This Technical Note (TN) examines thecurrent state of NPLs in Montenegro, assesses the regulatoryand supervisory framework as well as the insolvency andcreditor rights regime, and makes recommendations forstrengthening the framework. The analysis was carried out aspart of the 2015 Financial Sector Assessment Program (FSAP),and was based on the legal and regulatory framework inplace, the supervisory practices employed, and otherconditions as they existed as of September 2015. The TNevaluates the legal, regulatory, and supervisory regimes infour key areas: (i) creditor rights and enforcement systems(for secured and unsecured credit); (ii) debt recovery andinformal enterprise workout practices; (iii) formalinsolvency system (liquidation and reorganizationproceedings); and (iv) effectiveness of the relevantinstitutional, regulatory and supervisory frameworks inimplementing laws, regulations, and supervisory requirementsin this area. In addition, the TN assesses recent efforts atNPL resolution, including the implementation of a newlyenacted law on voluntary out-of-court restructuring, and therole of special purpose vehicles.