As Europe advances the digital euro, what does monetary sovereignty mean in practice for economies that are deeply integrated into - but do not fully control - the monetary system? How do you ensure both alignment with the Eurosystem and sufficient national policy space?

Irena Radović: For a small, highly euroized economy such as Montenegro, monetary sovereignty must be understood in practical rather than purely formal terms. Since we do not conduct independent monetary policy in the conventional sense, our policy space lies primarily in the strength of institutions, the credibility of regulation, and the resilience of the financial system. In that context, alignment with the Eurosystem is not passive adaptation, but an active process of building a credible, interoperable and operationally prepared financial system. This is why we have placed strong emphasis on SEPA integration, instant payments infrastructure (TIPS clone) and broader ESCB-related reforms.

Primož Dolenc: Monetary sovereignty in the euro area today means the capacity to shape how a shared monetary framework interacts with your specific economic structure. It is not to act unilaterally, but to engage meaningfully in collective decisions. With the digital euro, this translates into concrete policy priorities: ensuring holding limits that protect financial stability, maintaining private-sector intermediation so national banking systems remain resilient, and establishing data governance frameworks that preserve public trust. National central banks are not passive in this process. We contribute technical expertise, local institutional knowledge, and represent the diversity of economic conditions across the euro area. That input shapes design outcomes at the Eurosystem level.

With the financial system becoming increasingly digital, cyber risks are rising in parallel. What concrete steps have your institutions taken to strengthen the resilience of payment infrastructure and where do you still see the biggest vulnerabilities?

Irena Radović: Digitalisation creates major opportunities, but it also fundamentally reshapes the risk landscape. Our approach has therefore been to modernise infrastructure and regulation in parallel. The Central Bank of Montenegro has upgraded the national payment system, aligned it with EU standards, strengthened supervisory expectations and continuously assessed operational and cyber risks while investing in technology, processes and staff. We have also aligned key regulatory decisions with European Banking Authority guidelines and are preparing a legal framework for digital and operational resilience in line with DORA. The main vulnerabilities stem from speed and complexity: real-time fraud, operational disruptions, third-party dependencies and limited time for detection and response in an instant-payments environment.

Primož Dolenc: Banka Slovenije actively monitors that payment infrastructure operators have established a robust cyber risk management framework. Such framework should consist of comprehensive cyber security measures, require regular vulnerability testing, ensure that operators maintain incident response plans and promote industry-wide information sharing on cyber threats. Moreover, Banka Slovenije proactively implements similar measures in its capacity as an infrastructure operator and user of payment services.

Nevertheless, the complexity and interdependencies of modern payment infrastructures increase the risk that cyber incidents propagate across systems. Human factors, growing reliance on third party providers, and the pace of technological change further expand the attack surface and challenge traditional control frameworks. Addressing these vulnerabilities requires continuous adaptation of cyber risk management approaches and a sustained focus on operational resilience in an evolving threat environment.

In an evolving European monetary and payments architecture, how can smaller economies position themselves to avoid becoming policy-takers without influence? What mechanisms have proven most effective in ensuring your voice is heard?

Irena Radović: For smaller economies, influence is shaped less by size than by credibility, preparedness and the ability to deliver reforms effectively. When a country demonstrates that it can implement demanding European standards and contribute constructively to shared objectives, its voice carries greater weight. The most effective mechanism is early and substantive engagement through reform, dialogue and strategic partnerships. In Montenegro’s case, this has meant close cooperation with European institutions, regional central banks, the banking sector and international partners on reforms such as SEPA and TIPS. Regional and peer cooperation are equally important, because they help transform common standards into workable national solutions.

Primož Dolenc: In the evolving European payments architecture, we as a smaller central bank avoid becoming policy-takers by actively shaping Eurosystem policies through expertise and active participation of our experts in working bodies of the Eurosystem. What matters for being heard is prioritization of expert fields that matters the most to Slovenia and consequently to resource for building strength of arguments and thus proven competences of Banka Slovenije's employees. This is evident in the digital euro project, where all euro-area central banks contribute to its design. Furthermore, smaller markets enable faster, more coherent implementation of new solutions and delivery to the market. This ensures that our voice is heard because of our credibility and proven results.

In a context of continuous external shocks - from the pandemic to geopolitical conflicts - what institutional capabilities have proven most critical for maintaining financial stability and public trust? Have these crises fundamentally changed how central banks prepare for the future?

Irena Radović: The most important capabilities are institutional credibility, readiness to act and the strength of internal processes and expertise. Public trust depends on whether institutions are seen as competent, consistent and resilient. Maintaining stability requires continuous monitoring of liquidity, solvency and asset quality, close attention to domestic and global risks, and the capacity to respond in a timely manner when vulnerabilities emerge. Recent crises have broadened the meaning of resilience: it is no longer only financial, but also operational, digital and organisational. This is why institutional transformation and stronger preparedness have become essential.

Primož Dolenc: From a central bank perspective, the past decade of overlapping shocks has underscored the importance of institutional resilience rather than forecasting precision. The most critical capabilities have been the ability to act decisively to preserve market functioning, strong prudential oversight that built resilience ex ante, and credibility anchored in clear mandates and independence. Equally vital has been transparent, consistent communication to sustain public trust when policies had to be exceptional. These crises have changed how we prepare: the focus has shifted from planning for specific events to reducing vulnerabilities, strengthening operational readiness, and integrating financial stability more deeply into policy frameworks. The core objectives remain unchanged, but preparedness is now more structural, flexible, and resilience based.

Collaboration is central to resilience. How has working with partners such as the CEF strengthened your institution in practice? Can you point to a specific capability, reform, or way of working that improved and what gap would have been hardest to close without such partnerships?

Irena Radović: Partnerships such as those with the CEF are valuable because they help translate European standards into operational systems, procedures and day-to-day practices. For the Central Bank of Montenegro, peer exchange and structured learning have been particularly important in areas such as payment systems, supervision, risk management and digital transformation. They have strengthened our understanding of how complex reforms should be sequenced and implemented, while also building professional networks of trust. The gap that would have been hardest to close without such partnerships is the gap between formal alignment and operational readiness. For a country on the path to EU membership, that is a strategic advantage.

Primož Dolenc: Our partnership with the CEF allows Banka Slovenije staff to actively share their expertise at regional events, strengthening both our institution and the wider community. We meet biannually to coordinate on the central banking program, which we also sponsor. By contributing knowledge in fields like financial stability and digital transformation, our employees deepen their skills and gain fresh perspectives and without such cooperation, closing knowledge gaps and adapting to new challenges would be far more difficult.