## 1mneea2022002

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---

### Priority Recommendations — Summary of mission outcomes and assessment
- Mission: IMF Statistics Department technical assistance to the Central Bank of Montenegro (CBM), April 28–May 13, 2021; funded by Eurostat to meet EU acquis from the ESS perspective.
- Main focus: compilation of quarterly international investment position (IIP), preparation of the Reserves Data Template (RDT), and recording of financial intermediary services indirectly measured (FISIM) in balance of payments.
- Assessment:
  - Preliminary quarterly IIP data prepared by the CBM have sufficient quality and are in line with annual IIP data already disseminated by the CBM.
  - Some inconsistencies between quarterly balance of payments and IIP data were either addressed or explained.
- Achievements:
  - Successful preparation of preliminary quarterly direct investment (DI) position data.
  - CBM implemented several prior STA recommendations and prepared preliminary quarterly IIP data for 2019 (and preliminary estimates for 2020 which are yet to be finalized).
  - CBM prepared preliminary FISIM data ready to be included in balance of payments.
  - Draft RDT reviewed; preliminary RDT for CBM included official reserve assets but coverage should be expanded.

### Priority Recommendations — Staffing and dissemination
- Primary constraint: lack of human resources prevents CBM from regularly disseminating quarterly IIP with one-quarter lag.
- Recommendations:
  - CBM to start disseminating IIP quarterly (when additional resources are made available).
  - CBM to allocate three additional staff in total to External Debt and IIP Division and Balance of Payments Division to ensure quarterly compilation and dissemination of IIP data (as soon as possible).
  - Note: recommended additional three staff members do not include a replenishment of retired staff.

### Classification of government Eurobonds and external debt
- Identified deviation: Ministry of Finance (MOF) classifies all Eurobonds issued by the government of Montenegro as external liabilities, including those held by residents in Montenegro.
- Mission recommendation:
  - Remove residents' holdings of the Eurobonds from external liabilities. Start with holdings by the CBM and deposit-taking corporations, followed by those held by other sectors.
- Rationale: correcting this would improve IIP quality and reduce the government's external debt which is currently overstated and might be affecting the country ratings for Montenegro.
- Data sourcing suggestion: MOF could obtain resident/non-resident breakdown from the custodian in London in the medium term.

### Reserves Data Template (RDT) guidance and actions
- Recommendation: prepare two separate RDTs — one for the CBM and one for the central government (CG).
- CBM RDT needs to expand beyond official reserve assets to include other foreign currency assets (including CBM’s holdings of Eurobonds issued by the government) and expected short-term payments related to CBM foreign currency liabilities.
- MOF should share with CBM: CG demand deposits within CBM, scheduled payments for Eurobonds and loans by the CG, and any guarantees provided by the CG.
- Monthly production of the RDT is a requirement to subscribe to the IMF’s Special Data Dissemination Standard.
- Targets:
  - CBM to prepare the RDT for its own account (including Section I.B and Section II) for STA’s review. Target: December 2021.
  - CBM to approach the MOF to obtain information to prepare the RDT for the central government. Target: September 2021.

### FISIM (Financial Intermediation Services Indirectly Measured)
- Status:
  - Mission provided guidance on FISIM estimation methods.
  - CBM implemented previous recommendations and prepared preliminary FISIM data; data are ready to be included in balance of payments.
- Operational recommendations and targets:
  - CBM to adjust the interest rate to calculate interest from deposits (receipts) for import of FISIM. Target: June 2021.
  - CBM to incorporate FISIM estimates in the balance of payments statistics including revisions to historical data to the extent possible. Target: September 2021.
- Methodology guidance (calculation summary from mission):
  - Export of FISIM = (a+b)
    - a) On loans = (Actual interest revenues from loans provided to non-residents) - (Pure interest—interest at reference rate)
    - b) On deposits = (Pure interest—interest at reference rate) - (Actual interest payments for deposits received from non-residents)
  - Import of FISIM = (c+d)
    - c) On loans = (Actual interest payments for loans received from non-resident banks) - (Pure interest—interest at reference rate)
    - d) On deposits = (Pure interest—interest at reference rate) - (Actual interest receipts from deposit with non-resident banks)
- Adjustments advised by mission:
  - Use an average of enterprises' and households' deposit rates for the deposit position; lower the average by 50 percent assuming half of the deposits are demand deposits generating no interest. After adjustments, estimated import of FISIM became positive.

### Direct investment (DI) actions and recommendations
- Current practice: focused quarterly surveying of largest direct investment enterprises (DIEs—around 50 DIEs that constitute 85 percent of the DI liability position in Montenegro); the remaining 15 percent is estimated.
- DI assets: main source is direct reporting through the annual survey (Form DI-2) covering around 30 large companies; frequency increased to quarterly but some reporters provide incomplete data.
- Actions and recommendations:
  - CBM identified transactions not captured in ITRS via surveys and inter-company debt survey and plans to cross-check and adjust balance of payments data, including revisions for 2019 and 2020.
  - CBM to continue improving DI assets coverage and to consider online training to guide reporting enterprises. Target: June 2022.
  - CBM decided to start recording reinvested earnings in the balance of payments (previously not recorded due to data quality concerns). Target: December 2021.

### Portfolio investment and custodial data; comparison with CPIS mirror data
- CBM to approach custodian banks to explore provision of aggregated portfolio investment position data for households and non-financial corporations to avoid accumulation errors from ITRS flows and to meet EU integration requirements. Target: September 2021.
- CBM to continue checking data by comparing with CPIS mirror data for non-residents’ holdings of equity and investment fund shares in Montenegro. Target: Continuously.
- Comparison with CPIS mirror data (Equity and Investment Fund Shares, million euros):
  - Dec. 2018: CBM Data (IIP) 41.12; CPIS (Mirror Data) 61.21; Difference -20.09
  - Jun. 2019: CBM Data (IIP) 46.00; CPIS (Mirror Data) 48.19; Difference -2.19
  - Dec. 2019: CBM Data (IIP) 43.96; CPIS (Mirror Data) 14.18; Difference 29.78
  - Jun. 2020: CBM Data (IIP) 44.25; CPIS (Mirror Data) 11.18; Difference 33.06

### Other Investment — loans and deposits (coverage assessment) and recommendations
- Sources: Quarterly IIP data for currency and deposits and loans are sourced from the MFS and direct reporting from enterprises (Form RN-1).
- Coverage: CBM coverage sufficient compared with mirror data from the BIS Locational Banking Statistics (LBS); coverage higher than BIS LBS mirror data except for deposit assets for other sectors (households not included in direct reporting to the CBM).
- Key statistics (Table 3. Montenegro: Comparison of Loan and Deposit Data of the BIS LBS and the CBM (Q3 2019); Assets and Liabilities in million USD):
  - Assets (million USD)
    - Banks: BIS/LBS 439.48; CBM 693.94
    - General government: BIS/LBS 0.00
    - Other sectors: BIS/LBS 124.78; CBM 89.80
      - Non-bank financial corporations: BIS/LBS 0.92
      - Non-financial corporations: BIS/LBS 17.43
      - Households: BIS/LBS 105.51
      - Unallocated: BIS/LBS 0.92
  - Liabilities (million USD)
    - Banks: BIS/LBS 100.93; CBM 996.03
    - General government: BIS/LBS 268.83; CBM 1,574.83
    - Other sectors: BIS/LBS 946.86; CBM 2,137.76
      - Non-bank financial corporations: BIS/LBS 50.46
      - Non-financial corporations: BIS/LBS 153.22
      - Households: BIS/LBS 20.19
      - Unallocated: BIS/LBS 722.99
- Recommendations:
  - CBM to supplement deposit assets data for households using the mirror data from the BIS LBS. Target: September 2021.
  - CBM to approach the Tax Office to obtain aggregated data for households' deposits and security holdings abroad. Target: September 2021.
  - CBM to continue to conduct the trade credit survey and include the results in the balance of payments and the IIP after the review of the results is completed. Target: June 2022.

### Detailed Action Plan — Priority actions and target dates (selected)
- Outcome: A new data set has been compiled and made available internally and/or disseminated to the public.
  - H: CBM to start disseminating IIP quarterly. Target: When additional resources are made available.
  - M: CBM to start recording reinvested earnings. Target: December 2021.
  - H: CBM to prepare the RDT for its own account (including Section I.B and Section II) for STA’s review. Target: December 2021.
  - H: CBM to approach the MOF to obtain information to prepare the RDT for the central government. Target: September 2021.
  - H: CBM to adjust the interest rate to calculate interest from deposits (receipts) for import of FISIM. Target: June 2021.
  - H: CBM to incorporate FISIM estimates in the balance of payments statistics including revisions to historical data to the extent possible. Target: September 2021.
- Outcome: Source data are adequate for the compilation of these macroeconomic statistics.
  - H: CBM to approach the MOF to remove residents' holdings of Eurobonds issued by the government of Montenegro from its external debt. Start with holdings by the CBM and deposit-taking corporations followed by those held by other sectors. Target: September 2021.
  - M: CBM to further improve coverage of DI enterprise survey for DI assets by guiding and training reporting enterprises. Target: June 2022.
  - M: CBM to check with custodian banks if they can provide aggregate data on portfolio investment assets of households and non-financial corporations. Target: September 2021.
  - M: CBM to continue checking data by comparing with CPIS mirror data for non-residents’ holdings of equity and investment fund shares in Montenegro. Target: Continuously.
  - H: CBM to approach banks to obtain data on financial derivative transactions. Target: September 2021.
  - M: CBM to continue to conduct the trade credit survey and include results in the balance of payments and IIP after review. Target: June 2022.
  - M: CBM to approach the Tax Office to obtain aggregated data for households' deposits and security holdings abroad. Target: September 2021.
- Outcome: Staff capacity increased.
  - H: CBM to allocate three additional staff in total to External Debt and IIP Division and Balance of Payments Division to ensure quarterly compilation and dissemination of IIP data. Target: As soon as possible.

### Other recommendations and follow-up
- CBM to continue cross-checking ITRS and survey data (direct investment survey, inter-company debt survey) and make necessary adjustments to balance of payments, including revisions for 2019 and 2020.
- CBM, MFS, and Balance of Payments/IIP divisions to coordinate on collecting information from insurance companies, possibly starting in 2022.
- CBM to approach Tax Office for aggregated resident data on deposits and securities abroad. Target: September 2021.
- CBM to continue to improve reporting systems and training to support higher-frequency compilation and improved data quality.

### Financial derivatives positions are correctly recorded in the annual and quarterly IIP — findings and actions
- Findings:
  - Financial derivatives positions in the IIP are sourced from the MFS.
  - For the balance of payments, the CBM staff checked the information in the ITRS; however, information on derivatives transactions was not identified.
  - The CBM recorded the differences between the two positions in the balance of payments. The mission highlighted that this approach is incorrect because the difference largely includes price changes of financial derivative contracts which need to be recorded as revaluations (see paragraphs 6.59 and 9.30 of BPM6).
- Actions agreed:
  - CBM staff agreed to remove existing data recorded in the balance of payments that reflect the differences and to approach commercial banks to acquire data on financial derivative transactions.
  - The mission delivered a presentation focusing on practical recording aspects of financial derivatives.
- Recommendation:
  - CBM to approach banks to obtain the data on financial derivative transactions. Target: September 2021.

### Reserve assets — action taken
- The CBM removed from its reserve assets small holdings of Deutsche Marc and Austrian Schilling banknotes kept in its vault for many years; these holdings should not be included in reserve assets (action implemented).

### Annex I — Selected implementation status (priority actions and dates)
- Selected outcomes and statuses:
  - Complete reviewing the quality of reported quarterly direct investment position data focusing on largest DIEs. Target: June 2020 — Implemented.
  - Compile quarterly IIP data and submit them to STA for review. Target: December 2020 — Implemented.
  - Start recording positions of financial derivatives in IIP. If the ITRS captures transaction data on financial derivatives, record them in balance of payments. Target: June 2020 — Implemented. Note: Derivatives are now recorded in IIP. ITRS did not capture financial derivative transactions.
  - Use the LBS data to supplement the data reported by Form RN-1 for other sectors’ deposit positions in IIP. Target: June 2020 — To be implemented by September 2021.
  - Start recording data on trade credit and advances based on the survey results. Target: December 2021 — This survey is still pilot and not used as a source. The amount is expected to be small both in the balance of payments and the IIP.
  - Start recording FISIM from the data for the first quarter of 2019 according to the methodology agreed during the mission. Target: June 2020 — Partially implemented (planned publication in September 2021).
  - Receive necessary information from the MOF to start drafting RDT for the CBM and the central government. Target: March 2020 — Not Implemented. MOF to provide the data.
  - Remove holdings of Deutsche Mark and Austrian Schilling banknotes from reserve assets. Target: March 2020 — Implemented.
  - Allocate three additional staff to the Balance of Payments Division. Target: December 2020 — Partly implemented (allocated one additional staff members).
- Priority scale used: H – High, M – Medium

*Source: 1mneea2022002 - 22. Financial derivatives positions are correctly recorded in the annual and quarterly IIP*

### 1. Priority Recommendations_____________________________________________________________________________ 5

### 1. Priority Recommendations

### Summary of mission outcomes and assessment
- Mission: IMF Statistics Department technical assistance to the Central Bank of Montenegro (CBM), April 28–May 13, 2021; funded by Eurostat to meet EU acquis from the ESS perspective.
- Main focus: compilation of quarterly international investment position (IIP), preparation of the Reserves Data Template (RDT), and recording of financial intermediary services indirectly measured (FISIM) in balance of payments.
- Assessment: Preliminary quarterly IIP data prepared by the CBM have sufficient quality and are in line with annual IIP data already disseminated by the CBM. Some inconsistencies between quarterly balance of payments and IIP data were either addressed or explained.
- Achievements:
  - Successful preparation of preliminary quarterly direct investment (DI) position data.
  - CBM implemented several prior STA recommendations and prepared preliminary quarterly IIP data for 2019 (and preliminary estimates for 2020 which are yet to be finalized).
  - CBM prepared preliminary FISIM data ready to be included in balance of payments.
  - Draft RDT reviewed; preliminary RDT for CBM included official reserve assets but coverage should be expanded.
- Key data-process strengths and gaps:
  - Focused quarterly surveying of largest direct investment enterprises (DIEs—around 50 DIEs that constitute 85 percent of the DI liability position in Montenegro); the remaining 15 percent is estimated.
  - DI assets: main source is direct reporting through the annual survey (Form DI-2) covering around 30 large companies; frequency increased to quarterly but some reporters provide incomplete data.
  - Portfolio investment (PI) assets and liabilities of banks sourced from MFS and cross-checked with ITRS; insurance companies (largest sub-sector in other financial corporations) are not supervised by CBM and data are not directly collected.
  - Custodian bank data could be used to obtain aggregated position data to reduce reliance on accumulated ITRS flows.

### Staffing and dissemination recommendations
- Primary constraint: lack of human resources prevents CBM from regularly disseminating quarterly IIP with one-quarter lag.
- Recommendation highlights:
  - CBM to start disseminating IIP quarterly (when additional resources are made available).
  - CBM to allocate three additional staff in total to External Debt and IIP Division and Balance of Payments Division to ensure quarterly compilation and dissemination of IIP data (as soon as possible).
  - Note: recommended additional three staff members do not include a replenishment of retired staff.

### Classification of government Eurobonds and external debt
- Identified deviation: Ministry of Finance (MOF) classifies all Eurobonds issued by the government of Montenegro as external liabilities, including those held by residents in Montenegro.
- Mission recommendation: remove residents' holdings of the Eurobonds from external liabilities. Start with holdings by the CBM and deposit-taking corporations, followed by those held by other sectors.
- Rationale: correcting this would improve IIP quality and reduce the government's external debt which is currently overstated and might be affecting the country ratings for Montenegro.
- Data sourcing suggestion: MOF could obtain resident/non-resident breakdown from the custodian in London in the medium term.

### Reserves Data Template (RDT) guidance
- Recommendation: prepare two separate RDTs — one for the CBM and one for the central government (CG).
- CBM RDT needs to expand beyond official reserve assets to include other foreign currency assets (including CBM’s holdings of Eurobonds issued by the government) and expected short-term payments related to CBM foreign currency liabilities.
- MOF should share with CBM: CG demand deposits within CBM, scheduled payments for Eurobonds and loans by the CG, and any guarantees provided by the CG.
- Monthly production of the RDT is a requirement to subscribe to the IMF’s Special Data Dissemination Standard.

### FISIM
- Mission provided guidance on FISIM estimation methods.
- CBM implemented previous recommendations and prepared preliminary FISIM data; data are ready to be included in balance of payments.
- Specific operational recommendation: CBM to adjust the interest rate to calculate interest from deposits (receipts) for import of FISIM (target completion June 2021).
- CBM to incorporate FISIM estimates in the balance of payments statistics including revisions to historical data to the extent possible (target completion September 2021).

### Direct investment (DI) actions and recommendations
- Current practice: quarterly survey of largest DIEs (around 50 DIEs, 85 percent of DI liability position); remaining 15 percent estimated.
- CBM identified transactions not captured in ITRS via surveys and inter-company debt survey and plans to cross-check and adjust balance of payments data, including revisions for 2019 and 2020.
- CBM to continue improving DI assets coverage and to consider online training to guide reporting enterprises.
- CBM decided to start recording reinvested earnings in the balance of payments (previously not recorded due to data quality concerns); ongoing fiscalization project expected to improve company financial reporting.
- Recommendations:
  - CBM to further improve coverage of DI enterprise survey for DI assets by guiding and training reporting enterprises (June 2022).
  - CBM to start recording reinvested earnings (December 2021).

### Portfolio investment and custodial data
- CBM to approach custodian banks to explore provision of aggregated portfolio investment position data for households and non-financial corporations to avoid accumulation errors from ITRS flows and to meet EU integration requirements (target September 2021).
- CBM to continue checking data by comparing with CPIS mirror data for non-residents’ holdings of equity and investment fund shares in Montenegro (Continuously).
- Comparison with CPIS mirror data (Equity and Investment Fund Shares, million euros):
  - Dec. 2018: CBM Data (IIP) 41.12; CPIS (Mirror Data) 61.21; Difference -20.09
  - Jun. 2019: CBM Data (IIP) 46.00; CPIS (Mirror Data) 48.19; Difference -2.19
  - Dec. 2019: CBM Data (IIP) 43.96; CPIS (Mirror Data) 14.18; Difference 29.78
  - Jun. 2020: CBM Data (IIP) 44.25; CPIS (Mirror Data) 11.18; Difference 33.06

### Detailed Action Plan — Priority actions and target dates
- Outcome: A new data set has been compiled and made available internally and/or disseminated to the public.
  - H: CBM to start disseminating IIP quarterly. Target: When additional resources are made available.
  - M: CBM to start recording reinvested earnings. Target: December 2021.
  - H: CBM to prepare the RDT for its own account (including Section I.B and Section II) for STA’s review. Target: December 2021.
  - H: CBM to approach the MOF to obtain information to prepare the RDT for the central government. Target: September 2021.
  - H: CBM to adjust the interest rate to calculate interest from deposits (receipts) for import of FISIM. Target: June 2021.
  - H: CBM to incorporate FISIM estimates in the balance of payments statistics including revisions to historical data to the extent possible. Target: September 2021.
- Outcome: Source data are adequate for the compilation of these macroeconomic statistics.
  - H: CBM to approach the MOF to remove residents' holdings of Eurobonds issued by the government of Montenegro from its external debt. Start with holdings by the CBM and deposit-taking corporations followed by those held by other sectors. Target: September 2021.
  - M: CBM to further improve coverage of DI enterprise survey for DI assets by guiding and training reporting enterprises. Target: June 2022.
  - M: CBM to check with custodian banks if they can provide aggregate data on portfolio investment assets of households and non-financial corporations. Target: September 2021.
  - M: CBM to continue checking data by comparing with CPIS mirror data for non-residents’ holdings of equity and investment fund shares in Montenegro. Target: Continuously.
  - H: CBM to approach banks to obtain data on financial derivative transactions. Target: September 2021.
  - M: CBM to continue to conduct the trade credit survey and include results in the balance of payments and IIP after review. Target: June 2022.
  - M: CBM to approach the Tax Office to obtain aggregated data for households' deposits and security holdings abroad. Target: September 2021.
- Outcome: Staff capacity increased.
  - H: CBM to allocate three additional staff in total to External Debt and IIP Division and Balance of Payments Division to ensure quarterly compilation and dissemination of IIP data. Target: As soon as possible.

### Other recommendations and follow-up
- CBM to continue cross-checking ITRS and survey data (direct investment survey, inter-company debt survey) and make necessary adjustments to balance of payments, including revisions for 2019 and 2020.
- CBM, MFS, and Balance of Payments/IIP divisions to coordinate on collecting information from insurance companies, possibly starting in 2022.
- CBM to approach Tax Office for aggregated resident data on deposits and securities abroad (September 2021).
- CBM to continue to improve reporting systems and training to support higher-frequency compilation and improved data quality.

*IMF Statistics Department mission report: Priority Recommendations (Montenegro).*

### 22. Financial derivatives positions are correctly recorded in the annual and quarterly IIP

### 22. Financial derivatives positions are correctly recorded in the annual and quarterly IIP

### Financial derivatives: findings and actions
- Findings:
  - Financial derivatives positions in the IIP are sourced from the MFS.
  - For the balance of payments, the CBM staff checked the information in the ITRS; however, information on derivatives transactions was not identified.
  - The CBM recorded the differences between the two positions in the balance of payments. The mission highlighted that this approach is incorrect because the difference largely includes price changes of financial derivative contracts which need to be recorded as revaluations (see paragraphs 6.59 and 9.30 of BPM6).
- Actions agreed:
  - CBM staff agreed to remove existing data recorded in the balance of payments that reflect the differences and to approach commercial banks to acquire data on financial derivative transactions.
  - The mission delivered a presentation focusing on practical recording aspects of financial derivatives.
- Recommendation:
  - CBM to approach banks to obtain the data on financial derivative transactions (September 2021).

### Other Investment — loans and deposits (coverage assessment)
- Findings:
  - Quarterly IIP data for currency and deposits and loans are sourced from the MFS and direct reporting from enterprises (Form RN-1).
  - Coverage of CBM data is sufficient compared with mirror data from the BIS Locational Banking Statistics (LBS).
  - Coverage of CBM data is higher than BIS LBS mirror data, except for deposit assets for other sectors (households are not included in direct reporting to the CBM).
- Key statistics (Table 3. Montenegro: Comparison of Loan and Deposit Data of the BIS LBS and the CBM (Q3 2019); Assets and Liabilities in million USD):
  - Assets (million USD)
    - Banks: BIS/LBS 439.48; CBM 693.94
    - General government: BIS/LBS 0.00
    - Other sectors: BIS/LBS 124.78; CBM 89.80
      - Non-bank financial corporations: BIS/LBS 0.92
      - Non-financial corporations: BIS/LBS 17.43
      - Households: BIS/LBS 105.51
      - Unallocated: BIS/LBS 0.92
  - Liabilities (million USD)
    - Banks: BIS/LBS 100.93; CBM 996.03
    - General government: BIS/LBS 268.83; CBM 1,574.83
    - Other sectors: BIS/LBS 946.86; CBM 2,137.76
      - Non-bank financial corporations: BIS/LBS 50.46
      - Non-financial corporations: BIS/LBS 153.22
      - Households: BIS/LBS 20.19
      - Unallocated: BIS/LBS 722.99
- Recommendations:
  - CBM to supplement deposit assets data for households using the mirror data from the BIS LBS (September 2021).
  - CBM to approach the Tax Office to obtain aggregated data for households' deposits and security holdings abroad (September 2021).
  - CBM to continue to conduct the trade credit survey and include the results in the balance of payments and the IIP after the review of the results is completed (June 2022).

### Reserve assets
- Findings and actions:
  - The CBM removed from its reserve assets small holdings of Deutsche Marc and Austrian Schilling banknotes kept in its vault for many years; these holdings should not be included in reserve assets (action implemented).

### Reserves Data Template (RDT)
- Guidance and findings:
  - The mission recommended preparing two separate RDTs: one for the CBM and one for the Central Government (CG).
  - Montenegro is a fully euroized economy without being a part of the Eurosystem, so assets denominated in euros are considered as foreign currency assets.
  - RDT for the CBM: CBM populated Section I.A (Official Reserve Assets). Mission indicated Section I.B should be populated for other foreign currency assets of the CBM including CBM holdings of Eurobonds issued by the government of Montenegro. Section II should include expected short-term payments related to foreign currency liabilities (demand deposits from commercial banks and the CG; reserve requirements of commercial banks).
  - RDT for the CG: MOF should share information so CBM can record Sections I-IV. Section I.B should include CG's demand deposits with the CBM; Section II scheduled payments for Eurobonds and loans received by the CG; Section III guarantees; guidance provided on recording gold swap contracts made by the MOF.
- Recommendations:
  - CBM to prepare the RDT for its own account (including Section I.B and Section II) (December 2021) for the IMF’s review.
  - CBM to approach the MOF to obtain information to prepare the RDT for the central government (September 2021).

### FISIM (Financial Intermediation Services Indirectly Measured)
- Findings and methodology improvements:
  - CBM's FISIM estimates are now ready to be included in the balance of payments.
  - CBM implemented previous recommendations and prepared preliminary FISIM data.
  - CBM calculates the reference rate based on the weighted average of paid and received interest for all deposits and loan assets and liabilities of Montenegrin banks with non-resident banks using data from the MFS.
  - Exports of FISIM by Montenegrin banks estimated using the reference rate and MFS information.
  - Imports of FISIM by Montenegrin enterprises and households estimated using the reference rate and deposit assets from BIS LBS and interest rates from the ECB.
  - CBM relies on form KZ-1 for loan liabilities. Due to ITRS coverage issues capturing interest receipts by Montenegrin enterprises and households from deposits abroad, CBM estimated them by applying an average deposit interest rate (up to two years for households) obtained from the ECB to the position of deposit assets held by Montenegrin enterprises and households. This produced negative estimated imports of FISIM for deposit assets initially.
- Mission adjustments and guidance:
  - Adjust the interest rate applied to the position of deposit assets:
    - The deposit rate should be an average of the enterprises' and households' rates (enterprises' rate is lower than households').
    - The average rate should be lowered by 50 percent assuming that half of the deposits are demand deposits that generate no interest.
  - After these adjustments, estimated import of FISIM became positive.
  - Mission provided guidance on formulae to calculate interest after FISIM for each component. CBM staff plans to include FISIM estimates starting with data for 2019.
- Calculation summary (Table 4. Montenegro: Calculation of FISIM):
  - Export of FISIM = (a+b)
    - a) On loans = (Actual interest revenues from loans provided to non-residents) - (Pure interest—interest at reference rate)
    - b) On deposits = (Pure interest—interest at reference rate) - (Actual interest payments for deposits received from non-residents)
  - Import of FISIM = (c+d)
    - c) On loans = (Actual interest payments for loans received from non-resident banks) - (Pure interest—interest at reference rate)
    - d) On deposits = (Pure interest—interest at reference rate) - (Actual interest receipts from deposit with non-resident banks)
- Recommendations:
  - CBM to adjust the interest rate to calculate interest receipts from deposits abroad for imports of FISIM (June 2021).
  - CBM to incorporate FISIM estimates in the balance of payments statistics including revisions to historical data to the extent possible (September 2021).

### Annex I — Selected implementation status (priority actions and dates)
- Selected outcomes and statuses (as presented):
  - Complete reviewing the quality of reported quarterly direct investment position data focusing on largest DIEs. Target: June 2020 — Implemented.
  - Compile quarterly IIP data and submit them to STA for review. Target: December 2020 — Implemented.
  - Start recording positions of financial derivatives in IIP. If the ITRS captures transaction data on financial derivatives, record them in balance of payments. Target: June 2020 — Implemented. Note: Derivatives are now recorded in IIP. ITRS did not capture financial derivative transactions.
  - Use the LBS data to supplement the data reported by Form RN-1 for other sectors’ deposit positions in IIP. Target: June 2020 — To be implemented by September 2021.
  - Start recording data on trade credit and advances based on the survey results. Target: December 2021 — This survey is still pilot and not used as a source. The amount is expected to be small both in the balance of payments and the IIP.
  - Start recording FISIM from the data for the first quarter of 2019 according to the methodology agreed during the mission. Target: June 2020 — Partially implemented (planned publication in September 2021).
  - Receive necessary information from the MOF to start drafting RDT for the CBM and the central government. Target: March 2020 — Not Implemented. MOF to provide the data.
  - Remove holdings of Deutsche Mark and Austrian Schilling banknotes from reserve assets. Target: March 2020 — Implemented.
  - Allocate three additional staff to the Balance of Payments Division. Target: December 2020 — Partly implemented (allocated one additional staff members).
- Priority scale used: H – High, M – Medium

*Source: 1mneea2022002 - 22. Financial derivatives positions are correctly recorded in the annual and quarterly IIP*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1mneea2022002.pdf_