This chapter covers four key areas: banking and financial conglomerates, insurance and occupational pensions, financial markets infrastructure, securities markets and investment services.

In the area of banks and financial conglomerates in the EU acquis, the requirements for issuance of work, operating and prudential control of credit institutions’ operations, as well as requirements relating to the calculation of capital adequacy, are applied to credit institutions and investment firms. The legal framework in this sector prescribes the rules relating to the additional supervision of financial conglomerates, annual and consolidated reports of banks and other financial institutions, as well as the reorganization and liquidation of credit institutions with branches in several Member States. Special attention of the regulator is focused on the introduction of a unique deposit insurance scheme with mandatory participation of all banks in the system in its functioning.

In the area of insurance and pension funds, the rules governing the issuance of operating, operating and supervision of life and non-life insurance companies and the reorganization and liquidation of insurance companies with branches in several Member States are envisaged. The acquis establishes the rules for additional supervision of the group of insurers, and includes the regulatory framework for reinsurance in the EU in order to eliminate obstacles to the performance of reinsurance activities, such as the obligation for reinsurance companies to provide assets in stock. The rules for annual and consolidated reports of insurance companies are prescribed.

When it comes to financial market infrastructure, the rules in this section aim to reduce and harmonize formal requirements and procedures for the establishment and implementation of collateral throughout the EU, as well as reducing the systemic risk associated with insolvency of participants in payment systems and in securities settlement systems.

The regulatory framework of the capital market includes rules relating to investment services and the securities market, the establishment, operation and supervision of operations of investment funds and regulated markets, compensation scheme for investors, publication of prospectuses, prohibition of market abuse, etc. The prospectus rules aim to strengthen the protection of investors regardless of where they are issued to the EU, as they must provide clear and complete information needed to make investment decisions.

When was the chapter opened?

Chapter 9 – Financial Services was officially opened on 22 June 2015 at the Intergovernmental Conference in Luxembourg.

Closing benchmarks?

The European Commission defined five benchmarks:

1. Montenegro demonstrates an advanced level of alignment with the acquis in the field of banking and financial conglomerates, notably in relation to capital requirements, supervision of financial conglomerates, deposit protection, reorganization and winding up of credit institutions and demonstrates that it will be ready to implement the acquis as of accession.

2. Montenegro demonstrates an advanced level of alignment with the acquis in the field of insurance and occupational pensions, notably as regards life insurance, reinsurance, insurance intermediation, motor vehicle liability insurance, Solvency II and Institutions for Occupational Retirement Provision directive (IORPs) and demonstrates that it will be ready to implement the acquis as of accession.

3. Montenegro demonstrates an advanced level of alignment with the acquis in the field of financial market infrastructure, notably as regards settlement finality and financial collateral arrangements and demonstrates that it will be ready to implement the acquis as of accession.

4. Montenegro demonstrates an advanced level of alignment with the acquis in the field of securities markets and investment services, notably as regards Markets in Financial Instruments directive (MiFID), prospectus, transparency and market abuse and demonstrates that it will be ready to implement the acquis as of accession.

5. Montenegro demonstrates the robustness and independence of regulatory and supervisory institutions with an adequate administrative capacity for the implementation and enforcement of the aquis in the field of financial services.

The particular challenge of transposing the financial services acquis lies in the fact that it is changing and evolving on a daily basis. In this regard, the EC has defined the benchmarks in order for Montenegro to harmonize its legislation in all sub-areas of Chapter 9 and to achieve an advanced level of compliance with EU rules. It is also necessary to ensure the independence of financial services regulators and competent institutions, whose administrative capacity must be at the necessary level in order to meet EU requirements and standards.

What are the activities in the coming period?

In the following period, Montenegro will be committed to fulfilling its obligations under Chapter 9, which implies the adoption of a set of laws in the banking, insurance and securities markets. Namely, by adopting the Law on Credit Institutions, the Law on Resolution of Credit Institutions, the Law Amending the Law on Bankruptcy and Liquidation and the Deposit Insurance Law – in the field of banking; Law Amending the Law on Compulsory Traffic Insurance and the new Insurance Law (Solvency II) – in the field of insurance and the Law on Investment Funds, the Law on Alternative Investment Funds and the Law Amending the Law on Voluntary Pension Funds – in the market area the securities, will largely be met by the set requirements of the EC.

Institutions / organizations participating in the negotiating group?

The implementation of the acquis in this area lays within the competences of the Ministry of Finance (MF), the Central Bank (CBMN), the Capital Market Authority (CMA), Insurance Supervision Agency (ISA), and the Deposit Protection Fund (DPF).

What are the benefits for Montenegro from this chapter?

EU membership will have a positive effect on financial market participants as well as for citizens, entrepreneurs, investors or users of financial services. Innovation and supply of new types of services, as well as increased competition, will benefit entrepreneurs and citizens, especially when it comes to offering banks, but also offering products and services of non-banking financial institutions. In this regard, special attention is paid to ensuring the protection of users of services and their information on services provided by financial institutions, starting from the conclusion of a loan agreement, insurance or investment in capital markets. A greater degree of protection for financial services users is provided by a unique guaranteed deposit scheme, which strengthens public confidence in the banking system and promotes the stability of the financial system as a whole. Providing a better organized pension system by introducing a pension scheme under the auspices of the employer, it will provide an opportunity for employees to have additional benefits in terms of pension incomes.