(Adds details throughout)
By Adam Tanner
BELGRADE Feb 21 Montenegro's central bank has
relaxed restrictions on the country's largest domestic bank Prva
Banka to allow limited lending, the regulator said on Monday.
The central bank's previous governor Ljubisa Krgovic --
since dismissed -- halted Prva Banka's lending activity in early
2009 because of its high percentage of non-performing loans.
The bank's largest shareholder is the family of ex-Prime
Minister Milo Djukanovic and some rival banks and outside
analysts had alleged government favouritism, including in
placing deposits with the bank.
A central bank official who did not want to be named said
the bank, the largest locally owned institution in a market
dominated by European banks, would now be able to resume loans
under limited circumstances.
Krgovic was replaced as governor in October after parliament
passed legislation ending his mandate, a move that some banking
officials and analysts saw as undermining the central bank's
His successor, Radoje Zugic, held various board titles with
Prva Banka between 2008 through August 2010 when he was
appointed to his new job.
In a statement, the central bank said the overall banking
sector still faced some weaknesses, but was experiencing a
better outlook in terms of stability, liquidity and solvency.
"The council has considered the consolidation measures of
Prva Banka and stated that they are fully in accordance with the
law, and gave the central bank's full support in taking further
measures to consolidate the bank," the central bank said.
Montenegro's banking sector enjoyed a boom in the mid 2000s
as investors, including many from Russia, bought real estate
along the country's scenic Adriatic coastline and made other
investments. The 2008 financial crisis led to a sharp economic
downturn and a surge in non performing loans.
"The banking sector has proved one of the Achilles heels of
the economy," Jan-Peter Olters, head of the World Bank in
Montenegro, said in a recent interview. "It is probably the
single biggest obstacle to growth."
A subsidiary of Hungary's OTP Bank OTPB.BU is the largest
in Montenegro. Other major local players include NLB [LJUBB.UL]
and Hypo Group.
(Editing by Ruth Pitchford)