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Banking Regulations in Bosnia and Herzegovina Compared to EU’s Capital Requirements Regulation (CRR)

The following assessment compares the banking regulations in Bosnia and Herzegovina (B&H) with those of the European Union’s (EU) Capital Requirements Regulation (CRR). The assessment focuses on various sections, including:

• Risk Management
• Own Funds
• Credit Risk: Including Standardised Approach and Credit Risk Mitigation

Section 1: Risk Management

Overview

The regulatory framework in B&H is largely equivalent to the EU’s risk management approach, with some minor differences.

Section 2: Own Funds

Requirements

The own funds requirements in B&H are higher than those in the EU:

• CET1 ratio of 6.75%
• T1 ratio of 9%
• Total Capital ratio of 12%

Trigger Event

The trigger event for requiring additional capital is set at 7.687% or higher.

Section 3: Own Funds Assessment

Comparison with EU CRR

The own funds requirements are structured similarly to those in the EU, with core capital items and eligibility criteria matching those in the CRR. Adjustments and deductions from own funds are also similar, with some minor differences.

Section 4: Credit Risk (Standardised Approach)

Requirements

The credit risk requirements in B&H are equivalent to those in the EU for the Standardised Approach, which is the only method authorized by B&H supervisory authorities. No bank is allowed to use the Internal Ratings-Based (IRB) approach.

Section 5: Credit Risk Mitigation

Techniques Allowed

The regulatory framework in B&H allows for credit risk mitigation techniques similar to those in the EU, including:

• Guarantees
• Collateral
• Credit derivatives

Conclusion

Overall Assessment

Overall, the assessment finds that the banking regulations in Bosnia and Herzegovina are largely equivalent to those in the European Union, with some minor differences.