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Regulatory Framework Equivalence Assessment: Bosnia and Herzegovina (BiH) vs. EU CRR

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The following is a summary of the key points from an equivalence assessment evaluating Bosnia and Herzegovina’s (BiH) regulatory framework for banks against the European Union’s (EU) Capital Requirements Regulation (CRR).

Section 3: Own Funds

Equivalent

Bosnia and Herzegovina’s own funds requirements are 50% higher than in the EU framework.

Key Requirements

• Core Capital Items: These are the same as in CET1 under CRR, namely paid-in share capital (excluding cumulative preferential shares).
• Eligibility Criteria for Capital Instruments: The eligibility criteria for capital instruments are the same as prescribed in CRR.
• Trigger Event: This is set at 7.687% or higher.

Section 5: Credit Risk (Standardised Approach)

Equivalent

Bosnia and Herzegovina’s credit risk requirements and calculation of own funds for credit risk can be considered equivalent to those in the EU framework (CRR) for the Standardised Approach.

Key Differences

• Exposure Classes: The framework includes the same exposure classes as in CRR, with some notable exceptions where the approach is more conservative:
  • Residential Properties Secured by Mortgages: Higher risk weights than CRR Art. 125 (50% vs. 35% in CRR).
  • Commercial Real Estate Secured by Mortgages: Higher risk weights than CRR Art. 126 (75% vs. 50% in CRR), with a required Loan to Value of 60% (vs. 50% in CRR).

Section 7: Credit Risk Mitigation

Equivalent

Bosnia and Herzegovina’s credit risk mitigation requirements are equivalent to those in the EU framework.

Key Features

• Credit Risk Mitigation Techniques: These include collateral, guarantees, and credit derivatives, which are subject to certain conditions.