obliged to request high-quality collateral, fiduciary, mortgage on the immovable property, pledge on movables, guarantees or counter-guarantees and other instruments of loan protection used for reducing loan risks.
Mr Pejaković says that citizens won’t be affected by new measures.