In last 15 years, there has been no direct payment transaction between Montenegro and Serbia.
This issue was brought up to date during the meeting between the presidents of Montenegro and Serbia, Jakov Milatović and Aleksandar Vučić, in Belgrade on July 10, who assessed that this is an obstacle to the development of business and economic relations between the two countries.
Direct payment transaction all these years, despite numerous promises by officials, has not been established because the banks in Montenegro had no interest in participating in it, as it was regulated in 2007.
Montenegro and Serbia, as well as other countries in the region, conduct payments through foreign correspondent banks.
In the Central Bank, the supreme monetary institution in Montenegro, they cite as the most optimal solution the project of connecting the central banks of the Western Balkans with the European Central Bank – TARGET Instant Payment Settlement.
This project is taking place under the auspices of the Berlin Process, an initiative aimed at connecting the Western Balkan countries and the European Union on the way to EU membership.
When was direct payment stopped?
After leaving the joint state with Serbia and gaining independence of Montenegro in 2006, direct payment transactions between the two countries were stopped.
A year later, the Agreement on International Clearing from 2007 was signed between Montenegro, Bosnia and Herzegovina and Serbia under the auspices of the National Bank of Serbia.
The agreement came to life between Bosnia and Herzegovina and Serbia, while Montenegro did not join the system.
In order to establish direct payment transactions, it was necessary for banks from both countries to conclude bilateral agreements on opening an account, through which business transactions would be paid.
However, no bank based in Montenegro was interested in joining that system, even though the Central Bank, by signing the Agreement, created the conditions for the functioning of such a money transfer system.
As they unofficially explained to us from banking circles, it is more profitable for banks that do not have a large turnover to perform transactions through foreign banks, where they have open accounts.
What do the officials say?
After the restoration of Montenegro’s independence, all governments promised to establish direct payment transactions, but this did not happen.
Numerous meetings of businessmen and officials during the government in August 2020 of the deposed Democratic Party of Socialists ended with the conclusion that direct payment transactions between Serbia and Montenegro should be established.
However, the banks did not see their own interest in this, and the Central Bank did not have and does not have a mechanism to oblige them to do so.
And the new authorities continued with the same efforts.
The Minister of Finance of Montenegro, Aleksandar Damjanović, announced in the middle of last year that this department, in a letter to the Central Bank, initiated the establishment of direct payment transactions with Serbia.
In the same year, during a meeting in Belgrade with Serbian Prime Minister Ana Brnabić, Prime Minister Dritan Abazović said that he was committed to this initiative.
The issue was brought up to date during the last meeting between the officials of Montenegro and Serbia, President Jakov Milatović and Aleksandar Vučić in Belgrade on July 10.
I would not like to find the culprit, but from our side it is completely clear. It is about international clearing and neither the commercial banks in Montenegro nor the Central Bank have any costs for it – claims Vučić.
He said that “something else” is involved.
The majority of correspondent banks in Montenegro are German and Swiss, and since the introduction of the euro they want to have full control – said Vučić.
And the businessmen of the two countries have been pointing out for years that their problem is the payment transaction through foreign correspondent banks, which creates additional costs for them in the form of high commissions, and then they wait more than two days for the money to “lie” in their account.
Milatović supported the idea of establishing a direct payment transaction because, as he said, Serbia is one of the most important economic partners of Montenegro.
What does the data say?
As Milatović stated, Serbia was the largest foreign investor in 2022 with EUR 137 million or 12 percent of the total value of foreign investments, which is an increase of 80 percent compared to the previous year.
Interpretations that the establishment of the clearing of international payments with Serbia would save the Montenegrin economy more than EUR 10 million per year are arbitrary, the Central Bank informed Radio Free Europe.
In October 2022, the Central Bank conducted an analysis of the calculated fees in payment transactions with Serbia, which, as they state, indicate the unfoundedness of these estimates.
This means, they conclude from the Central Bank, that banks earned only 0.17 percent of the total value of transactions. As many as six out of 11 banks earned less than EUR 100,000 per year on this basis:
It is clear that we cannot talk about systemic savings for the economy and individuals. On the other hand, it is obvious why some banks do not find a commercial reason for establishing this system.
Where to look for a solution?
The Central Bank believes that the most optimal solution should be sought within the Berlin process, through the connection of the central banks of the Western Balkan countries and the European Central Bank.
It Is about the creation of a multilateral connection of the Western Balkan central banks with the TARGET Instant Payment Settlement (TIPS) of the European Central Bank.
The experts of the World Bank, as well as the central banks of the region, concluded that TIPS is the best and significantly more efficient scenario than the connection with the clearing system of the National Bank of Serbia and some new regional initiatives.
TIPS is a new market infrastructure service launched by the Eurosystem in November 2018, which, according to the CBCG, enables clients to transfer money in real time, 24 hours a day, every day.
In this way, they say, citizens and companies would be able to transfer money within a few seconds, regardless of the working hours of their bank.
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