Bosnia and Herzegovina’s Banking Sector Tackles Compliance Challenges

Strengthening Regulatory Frameworks in the Post-Crisis Era

In the aftermath of the global financial crisis, regulatory frameworks have been strengthened to ensure financial stability. Countries in transition, such as Bosnia and Herzegovina (BiH), face unique challenges in developing a stable economy and enforcing laws. The banking sector, in particular, must navigate complex regulations to provide financial security.

Compliance Procedures for Banks in BiH

In BiH, compliance procedures for banks are governed by the Federal Banking Act and the Banking Act of Republic of Srpska. These acts have formalized the Compliance function as a critical control mechanism in banks, alongside Risk Management and Internal Audit functions. The Compliance function is defined as ensuring that bank operations comply with regulations, standards, and laws.

Key Responsibilities of the Compliance Function

• Ensuring compliance with banking regulations: Adhering to anti-money laundering and counterterrorist financing procedures
• Identifying risks associated with non-compliance: Managing reputational risk and other consequences of non-compliance
• Advising management on regulatory matters: Providing updates and guidance on regulatory changes
• Assessing the impact of regulatory changes: Evaluating how changes affect bank operations

Emphasizing Ethics in Compliance

The bylaws adopted by banking regulators and agencies in BiH emphasize that Compliance function employees must not only be familiar with regulations but also possess knowledge of business ethics and good practices. This suggests that compliance responsibilities extend beyond regulatory requirements to include promoting a culture of ethics within the bank.

Conclusion

Bosnia and Herzegovina’s banking sector is actively addressing compliance challenges by establishing a strong regulatory framework and emphasizing the importance of Compliance functions in banks. By prioritizing compliance and ethics, the sector can contribute to financial stability and promote trust in the market.