BOSNIA AND HERZEGOVINA: REGULATORY REQUIREMENTS FOR BANKING SYSTEM IMPROVE, BUT SHORTCOMINGS REMAIN

Enhanced Banking Supervision Oversight

The system of banking supervision oversight in Bosnia and Herzegovina has made significant improvements since the last review in 2006. Both supervisory authorities have enhanced the regulatory framework and supervisory processes, building on the progress made during the 2006 Financial Sector Assessment Program.

Progress Made

• The banking agencies have been working to prepare a new Law on Banks that aims to address deficiencies in supervisory powers, resolution tools, and consolidated supervision.
• The regulatory framework has been improved, and supervisory processes have become more effective.

Remedial Actions Required

Despite the progress made, several areas of concern remain, including:

Key Issues to Address

• Weaknesses in the framework for dealing with troubled banks
• Lack of a clear policy for resolving bank failures
• Need for greater transparency and accountability in the supervision process

Challenges Ahead

While Bosnia and Herzegovina has made significant progress in strengthening its banking sector oversight, ongoing efforts are needed to address remaining issues and ensure that the banking system is fully aligned with international best practices.

Path Forward

The new Law on Banks is expected to provide a solid foundation for further improvements in banking supervision. If implemented effectively, it could help to strengthen the resilience of Bosnia and Herzegovina’s banking system and promote greater financial stability in the country.

Conclusion

Much remains to be done before the regulatory requirements for banking in Bosnia and Herzegovina can be considered fully aligned with international standards. However, with ongoing efforts and effective implementation of the new Law on Banks, there is potential for significant improvement in the banking supervision oversight system.