1. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 9 – Financial services Bilateral screening: Chapter 9 PRESENTATION OF MONTENEGRO Brussels, 10 June 2013

2. Chapter 9: Financial Services Reorganisation and winding-up of credit institutions Miomir Ćirović Head of Legislation Division Supervision Department Central Bank of Montenegro miomir.cirovic@cbcg.me M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: FINANCIAL SERVICES

3. Chapter 10: Information society and media M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Relevant Acquis DIRECTIVE 2001/24/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 4 April 2001 on the reorganisation and winding up of credit institutions Chapter 9: FINANCIAL SERVICES 3

4. Chapter 10: Information society and media M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union National Legislation Bank Bankruptcy and Liquidation Law (OGRM 47/01 and OGM 62/08, 44/10); Banking law ( OGM 17/08, 44/10); Central Bank of Montenegro Law (OGM 40/10, 46/10, 6/13) Chapter 9: FINANCIAL SERVICES 4

5. Chapter 10: Information society and media M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Institutes “ winding up ” and “reorganisation measures” in the national legislation “Winding up procedure”, within the meaning of Directive 2001/24/EC, in Montenegrin regulations refers to the banking bankruptcy and liquidation proceedings prescribed under the Bank Bankruptcy and Liquidation Law “Reorganisation measure”, within the meaning of Directive 2001/24/EC, is a measure of interim administration against a bank prescribed by the Banking Law, as this measure includes restrictions to third-party rights (Article 125, paragraphs 5-9) Chapter 9: FINANCIAL SERVICES 5

6. Chapter 10: Information society and media M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Institutional Framework The measures of reorganisation and winding up are performed by the Central Bank of Montenegro pursuant to the powers granted under the: 1. Central Bank of Montenegro Law, Article 14: “The Central Bank shall: 3) carry out bankruptcy and liquidation proceedings against banks and financial institutions in line with the law.” 2. Bank Bankruptcy and Liquidation Law, Article 3 : “The bankruptcy proceedings and liquidation proceedings over a bank shall be commenced and conducted by the Central Bank.” 3. Banking law, Article 116: “If the Central Bank establishes irregularities in the bank’s operations, it may take one of the following measures: 5) institute interim administration in the bank in accordance with Article 120 of this Law. “ Chapter 9: FINANCIAL SERVICES 6

7. Chapter 10: Information society and media M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition General assessment: Provisions of Directive 2012/44/EC which shall be applied only upon Montenegro's accession to the European Union so they are not transposed into the national legislation. The Bank Bankruptcy and Liquidation Law is highly complied with the requirements from Article 10 of the Directive 2012/44/EC which prescribes issues that must be regulated by national legislation. Chapter 9: FINANCIAL SERVICES 7

8. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition Compliance with Article 10 of the Directive: A. Powers of the credit institution and the liquidator: The CBCG commences the bankruptcy proceedings and appoints the bankruptcy administrator and the bankruptcy board, and the bodies of the CBCG in the bankruptcy proceedings; The bankruptcy administrator prepares the initial balance of bankruptcy, takes care of the payment of claims of the bank, adopts a decision on claims of the creditors, cashes in the property of the bank, prepares a draft of the main distribution, performs the payment of creditors from the bankruptcy pool of assets and prepares the final bankruptcy balance. The Bankruptcy Board shall supervise the performance of the Bankruptcy Administrator, give instructions for the conduct of the bankruptcy proceedings, decide on appeals against decisions of the Bankruptcy Administrator ( Article 13) Chapter 9: FINANCIAL SERVICES 8

9. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition (cont.) B. Dealing with the property of the bank under bankruptcy proceedings: Bankruptcy administrator is obliged to convert into cash the bank’s property that will be a part of the bankruptcy pool of assets (Article 13) Bankruptcy administrator may transfer a part or total assets and/or liabilities of the bank under bankruptcy proceedings to other bank or banks (Article 43); The property of the bank that goes into the bankruptcy pool of assets shall be sold by public auction, and in exception, through the acquiring of the offers or through direct negotiation (Article 43); In any sale, the Bankruptcy Administrator should accomplish as favourable price as possible, secure equal treatment of potential buyers, and disable any type of discrimination in the process of bidding and considering the bids (Article 55) Chapter 9: FINANCIAL SERVICES 9

10. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition (cont.) C. Off-set claims: The Bankruptcy administrator may, without the authorisation of the creditors, offset mutual claims of the bank and its creditors that have occurred before passing a decision on commencing bank bankruptcy proceedings (Article 42a). D. Treatment of current contracts: The contracts entered into with the bank before commencing the bankruptcy proceedings shall remain valid. Bankruptcy Administrator may in a period of 90 days rescind contracts. In that case, the other contracting party may only claim compensation of actual damages, as a bankruptcy creditor. (Articles 32-33) Chapter 9: FINANCIAL SERVICES 10

11. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition (cont.) E. Treatman of proceedings against a bank: All pending lawsuits against the bank shall be suspended on the day of commencing bankruptcy proceedings; No lawsuit against the bank may be filed except as provided in this Law.; On the day of commencing the bankruptcy proceedings, no collateral can be foreclosed against the bank nor can compulsory enforcement be done for the purpose of settlement of claims in respect of which there is an enforcement decision; Any proceedings related to security foreclosure and enforcement shall be stopped ( Articles 35-36). Chapter 9: FINANCIAL SERVICES 11

12. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition (cont.) F. Deciding on claims: The creditors of the bank report their claims within 30 days from the publication of the notice in the “Official Gazette of Montenegro”. The claims from the bank’s business records, as well as the claims identified under the final and binding court decision before the commencement of the bankruptcy proceedings, shall be considered filed. The Bankruptcy Administrator passes a decision in reference to the amount of the recognized claims and submits it to the creditors. An appeal may be adopted against those decisions before the Bankruptcy Board, and a complaint may be adopted against the decision before the Administrative Court. Chapter 9: FINANCIAL SERVICES 12

13. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition (cont.) G. Order to priority: 1) Secured claims,2) Central Bank 3) Deposit Protection Fund in accordance with guaranteed deposits; 4) non-compensated protected deposits; 5) other depositors; 6) other creditors, 7) subordinated debt and/or hybrid instruments; 8) bank shareholders. H.Creditors' rights after the closure of winding-up proceedings: - creditors who have not reported the claims up to the day of distribution of the bankruptcy pool of assets have the right to settle from the funds which went to the shareholders of the bank upon the closure of the liquidation proceedings - the request in reference to the settlement of the claims is submitted to the shareholders in a term of six months following the closure of the liquidation proceedings, Chapter 9: FINANCIAL SERVICES 13

14. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Level of Transposition (cont.) I. Costs of the proceedings: - The costs of the bankruptcy proceedings are defrayed by the bank in bankruptcy, J. Challenge the Legal Actions: - The Bankruptcy Administrator and creditors shall have the right to challenge the legal actions that the bank has made to the detriment of creditors during the last three years preceding the day the legal effects of commencing the bankruptcy proceedings have come into force, before the Commercial Court. Chapter 9: FINANCIAL SERVICES 14

15. Chapter 9: Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Manner of compliance and timeframe The adoption of the new Law that will : - be fully complied with requirements of the Directive 2001/24 which refer to the universality in the winding up and reorganisation of credit institutions with branches on other EU countries, mutual recognition of measures and proceedings and cooperation of authorities - treat the interim administration in banks as the measures of reorganisation in the sense of Directive 2001/24/EC. Time frame : end-2016. Chapter 9: FINANCIAL SERVICES 15

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