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 4– Capital Movements and Payments Bilateral screening: Chapter 4 PRESENTATION OF MONTENEGRO Brussels, 21 February 2013

2. Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments PAYMENT SYSTEM Nađa Marović Central Bank of Montenegro nadja.marovic@cbcg.me nadja.marovic@cbcg.me

3. 3 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments CURRENT LEGISLATIVE FRAMEWORK IN MONTENEGRO LAW ON NATIONAL PAYMENT OPERATIONS (OGM 61/08 and 31/12) 1)Decision on the structure of the transfer execution account and the detailed conditions and manner of the account opening and closing (OGM 24/09, 15/11); 2)Decision on the unique structure for identification and classification of the accounts by IBAN standard for cross border payments (OGRM 74/06); 3)Decision on the contents of the Central registry of accounts (OGM 24/08,15/11); 4)Decision on the records of accounts for international payment transactions (OGM 24/09, 15/11); 5)Decision on the minimum elements of credit and debit orders (OGM 24/09, 41/09); 6)Decision on the conditions and manner of performing certain activities involved in the transfer execution by the agent (OGM 24/09); 7)Decision on the issuing and use of remote access instruments and the reporting manner and timelines (OGM 24/09); 8)Decision on detailed conditions for the issuing and revoking of the payment system licence and the issuing of approval (OGM 24/09); 9)Decision on the minimum value of interbank transfers of assets to be processed in RTGS system (OGM 24/09); 10)Decision on the manner and procedure of the national payment system supervision (OGM 15/11); 11)Decision on payment system supervision (OGM 24/09). Payment system rules for interbank payment transfers (OGM 24/09).

4. 4 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments ASSESSMENT OF THE CURRENT LEGAL FRAMEWORK IN MONTENEGRO Within the TWINNING PROJECT: “Strengthening the Regulatory and Supervisory Capacity of the Financial Regulators in Montenegro“ which lasted from February 2009 until December 2011, representatives of the Bulgarian National Bank carried out the assessment of the current legal framework; The assessment showed that high standards in payment services provision had been reached (national payment transactions are carried out on the same business day and international transaction within one day); It also showed that the current legal framework is more than 80% in compliance with EU regulations; The key issues where there is non-compliance with EU regulations involve: - information of payment service users at a lower level; - the lack of payment institutions; - the lack of possibility of e-money issuing and e-money institutions; - restricting payment system operators to banks.

5. 5 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments INSTITUTIONAL FRAMEWORK Payment service providers – Central Bank of Montenegro and 11 banks, as of the payment system reform from 2005; Payment System – According to the current Law, a payment system operator may be: 1. the Central Bank of Montenegro, or 2. a bank, if indicated as a payment system operator in the payment system license; The Central Bank of Montenegro is the owner, operator, participant and agent of the payment system for settlement of all interbank transfers (Real Time Gross Settlement (RTGS) system); No other payment systems in Montenegro.

6. 6 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments DRAFT OF NEW PAYMENT SYSTEM LAW Drafting of a new PAYMENT SYSTEM LAW started in November 2011 with the representatives of the Bulgarian Nation Bank within the TWINNING PROJECT: “Strengthening the regulatory and supervisory capacity of the financial regulators in Montenegro“; Working version of the Draft Payment System Law was sent to representatives of the European Commission - Internal Market and Services Directorate General (DG MARKT) in June 2012; In September 2012, DG MARKT sent general comments and recommendations, which have been accepted and incorporated in the Draft law; The Council of Central bank of Montenegro addopted the Draft Payment System Law in October 2012 and sent it to the Ministry of Finance; The Ministry of Finance submitted the Draft Payment System Law for public hearing, which ended on 10 December 2012; After the public hearing, the innovated version of the Draft Payment System Law was prepared and sent to the EC two weeks ago.

7. 7 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments DRAFT PAYMENT SYSTEM LAW TRANSPOSES INTO MONTENEGRIN LEGISLATION : Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC; Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC; Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems; and Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims.

8. 8 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments SUBJECT OF THE DRAFT PAYMENT SYSTEM LAW The The Draft Payment System Law provides for: 1)the categories of the payment service providers; 2)the types of payment services; 3)the requirements for information provision in payment services; 4)the rights and obligations of parties in the provision of payment services; 5)the terms and procedure for licensing, operation and supervision of payment institutions; 6)the requirements for issuing electronic money and the requirements and procedure for licensing, operation and supervision of the electronic money institutions; 7)payment systems in Montenegro and settlement finality in payment settlement systems; 8)the requirements and procedure for licensing, operation, supervision and oversight of payment systems; 9)the procedure for out-of-court redress in connection with the provision of payment services; 10)Special component - providing payment services with Member States after Montenegro's accession to the European Union.

9. 9 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union PAYMENT SERVICE PROVIDERS Chapter 4: Capital Movements and Payments Payment services in Montenegro may be provided by: 1)banks and other credit institutions whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; 2)a payment institution; 3)an electronic money institutions; 4)a branch of a third-country credit institution having its head office in Montenegro; 5)the Central Bank of Montenegro when not acting in its capacity as the monetary authority or other public authorities; 6)the state of Montenegro and local authorities when not acting in their capacity as public authorities. Persons who are not abovementioned payment service providers, may not provide payment services in Montenegro. Chapter 04:

10. 10 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union PAYMENT SERVICES Chapter 4: Capital Movements and Payments Payment services are: 1)services related to the placement of cash in a payment account, as well as related operations of servicing of a payment account; 2)services related to cash withdrawals from a payment account, as well as the operations of servicing of a payment account; 3) execution of payment transactions, including transfers of funds to a payment account with the user's payment service provider or with another payment service provider: - execution of direct debits, including one-off direct debits; - execution of payment transactions through a payment card or a similar device; - execution of credit transfers, including standing orders. Chapter 04:

11. 11 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union PAYMENT SERVICES (cont.) Chapter 4: Capital Movements and Payments 4) execution of payment transactions where funds are covered by a credit line for a payment service user: - execution of direct debits, including one-off direct debits; - execution of payment transactions through a payment card or a similar device; - execution of credit transfers, including standing orders; 5) issuing and/or acquiring of payment instruments; 6) money remittance; 7) execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the goods and services. Chapter 04:

12. 12 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union SPECIFIC INFORMATION OBLIGATIONS Chapter 4: Capital Movements and Payments The The Draft Payment System Law defines (according to Title III, Chapters 2 and 3 of the PSD) the precise information that should be provided in advance - before the conclusion of a contract and also before and after a payments transaction takes place. The information should be given in easily understandable words, and in a clear and comprehensive form, in Montenegrin language or in any other language agreed between the parties. The payment service provider provides the prior information on paper or on another durable medium. All abovementionned information is mandatory for consumers. In relation to corporate payment services users, parties (the PSP and the PS user) may agree to opt-out these requirements. Chapter 04:

13. 13 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union INFORMATION REQUIREMENTS FOR PAYMENT TRANSACTIONS Chapter 4: Capital Movements and Payments Chapter 04: Prior information and requirements Information to the payer after receipt of the payment order Information to the payee after execution of the payment transaction Single payment transaction Prior information and conditions Accessibility of information and conditions of the framework contract Changes in conditions of the framework contract Termination of the framework contract Information before execution on individual payment transactions Information for the payer on individual payment transactions Information for the payee on individual payment transactions Framework contract

14. 14 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments RULES APPLICABLE TO BOTH KIND OF PAYMENT TRANSACTIONS Providers may not charge users for necessary information; Burden of proving compliance rests on the information provider; Low value payment instruments & e-money instruments require less information; Currency conversion charges and exchange rates must be communicated; Charges or reductions must be communicated to users prior to transactions

15. 15 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union RIGHTS & OBLIGATIONS PROVISIONS Chapter 4: Capital Movements and Payments TheThe Draft Payment System Law defines rules of the provision and use of payment services. TheThe Draft Payment System Law defines the operational and technical issues regarding payment services and lays down detailed rules for authorisation and execution of payment transactions, liability of both PSP and PS users, as well as out-of-court redress procedures in case of disputes between them. All requirements are mandatory for consumers. In relation to corporate customers, parties may agree to opt-out some specified provisions. Full amount principle: No deductions of charges from the full amount of a payment transaction are allowed, except by the payee’s PSP where this has been agreed with the payee. Chapter 04:

16. 16 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union EXECUTION OF PAYMENT TRANSACTIONS Chapter 4: Capital Movements and Payments The payment service provider shall ensure that the amount of the payment transaction is credited to the payee's account with the payment service provider at the end of the same business day; After receiving the amount of a payment transaction, the payee's payment service provider shall credit the payee's payment account with the credit value date and make the funds available to the payee; The payee's payment service provider shall transmit a payment order initiated by or through the payee to the payer's payment service provider within the time limits agreed between the payee and the payee's payment service provider, and in the case of a direct debit, within the time limits enabling settlement on the agreed due date of the payer's liability; Where the payee does not have a payment account with the payment service provider, the funds shall be made available to the payee by the payment service provider by the end of the same business day the funds have been received. Chapter 04:

17. 17 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union OTHER RIGHTS & OBLIGATIONS Chapter 4: Capital Movements and Payments The The Draft Payment System Law also prescribes provisions related to: Chapter 04: Obligations in relation to payment instruments Incorrect unique identifier Unauthorised or incorrectly executed payment transactions Payment service provider’s liability for unauthorised payment transactions Payer's liability for unauthorised payment transactions

18. 18 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments PAYMENT INSTITUTION Payment institution Payment institution is a legal entity established in Montenegro or in the Member State that has been granted a license by the competent authorities to provide and execute payment services in Montenegro or throughout the EU/EEA counties. Competent authority in Montenegro The Central Bank of Montenegro issues a license for conducting activity of a payment institution when the seat of the applicant is in Montenegro. Prohibition for operations without a license. Any persons who intend to provide payment services as a payment institution shall obtain a license as a payment institution before commencing the provision of payment services. Only authorised payment institutions may provide the payment services included in their license. Register The Central Bank of Montenegro keeps a public registry of licensed payment institutions, their agents and branches.

19. 19 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union CAPITAL REQUIREMENTS Chapter 4: Capital Movements and Payments Initial Capital At the time of obtaining the license, the payment institution should hold initial capital of no less than: 1)20 000 EUR – where the payment institution is to provide money remittance; 2)50 000 EUR – where the payment institution is to execute payment transactions with the consent of the payer to the execution of the payment transaction given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the goods or services; 3)125 000 EUR – where the payment institution will provide any of the other payment services. Own Funds A payment institution should hold, at all times, own funds that shall never fall below the initial capital or minimum amount of own funds specified in accordance with the law, whichever is higher. Own funds shall be calculated as a percentage of the amount of payments according to a specific formula, prescribed by the Central bank of Montenegro regulation. Chapter 04:

20. 20 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union ADDITIONAL ACTIVITIES Chapter 4: Capital Movements and Payments Apart from providing payment services, payment institutions are entitled to engage in the following activities: 1)the provision of operational and ancillary services closely related to payment services, such as ensuring the execution of payment transactions, foreign exchange services, safekeeping activities, and the storage and processing of data; 2)activity of a payment system operator, with the exception of payment systems providing settlement finality; 3)other business activities. Where a payment institution, in addition to payment services, engages in other business activity, the Central bank of Montenegro may request the establishment of a separate entity for the payment services business, where the other business activity impairs or is likely to impair either the financial stability of the payment institution or the ability of the Central bank of Montenegro, as a supervisory authority, to supervise the payment institution. Chapter 04:

21. 21 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union GRANTING OF CREDITS AND PROHIBITION OF ACCEPTING DEPOSITS Chapter 4: Capital Movements and Payments Payment institutions may grant credits related to payment services, only if the following conditions are met: 1)the credit should be ancillary and granted exclusively in connection with the execution of a payment transaction; 2)such credit should not be granted from the funds received or held by the payment institution for the purpose of executing a payment transaction; and 3)the own funds of the payment institution should at all times, and to the assessment of the Central Bank of Montenegro, be appropriate in view of the overall amount of the credit granted. A payment institution shall not perform activities which consist of accepting deposits or any other repayable funds. : Chapter 04:

22. 22 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union SAFEGUARDING MEASURES Chapter 4: Capital Movements and Payments The payment institution shall safeguard the funds received from payment service users or through another payment service provider for the execution of payment transactions. The payment institution shall not commingle the funds of payment service users on whose behalf they are held with the funds of other natural or legal persons. Where the payment institution holds the funds and these funds have not been delivered to a payee or transferred to another payment service provider by the end of the business day following the day when the funds were received, the payment institution shall: - deposit them in a separate account with a bank in Montenegro; - deposit them in a separate account with a bank in abroad; - invest them in low-risk and highly liquid types of assets. The funds of the payment service users shall not be the property of a payment institution, and shall neither be included in its assets, or winding-up or bankruptcy estate, nor may they be subject to execution or enforced collection against the payment institution. : Chapter 04:

23. 23 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments PAYMENT ACCOUNTS OF PAYMENT INSTITUTIONS Payment institutions may hold payment accounts used exclusively for payment transactions. Payment institutions may receive funds from payment service users with a view to the provision of payment services only. Any funds received by payment institutions from payment service users with a view to the provision of payment services should not constitute a deposit. Payment institutions should lay down in a separate payment account with a bank any funds received by payment service users that are not yet delivered to the payee or transferred to another payment service provider by the end of the business day following the day when the funds have been received.

24. 24 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments BRANCHES AND AGENTS A payment institution may engage in the business for which it was licensed directly or through an agent. Agents and branches may not start operation before they are registered. After checking the information and documents provided by the payment institution, the Central Bank of Montenegro registers branches or agents in the public register of licensed payment institutions. A payment institution remains fully liable for any acts of its employees, or any agent, branch or entity to which activities are outsourced. The Central Bank of Montenegro shall prescribe detailed requirements for agent operations and the information and documents required for their listing in the register.

25. 25 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union LIST OF IMPLEMENTING OPTIONS OF “PSD” Chapter 4: Capital Movements and Payments Article 9(2) PSD Calculation of safeguarding requirements when funds can be used for future payment transactions and for non-payment services (Article 79 paragraph 6) Article 9(3) PSD Application of safeguarding requirements to non hybrid payment institutions (Article 79) Article 33 PSD Burden of proof on the payment service provider for information requirements (Article 11) Article 52(3) PSD Interdiction or limitation of surcharging practices (Article 28 paragraph 5) Article 72 PSD Shorter maximum execution times for purely national payment transactions (Article 44 paragraph 1) Chapter 04:

26. 26 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union ELECTRONIC MONEY Chapter 4: Capital Movements and Payments Electronic money means electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined under this law, and which is accepted by a natural or legal person other than the electronic money issuer. Electronic money issuers may be: 1)banks and other credit institutions whose business is to accept cash deposits and grant loans for their own account; 2)electronic money institutions that has been approved pursuant to this law; 3)branch of a third-countries credit institution with its registered office in Montenegro; 4)Central bank of Montenegro when not acting in their capacity as monetary authority or other public authorities; 5)State of Montenegro and local self-government units when not acting in their capacity as public authority. Natural or legal persons who are not electronic money issuers shall be prohibited from issuing electronic money. Chapter 04:

27. 27 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union ISSUANCE AND REDEEMABILITY Chapter 4: Capital Movements and Payments Electronic money issuers shall issue electronic money at par value on the receipt of funds. Upon request by the electronic money holder, electronic money issuers shall redeem, at any moment and at par value, the monetary value of the electronic money held. The contract between the electronic money issuer and the electronic money holder shall clearly and prominently state the conditions of redemption, including any fees relating thereto, and the electronic money holder shall be informed of those conditions before being bound by any contract or offer. Redemption may be subject to a fee only if stated in the contract and only in some strictly specified cases (article 11 paragraph 4 Directive 2009/110/EC) Electronic money issuer shall prohibit the granting of interest or any other benefit related to the length of time during which an electronic money holder holds the electronic money. Chapter 04:

28. 28 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 04: Chapter 4: Capital Movements and Payments ELECTRONIC MONEY INSTITUTIONS Electronic money institution Elecronic money institution is a legal entity established in Montenegro or in the Member State that has been granted a license by the competent authorities to issue electronic money in Montenegro or throughout the EU/EEA counties. Competent authority in Montenegro The Central Bank of Montenegro issues a license for conducting activity of a elecronic money institution when the seat of the applicant is in the Montenegro. Register The Central Bank of Montenegro keeps a public register of licensed elecronic money institutions, their agents and branches. Issuing and distribution electronic money. Electronic money institution shall not issue electronic money through agent. Electronic money institution may distribute or redeem electronic money through natural or legal persons which act on their behalf.

29. 29 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Capital Movements and Payments CAPITAL REQUIREMENTS AND OTHER ISSUES Initial Capital Initial capital of an electronic money institution shall not be less than EUR 350.000, at the time of authorisation. Own Funds Own funds of an electronic money institution for the activity of issuing electronic money shall amount to at least 2% of the average outstanding electronic money. The Central Bank of Montenegro shall prescribe in more detail the conditions and manner of calculating own funds of electronic money institutions. * * * Many articles related to the payment intitutions shall apply mutatis mutandis to electronic money institutions, including provisions on the supervision of payment institutions and out-of-court settlement of disputes. Chapter 04:

30. 30 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union ADDITIONAL ACTIVITIES Chapter 4: Capital Movements and Payments In addition to issuing electronic money, electronic money institutions shall be entitled to engage in any of the following activities: 1)the provision of payment services listed in Article 3 of this Draft law; 2)the granting of credit related to payment services referred to in Article 3 points 4), 5) or 7) of this Draft law, provided that the conditions laid down in Article 81(1) of this Draft law are met; 3)the provision of operational services and closely related ancillary services in respect of the issuing of electronic money or to the provision of payment services; 4)the operation of payment systems, other than payment system providing settlement finality, notwithstanding access to payment systems in accordance with the provisions of Article 144 of this Draft law; or 5)business activities other than issuance of electronic money. Chapter 04:

31. 31 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union OUT-OF-COURT SETTLEMENT OF DISPUTES Chapter 4: Capital Movements and Payments Out-of-court settlement of disputes in payment system shall be performed by the Committee for out-of-court settlement of disputes in payment system. The procedure before the Committee shall be initiated in the moment of submission of proposal for out-of-court settlement of disputes in payment system. The Committee shall be founded in the Montenegrin Bankers Association which performs professional and administrative operations for the Committee requirements and shall provide premises and other technical conditions for the work of the Committee. The Committee shall have five members, of which two members shall be elected and relieved of duty by the Montenegrin Bankers Association and organisations engaged in the protection of rights and interests of consumers, and one member shall be elected and relieved of duty by the Central Bank of Montenegro. Chapter 04:

32. 32 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union SETTLEMENT FINALITY IN PAYMENT SYSTEMS Chapter 4: Capital Movements and Payments Directive 98/26/EC and Directive 2009/44/EC are fully implemented in the Draft Payment System Law. Transfer orders and netting in the event of insolvency proceedings Transfer orders and netting shall be legally enforceable and binding on third parties even in the event of insolvency proceedings against a participant, provided that transfer orders were entered into the system before the moment of opening of such insolvency proceedings. This shall apply even in the event of insolvency proceedings against a participant (in the system concerned or in an interoperable system) or against the system operator of an interoperable system which is not a participant. Where transfer orders are entered into a system after the moment of opening of insolvency proceedings and are carried out within the business day, as defined by the rules of the system, during which the opening of such proceedings occur, they shall be legally enforceable and binding on third parties only if the system operator can prove that, at the time that such transfer orders become irrevocable, it was neither aware, nor should have been aware of, the opening of such proceedings. Chapter 04:

33. 33 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union SETTLEMENT FINALITY IN PAYMENT SYSTEMS Chapter 4: Capital Movements and Payments The moment of opening of insolvency proceedings According to the Draft Law, insolvency proceedings against a participant in a payment system where settlement finality is performed shall occur either by opening bankruptcy proceeding or winding up proceedings. The moment of opening of insolvency proceedings shall be the moment when competent authority reaches a decision on opening bankruptcy proceedings or winding up proceedings against such participant. Insolvency proceedings shall not have retroactive effects on the rights and obligations of a participant arising from, or in connection with, its participation in a system before the moment of opening of such proceedings. This shall apply, inter alia, to the rights and obligations of a participant in an interoperable system, or of a system operator of an interoperable system which is not a participant. Chapter 04:

34. 34 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union SETTLEMENT FINALITY IN PAYMENT SYSTEMS Chapter 4: Capital Movements and Payments Rights of holders of collateral security in the event of insolvency proceedings The rights of a system operator or a participant to collateral security provided to them in connection with a system or any interoperable system, and the rights of the Central Bank of the Montenegro, central banks of the Member States or the European Central Bank to collateral security provided to them, shall not be affected by insolvency proceedings against the participant (in the system concerned or in an interoperable system); the system operator of an interoperable system which is not a participant, or any third party which provided the collateral security. Such collateral security may be called for the satisfaction of those rights. Chapter 04:

35. 35 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union AFTER MONTENEGRO`S ACCESSION TO THE EUROPEAN UNION Chapter 4: Capital Movements and Payments The provisions of Titles I to IX of the Draft law shall apply to cross-border payments after Montenegro's accession to the European Union, unless otherwise specified in Title XI Time of execution of payment transaction For cross-border payment transactions – by the end of the next business day or within the agreed time limits, but not later than by the end of the fourth business day after the receipt of the payment order. Applicable to: - all payment transactions in euros; - national payment transactions in the currency of the Member State concerned outside the euro area; - payment transactions involving only one currency conversion between the euro and the currency of a Member State outside the euro area, provided that the required currency conversion is carried out in the Member State outside the euro area concerned and, in the case of cross-border payment transactions, the cross-border transfer takes place in euros. Chapter 04:

36. 36 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union FREEDOM TO PROVIDE SERVICES Chapter 4: Capital Movements and Payments After Montenegro's accession to the European Union: A payment institution licensed in Montenegro may provide payment services it was licensed for in the territory of another Member State through a branch, agent, or directly, after the Central Bank of Montenegro has notified the competent authority on the payment institution's intention to operate in another Member State for the first time; A payment institution licensed in another Member State may provide payment services it was licensed for in the territory of Montenegro through a branch, agent, or directly, after the Central Bank of Montenegro has been notified by the competent authority which granted the license; This provisions shall apply mutatis mutandis on the electronic money institutions. Chapter 04:

37. 37 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union AFTER MONTENEGRO`S ACCESSION TO THE EUROPEAN UNION Chapter 4: Capital Movements and Payments Charges for payment transactions Article 175 of the Draft law - Charges for payment transactions offered by a payment service provider have to be the same for the euro payment of the same value whether the payment is national or cross-border (Basic principle of cross-border payments Regulation (EC) No. 924/2009) Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009: Full migration to pan-European payment schemes for credit transfers and direct debits without distinction national – cross-border payment and implementing the uniform technical standards for SEPA credit transfers/direct debits: IBAN, BIC and SEPA data format (ISO 20022 XML), might be implemented by the Central bank of Montenegro regulations Chapter 04:

38. 38 Capital Movements and Payments M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union TRANSITIONAL PROVISIONS Chapter 4: Capital Movements and Payments Time limits for compliance with provisions of this Law Legal persons, with the exception of banks, which as at the date of entry into force of this Law provide payment services shall submit to the Central Bank of Montenegro an application for authorisation to provide payment services within 90 days of the date of entry into force of this Law. Banks shall continue providing payment services without new special approval of the Central Bank of Montenegro Legal persons that fail to submit the application for authorisation to provide payment services shall cease to provide payment services Framework contracts Framework contract concluded until the effective date of this Law shall continue applying until its expiration, and payment service providers shall, until the application of this law, submit relevant information which has not been previously submitted to all payment service participants with which they concluded framework contract. Chapter 04:

39. Thank you for your attention QUESTIONS