www.aab.al
BANKING SYSTEM
Banking system in Bosnia and Herzegovina Aiming to permanently remain in the process of growth We must be aware that the future mostly depends on what we do today – now, in order to bring it about. Without the present effort, continuous rational activity, the future may remain only an unfulfilled dream.
Berislav KUTLE
Director BANKS ASSOCIATION OF BOSNIA AND HERZEGOVINA
B
anks Association of Bosnia and Herzegovina encompasses all the banks that do business in BiH. Through its task forces, primarily the Management Board, it considers its obligation, right and responsibility to publicly present its first White Book, under the auspices of the Management Board of Banks Association, with active participation of all banks’ representatives, with maximum respect for clients and the entire social community of Bosnia and Herzegovina. Modern development of banking in BiH began simultaneously with the establishment of Bosnia and Herzegovina, as an independent and internationally recognized state. The end of the war (1992-1995) witnessed the beginning of restoration and construction of all components of the state, including financial institutions, particularly in the sphere of banking: Central Bank of BiH, Entity banking
agencies, numerous commercial banks, Deposit Insurance Agency, as well as other financial institutions. In the first post-war years we had nothing special for the development of banking, except for desire, willingness and part of vision. We lacked modern knowledge, quality staff, money, organizational and material infrastructure, essential credible clients, adequate legislation, etc. Help by international institutions was of vital significance and a true catalyst in constructing the present banking system in Bosnia and Herzegovina. Banking has traversed a painstaking, arduous though - most importantly successful road. At present, it is the most up-to-date part of Bosnian and Herzegovinian economy and society. We have modern European and world regulations substantially aligned with the European Union. Due to the quality of their work, operations and products, banks are able to provide top-class services to their clients. And how does Bosnia and Herzegovina ranks, measured by the international institutions’ criteria? In its Global Competitiveness Report for 2018, World Economic Forum in Davos ranks Bosnia and Herzegovina 91, out of a total of 140 ranked world
countries. In mid-2019, BiH credit rating was B with positive prospects according to Standard & Poors, and B3 with stable prospects according to Moody’s. If political conditions in BiH do not change significantly, there will be realistic bases for downgrading this credit rating, which will affect the banking sector, as well. All macroeconomic parameters in BiH are at an absolutely low level: nominal GDP, exports, imports, export-import ratio, external and internal debt, unemployment rate, industrial production growth rate, monetary policy based on currency board, complexity of the fiscal system, volume of foreign direct investment, etc. It is important to note that each percent of growth on a low basis brings no significant positive breakthroughs. A positive breakthrough requires at least double growth rates, compared to the present ones. Unstable political conditions in the country, additionally slow down the possibilities of growth and changes, which are a prerequisite for major reforms. The banking sector of Bosnia and Herzegovina is characterized by strong concentration, dominated by four banks/groups, which hold
January 2020
Bankieri
19
