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Banking Regulations in Bosnia and Herzegovina (BiH) against EU’s Capital Requirements Regulation (CRR)

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It appears that you have provided a comprehensive assessment of the banking regulations in Bosnia and Herzegovina (BiH) against the EU’s Capital Requirements Regulation (CRR). Here is a summary of the key points:

Institution Specific Requirements

  • The regulatory framework in BiH is equivalent to the CRR, with some minor differences.
  • Both agencies can assess and challenge internal capital estimates and set additional requirements for risks that are not adequately covered by Pillar 1 capital.

Own Funds

  • The own funds requirements are 50% higher than in the EU framework.
  • The composition of core capital items is the same as in CET1 under the CRR, with eligibility criteria also being equivalent to those prescribed in the CRR for all capital instruments that can be issued by an institution (CET1, AT1, T2).
  • Provisions about requirements for cooperative banks are not included in BiH regulatory framework.

Adjustments and Deductions

  • Prudential filters mirror Article 32-35 of the CRR.
  • Most deductions are equivalent to those in the EU framework, with some exceptions:
    • Securitization: while not relevant at present, investments in asset-backed securities issued abroad should be treated as deductible items from CET1 or risk-weighted 1250%.
    • Cross-holdings: such investments must be treated as deductible items from CET1.
    • Deferred tax assets: no netting is allowed against deferred tax liabilities.

Credit Risk (Standardized Approach)

  • The framework for the Standardized Approach to Credit Risk in BiH includes the same exposure classes as in the CRR.
  • Risk-weights for all exposures are equivalent to those under the CRR, with some notable exceptions:
    • Residential properties secured by mortgages: higher risk weights than CRR Art. 125 (50% vs. 35%).
    • Commercial real estate secured by mortgages: higher risk weights than CRR Art. 126 (75% vs. 50%).

Credit Risk Mitigation

  • The framework for credit risk mitigation in BiH is equivalent to the CRR, with some notable exceptions:
    • Covered bonds: only exposures guaranteed by central banks, central governments, or institutions that qualify for credit quality step 1 can allow a covered bond to qualify for preferential treatment.
    • Cross-dependence between property value and borrower creditworthiness: not envisaged in regulation.

Conclusion

Overall, the banking regulations in BiH are broadly equivalent to those in the EU, with some minor differences. However, it is essential to note that these assessments should be taken as a general indication rather than a comprehensive or definitive evaluation of the regulatory frameworks in each jurisdiction.