FINANCIAL SECTOR

Financial Sector in Bosnia and Herzegovina

The financial sector consists of all resident institutions engaged in financial intermediation or complementary financial activities. The BH financial sector consists of the BH Central Bank, banks and other financial institutions (OFI).
The BH Central Bank represents the monetary authority in BH, it was established in 1997, its goals and tasks were defined by the Law on the BH Centra Bank (BH Official Gazette No. 1/97, 29/02, 8/03, 13/03, 14/03, 9/05, 76/06).
Banks are institutions engaged in collection of deposits and extension of credit, as well as in other business in accordance with valid entity banking laws (FBH Official Gazette No. 39/98, 32/00, 48/01, 27/02, 41/02, 58/02, 13/03, 19/03 i 28/03 and RS Official Gazette No. 44/03).
The FBH Development Bank was defined by the FBH Law on the Development Bank (FBH Official Gazette No. 37/08) as a special financial institution and it is included in the monetary statistical data.
Other financial institutions (OFI) engage in financial intermediation and suupport functioning of various segments of the financial system, do not collect deposits and their operations are regulated by valid entity laws. The OFI sector in BH consists of: insurance companies, investment funds, leasing companies, microcredit organizations, brokerage houses and stock of exchanges.
The statistics of the BH financial sector, which is published by the BH Central Bank since December 2011, consists of the statistics of the monetary sector and the statistics of the sector of Other Financial Institutions.

MONETARY SECTOR

Methodological Foundations

Compilation and presentation of the Monetary Sector Statistics in Bosnia and Herzegovina are conducted in accordance with the basic rules from the IMF Monetary and Financial Statistics Manual (MFSM 2000) and the Guide for Compilation of Monetary and Financial Statistics (2007). Application of the above mentioned rules and concepts, as well as of the single approach to identification, classification and recording of financial and non-financial asset and liability positions of the financial sector promotes consistency with the lender and borrower data on the international level, ensures consistency with other sets of macro statistics and permits comparison between countries.
The monetary statistics is an important component of a country's macroeconomic statistical system and it consists of the data on stocks and flows of financial and nonfinancial assets and liabilities of the country's financial sector. The monetary statistics compiled and published by the Central Bank of Bosnia and Herzegovina produces harmonized data on the stock of financial and non-financial assets and liabilities of the financial sector of Bosnia and Herzegovina, with the tendency to expand the future coverage to the flows, depending on available resources.
The monetary statistics published by the CBBH from August 1997 till September 2011 covered the data of the BH Central Bank and banks in BH. Starting from October 2011, the monetary statistics was expanded to include the statistics of the Other Financial Institutions (OFI) sector in BH, which made available the data for the entire financial sector in BH, produced in accordance with the IMF methodology. It is important to note that previously published monetary sector data were revised in accordance with the new methodology, retroactively since January 2006, on the monthly basis.
The monetary statistics produced by CBBH retroactively, starting from 2006, in accordance with the new IMF methodology, was published in the International Financial Statistics (IFS) December 2011 edition, which constituted an official corroboration of the quality and consistency of the newly prepared monetary sector statistics with the previously collected statistics.
The OFI sector statistics constitutes an entirely new statistical sets compiled and published by CBBH, and it is also available retroactively from 2006 on the annual and from 2011. on semiannual basis.

Data Sources

The BH Central Bank and banks in BH, as well as the FBH Development Bank, are the sources of data for compilaiton of the monetary statistics. As of October 2011, 29 banks and the FBH Development Bank were covered by the monetary statistics published monthly by the CBBH.
For compilation of the Other Financial Institution (OFI) sector data in BH, the data sources are all institutions from the following subsectors: insurance companies, investment funds, leasing companies, microcredit organizations, brokerages and securities' exchanges. Activities on developing the OFI sector statistics were initiatied in 2006, through gradual incorporation of the above mentioned subsectors, resulting in formation of five years-long data series. Until 2010, the OFI sector statistics had been compiled on the annual basis, while since June 2011 it was compiled semiannually, with the tendency of transformation into quarterly statistics, in accordance with IMF requirements, once appropriate conditions are in place.
As of end-2010, 113 institutions from the OFI sector were included in the regular systematized statistics published by CBBH starting from October 2011. Data dissemination is conducted both for the entire OFI sector in BH and separately for each subgroup.

Compilation and Presentation of Data

Data compilation for preparation of monetary statistics from above mentioned reporting units is conducted by preparation of Standardized Report Forms (SRFs). Data is collected and submitted to the Monetary and Financial Sector Statistics Section (hereinafter: «the Section») of the Central Bank of Bosnia and Herzegovina electronically in the Excel format and other electronic formats as needed, in accordance with an agreed schedule.
   Compilation of standard reporting forms for balance sheets and consolidated surveys is organized in two levels.
   1. The first level of compilation implies data collection through standard reporting forms on asset and liability positions of each reporting unit. Aggregation of reporting units into sectoral balance sheets is the next phase. Sectoral balance sheets include detailed data on the financial and nonfinancial assets and liabilities' positions in the subsectoral balance sheets of the Central Bank, banks (depository institutions) and OFIs. The following standard reporting forms are collected:
   1SR – CBBH balance sheet
   2SR – Banks' balance sheet
   4SR – OFI balance sheet.
   2. The second level of compilation includes consolidation of the from sectoral balance sheets into consolidated surveys. The Monetary Survey is a consolidated survey on depository institutions with its components: the consolidated survey of the central bank (monetary authorities) and the consolidated survey on banks. The Monetary Survey contains the essential data for macroeconomic analysis, such as the data on the liability positions of banks, which, according to the national definition, constitute a component of broad money, the claims of banks on other sectors of the economy, as well as claims and liabilities with nonresidents, as well as other as other assets and liabilities. The Monetary Survey permits monitoring of the mechanisms of multiplication of monetary base in the monetary aggregate money supply at the national level. The Monetary Survey is a basic tool for creators of monetary policy in the process of formulation and controlling the guidelines of monetary policy.
There are following consolidated surveys:

-CBBH Balance Sheet (monetary authorities),
-Consolidated Survey on commercial banks in Bosnia and Herzegovina,
-Monetary Survey (created by consolidation of the Consolidated Survey of     Monetary Authorities and the Consolidated Survey of BH commercial Banks),
-Consolidated Survey of OFI in Bosnia and Herzegovina (due to current issues with sectorization in BH, the Consolidated Survey for OFIs is not being published at the moment, but in future efforts will be made to ensure official publication of consolidated OFI data, and
-Consolidated Survey of the Overall Financial Sector in Bosnia and Herzegovina (created by consolidation of the Monetary Survey and the Consolidated Survey of Other Financial Institutions in Bosnia and Herzegovina). When the Consolidated Survey for OFIs is available, it will be possible to prepare the Consolidated Survey of the Entire Financial Sector in BH.

Data Revision

Revision of published data is conducted in the first following reporting month, in the event of submission of new corrected information and data by reporting units, and in the event of methodological changes in the compilation procedures of of balance sheets and consolidated surveys.
Revised data is footnoted to explain the changes that occurred. Data in data series is revised from the time of the occurrence of the change which caused the change to the data series, if necessary conditions exist.
If a change in presentation occurs, such as: publication of a new indicator, instrument etc, the historical data series is revised from the moment of introduction of the new indicator, if necessary conditions exist.

Rules, Concepts and Principles for Compilation of Balance Sheets and Consolidated Surveys

The following rules and concepts are observed in the process of compilation of standard reporting forms for balance sheets and consolidated surveys:
   a) The national currency unit (domestic currency) - the standard unit of account for monetary and financial statistics is the national currency unit, convertible mark (KM). Consequently, all foreign-currency-denominated stocks of assets and liabilities are converted into domestic currency. Stocks denominated in foreign currency are converted into domestic currency at the midpoint exchange rate for the appropriate currency from the Central Bank’s Exchange Rate List on the last day of the reporting month covered by the balance sheets in question;
   b) Valuation - the basic principle for valuation of financial assets and liabilities in reports is to use market prices or estimates of market prices for valuing financial assets and liabilities in the balance sheet. This valuation principle applies to assets and liabilities in the form of deposits and loans, as well as to most categories of other claims/liabilities and to liabilities in the form of shares and securities. In accordance with the IMF’s Monetary and Financial Statistics Handbook (2000), accrued interest on deposits, loans and securities, other than shares, are included in the outstanding financial assets or liabilities, instead of being treated as part of other assets or other liabilities. Service charges, fees, commissions and similar payments are considered income flows and are, therefore, excluded from the valuation following this principle. Stocks of financial assets and liabilities are valued on the basis of market prices prevailing at the time of preparation of the balance sheet;
   c) Residency – to ensure proper preparation of the balance sheet, it is of primary importance to define the differences between residents and non-residents. Residency of clients is determined on the basis of the economic center of interest of the institutional unit. All units that have a residence, headquarters, an operational site, fixed assets, centers of economic interests in the territory of the reporting country in which they engage in a significant amount of economic activities in the reporting country are treated as residents.

Principles for Compilation of Balance Sheets and Further Consolidation:

a) Aggregation - the aggregation principle implies aggregation of data on stocks or positions for all institutional units within sectors or subsectors, or aggregation of assets and liabilities by standard categories;
   b) Consolidation - the consolidation principle implies elimination of positions that occur between reporting units, or between residents within the same group. Institutional units include headquarters or branches, with data consolidated by elimination of mutual claims and liabilities;
   c) Netting - according to the IMF MFS Manual, the basic principle for compilation of monetary statistics is that data should be collected on gross basis, which means that claims on a certain client need not be offset with liabilities towards the same client. In exceptional cases, it is necessary to compile data on net basis, as data on gross basis is not available, but it is important to note the difference between compiling and presentation of data on net basis, for analytical value of such data (e. g. some data categories in the Monetary Survey, such as foreign assets, claims on central government and other items, are presented on net basis for analytical purposes due to practical considerations).

Standard Reporting Forms

Three types of Standard Reporting Forms are collected and they, in essence, represent balance sheets, i. e. surveys of financial assets and liabilities, as well as nonfinancial assets of certain subsectors within the financial sector, harmonized with the methodology recommended in the IMF's Monetary and Financial Statistics Handbook as follows:
   a) 1SR - Central Bank Balance Sheet - the 1SR Report includes data on financial and nonfinancial assets and liabilities of the Central Bank, including assets and liabilities of the Main Office of the Central Bank and all main units and branches of the Central Bank.
   b) 2SR - Balance Sheet of Banks - the 2SR Report includes financial and nonfinancial assets and liabilities of banks licenced by the appropriate banking agency, as well as financial and nonfinancial assets and liabilities of the Federation of Bosnia and Herzegovina Development Bank. For submission of their data, banks use the 2SR Report - Expanded, which, relative to the original version of 2SR Report, includes a more detailed division by sectors and instruments. The purpose of this report is to produce harmonized data on the stock of financial and nonfinancial assets and liabilities of all resident units of the financial sector that create liabilities included in the national definition of money supply. This report also needs to incorporate the calculation of assets for banks undergoing reorganization or liquidation.
   c) 4SR - Balance sheet of OFIs - the 4SR Report includes data on financial and nonfinancial assets and liabilities of all other resident financial institutions from BH and produces harmonized data for the entire sector of OFI in BH. This report should, to the extent possible, incorporate data for all units in the sector of financial institutions, except depository institutions, which are covered by reports 1SR and 2SR.

Classification of Financial Assets and Liabilities by Financial Instruments in Standard Reporting Forms

The framework structure of the balance sheets of the Central Bank (1SR), banks (2SR) and OFI (4SR) comprises the following financial instruments. Certain instruments will appear in a given statement, depending on the type of the reporting unit:

Assets
   Monetary gold and SDRs
   Currency and deposits
   Securities, other than shares
   Loans
   Shares and other equity
- Insurance technical reserves
   Financial derivatives
   Other claims.
   Nonfinancial assets.

Liabilities
   Currency in circulation
   Deposits included in Broad money
   Deposits excluded from Broad money
   Securities, other than shares, included in Broad money
   Securities, other than shares, excluded from Broad money
   Loans
   Insurance technical reserves
   Other liabilities
   Shares and other capital

More detailed explanations of the features of financial instruments, as well as the reporting forms, are available on the CBBH website, folder Statistics/folder Financial Sector/New Methodology/Instruction for Compilation and Presentation of Monetary and Financial Sector on the Basis of Standard Reporting Forms/Reporting Forms 1SR, 2SR 2SR – Extended and 4SR.

Classification of Institutional Units by Sectors for Preparation of Standard Reporting Forms

Institutional units differ by their economic goals, functions and operations, and they are grouped together in sectors characterized by similar features.
In Standard Reporting forms, institutional units are classified into the nonresident sector and resident sectors as follows:

a)   Nonresidents (all nonresident institutional unit are incorporated cumulatively into the nonresidents' position under the given financial instrument),
b)   Resident sectors (all resident financial units are classified under a given financial instruments in line with the explanation provided below) are as follows:
   Financial institutions include: the Central Bank, other depository institutions/banks, other financial institutions: insurance companies and pension funds, other financial intermediaries, except insurance companies and pension funds, financial intermediaries.
   Nonfinancial institutions are classified as:
   public nonfinancial institutions are controlled and established by the state with a share of at least 50 per cent, performing functions of general interest.
   private (other) nonfinancial institutions, engaged in manufacturing and sales of goods and services for the market majority owned by private legal or physical persons and conduct their activities with the purpose of creating profits,
-   Government is classified into:
   central government, for preparation of CBBH monetary statistics, the central government includes the BH Institutions, entity governments of FBH and Republika Srpska, the Government of the Brcko District of Bosnia and Herzegovina, social security funds at the entity level,
   local government, for preparation of CBBH monetary statistics, local government in BiH includes: cantonal governments and municipalities.
For proper classification of governmental sectors in BiH in the Standard Reporting Forms, please use the Instruction on Classification of Budget Beneficiaries and Extrabudgetary Funds in BiH, prepared by the Monetary and Financial Statistics Section of CBBH.
   Households consist of one or more persons who, through their own, or joint labor earn income by selling goods or services in the market, expend the earned income, and share the place of residence. The household sector includes individuals, home industries, craft and trading shops etc.
   Nonprofit institutions serve households and do not have profit-creation for their main purpose, although profits may be created through performance of their activities. The sector includes: humanitarian organizations, religious organizations, sports clubs, political parties, trade unions, chambers of commerce etc.

In the Standard Reporting Forms, positions related to households and nonprofit institutions serving households are grouped together as Other resident sectors.

Data Dissemination

Data of the CBBH monetary statistics produced on the basis of the new IMF monetary statistics methodology were published in the IMF's monthly publication International Financial Statistics/IFS, beginning from the December 2011 issue.

CBBH Internet Site

The monetary sector data is published in accordance with the Data Publication Calendar of the BH Financial Sector, 4 to 5 weeks following the end of the reporting months for the monetary sector.
The data for the Other Financial Institutions Sector (OFI) in BH is published 5-6 months following the end of the reporting period
The following reports are also published on the CBBH Internet site:
   1SR - Central Bank Balance Sheet, monthly,
   2SR - Balance Sheet of BiH Commercial Banks, monthly,
   4SR - Balance Sheet of Other Financial Institutions (OFI) in BH, semiannually,
   Consolidated surveys
   accompanying tables on BH monetary sector on the monthly basis, covering credit, deposits by maturity, currency and sectoral structure, interest rates, required reserves average exchange rates, payment transactions, purchases and sales of KM,
   Instruction for Compilation and Presentation of the Monetary and Financial Sector on the Basis of Standard Reporting Forms,
-   Standard Reporting Forms for data submission – 1SR, 2SR (2SR – Expanded) and 4SR,
-   Differences in financial sector data between the new and previous methodologies,
-   Methodological explanations,
-   Archive of the monetary sector data previously published on the CBBH Internet site, following the previous methodology, for August 1997 – September 2011 period.

Monthly data is available to users also through quarterly bulletins and annual reports, as well as through monthly CBBH information sheets, published by the CBBH on its website.

The contents of tables published on the CBBH Internet site is briefly described below:

Table 1.   Monetary Aggregates

Cash outside monetary authorities is taken from the CBBH Balance Sheet and it refers to cash outside the Central Bank (monetary authorities). Deposits of commercial banks with monetary authorities refer to commercial banks' funds in the accounts with CBBH. Transferable deposits of other domestic sectors with monetary authorities refer to transferable deposits of other domestic sectors, except for the deposits of the central government. The central government includes the BH Institutions, entity governments, entity social security funds and the Brcko District. Entity-level social security funds (in FBH: Pension and Disability Insurance Fund, FBH Health Care Fund, FBH Employment Fund, and in RS: RS Pension and Disability Fund, RS Health Care Fund, RS Employment Fund and RS Child Care Fund) are all included in the level of central government. Cash outside banks is taken from the CBBH Balance Sheet (Table 3) and refers to cash in circulation outside the Central Bank (monetary authorities) and to cash outside commercial banks. Transferable deposits in domestic currency are taken from the Monetary Survey (Table 2) and refer to deposits of the non-central government (deposits of cantons and municipalities), deposits of public and private enterprises, other financial institutions and other non-classified sectors). Other deposits in domestic currency, transferable and other deposits in foreign currency were taken from the Monetary Survey (Table 2), and represent other deposits of the non-central government (deposits of cantons and municipalities), other deposits of public and private enterprises and private (other) financial institutions, as well as other deposits of other domestic sectors (households, non-profit institutions and other non-classified sectors). Reserve money (primary money or monetary base) is in its entirety taken from the CBBH Balance Sheet (Table 3), and it comprises cash outside monetary authorities, deposits of commercial banks and deposits of other domestic sectors (except the central government) with monetary authorities. According to the national definition, monetary base comprises all transferable and other deposits of domestic non-banking and non-governmental sectors, as well as of local government sectors, in both domestic and foreign currency. Therefore, monetary base does not include the deposits of the central govenrment, deposits of banks and deposits of nonresidents. Deposits of entity social security funds are aggregated with the central government at the entity level and are consequently excluded from monetary base or monetary aggregates. M1 monetary aggregate comprises cash outside banks and transferable deposit in domestic currency of all domestic sectors (except central government deposits). QM monetary aggregate is defined as the homonymous item in the Monetary Survey (Table 2) and it covers other deposits in domestic currency, transferable and other deposits in foreign currency of all domestic sectors (except the deposits of the central government). M2 Broad money is comprised of monetary aggregates, M1 money and QM quasi money.

Table 2: Monetary Survey

The Monetary Survey presents consolidated data of the CBBH Balance Sheet – monetary authorities (Table 3) and the Consolidated Balance Sheet of BH Commercial Banks (Table 4). Net foreign assets represent the difference between the sum of foreign assets of the CBBH – monetary authorities and BH commercial banks and the sum of foreign liabilities of CBBH – monetary authorities and BH commercial banks. Domestic credit represents commercial banks' claims on all domestic sectors, with the note that the claims on the central government are recorded in the net base, i. e. after deduction of the central government deposits with the CBBH and BH commercial banks. The central government includes the BH Institutions, entity governments, entity social security funds and the Brcko District. According to the new methodology, social security funds are classified at the central government level as entity extrabudgetary funds, which directly affects the data on net claims on the central government in the Monetary Survey. M1 money comprises cash outside banks and transferable deposits in domestic currency of all domestic sectors (except the deposits of the central government and of banks) and deposits of nonresidents. QM quasi money includes other deposits in domestic currency, transferable and other deposits in foreign currency of all domestic sectors (except central government deposits and banks' deposits) as well as of nonresidents. M2 Broad money comprises monetary aggregates, M1 money and QM quasi money. Other liabilities include securities, credits, shares and other capital and other items (net). According to the new methodology, credits are recorded on the liability side as special financial instruments, as well as shares and other capital. Other items (net) are unallocated liability items after deduction of unallocated asset items. Other items (net) also include restricted deposits, funds' counter-entries and government credit funds.
For preparation of the Monetary Survey, the balance sheet approach is applied, which links banks' liabilities to their claims arising from credits to nonresidents and sectors of the domestic economy. This balance sheet approach in the Monetary Survey links broad money liabilities to foreign assets and liabilities as well as to claims and liabilities to the government. In this way, monetary statistics is linked to the statistics of balance of payments and to the statistics of government finances.

Table 3.   CBBH Balance Sheet

Foreign assets of the BH Central Bank – monetary authorities include gold, foreign currency in the CBBH vault, foreign currency deposits with foreign banks, SDR allocations, foreign securities and other. Claims on domestic sectors refer to claims on CBBH employees for approved long-term credits and claims on commercial banks arising from settlement accounts. Reserve money (primary money or monetary base) is comprised by cash outside monetary authorities, deposits of commercial banks and deposits of other domestic sectors (except the central government) with monetary authorities. Cash outside banks represents cash in circulaiton outside the Central Bank (monetary authorities) and cash outside commercial banks. Foreign liabilities of CBBH include short-term liabilities to nonresidents, deposits of nonresidents and other shor-term liabilities to nonresidents, as well as the liabilities to IMF (accounts No. 1 and 2). The central government deposits with CBBH represent transferable and other deposits of the BH Institutions, entity governments, entity social security funds and the Brcko District, in domestic currency. Shares and other capital comprise share capital, the current year’s result, general and special reserves and adjustment/re-valuation. Other items (net) are unallocated liability items after deduction of unallocated asset items.
An annex to the CBBH Balance Sheet, with primary focus on the sectoral approach, is provided in excel format in the Attachment 3.a to the 1SR Report – the Balance Sheet of the BH Central Bank, where priority is given on financial instruments (see additional details below).

Attachment 3.a   1SR Report – CBBH Balance Sheet

1SR Balance Sheet of the BH Central Bank represents the CBBH Balance Sheet, compiled on gross basis, in accordance with the standard classification of financial instruments, which are further classified by sector following the residency rule. Specifically, 1SR Report, unlike other reports, contains monetary gold and SDRs on the asset side, while the liability side includes money in circulation and IMF membership accounts No. 1 and 2.

Table 4.   Consolidated Balance Sheet of BH Commercial Banks

The Consolidated Balance Sheet of commercial banks includes the consolidated balance sheets of resident commercial banks covered by: Main Unit Sarajevo, Main Unit Mostar, Main Bank of Republika Srpska, Brcko District (between July 2001 and November 2002), National Bank of Republika Srpska – NBRS (until December 1998) and National Bank of Bosnia and Herzegovina – NBBH (until November 2002). Mutual claims and liabilities between commercial banks were consolidated. Banks’ reserves consiste of cash in banks’ vaults and banks’ deposits with the BH Central Bank. Foreign assets of commercial banks include: foreign currency in vaults, transferable and other deposits in foreign curency with nonresidents, credit to nonresidents, nonresidents’ foreign currency-denominated securities, and other claims on nonresidents. Claims on the general government include claims on all levels of government: central government (BH Institutions, entity governments, entity social security funds and Brcko District) and noncentral government (cantonal and municipal governments). Claims on other domestic sectors include: claims on nonfinancial public enterprises, nonfinancial private enterprises, other financial institutions and other domestic sectors (households, nonprofit institutions and other nonclassified sectors). The balance sheet of FBH commercial banks includes, in addition to the active sub-balance sheet, also the data for the passive sub-balance sheet of one bank. The passive sub-balance sheet includes commitments on foreign credit and old foreign-currency savings of citizens until 31 March 1992. In accordance with the entity Law on the Starting Balance Sheet of Enterprises and Banks and with the Law on Privatization, in the process of the bank’s privatization, such liabilities will be assumed by the FBH Ministry of Finance.
The central government deposits include transferable and other deposits in domestic and foreign currency of the BH Institutions, entity governments, entity social security funds and the Brcko District. Transferable and other deposits by other domestic sectors in domestic and foreign currency constitute liabilities of banks to the noncentral government (cantons and municipalities), nonfinancial public enterprises, nonfinancial private enterprises, other financial institutions and other domestic sectors (households, nonprofit institutions and nonclassified sectors). Foreign liabilities of commercial banks include banks’ liabilities to nonresidents arising from transferable and other deposits, credits, securities, trade credit and advances and other payable accounts. According to the new methodology, credits on the liability side are recorded as a special financial instrument.
   Shares and other capital include equity capital, retained earnings, current-year result, general and special reserves and adjustments/re-evaluations. Other items (net) are unallocated liability items after deduction of unallocated asset items. Other items (net) also include limited deposits.
   An Annex to the Consolidated Balance Sheet of BH Commercial Banks, with primary focus on the sectoral approach, is provided in excel format in the Attachment 4.a of the 2SR Report – BH Banks' Balance Sheet, where priority is given to financial instruments (please see additional details below). In accordance with the most recent valid regulations, BH commercial banks were required to implement the International Accounting Standards and the International Financial Reporting Standards, which prescribe a new mode of accounting for credit, i. e. by restoration of «E» category loans and the interest on bad assets from the Off-Balance Sheet to Balance Sheet, and by modigying the method of calculation of general and special reserves. Banks in RS began implementing the above regulations at the end of December 2010, while the banks in FBH will begin their implementation no later than December 2011.

Attachment 4.a   2SR Report – Balance Sheet of BH Commercial Banks

The 2SR Report represents an aggregated balance sheet of all BH banks, prepared in accordance with the standard classification of financial instruments recommended by IMF, that is further broken down by sectors and by currencies. The 2SR Report – Balance Sheet of Commercial Banks is a balance sheet prepared on gross basis with Total Assets/Total Liabilities greater than Total Assets/Total Liabilities in statements prepared by banks in accordance with valid legal regulations by the amounts of Loan Loss Provisioning and Accumulated Amortization, which do not reduce assets but are recorded on the liability side, in the Other item, in accordance with the IMF's new methodology. This report is peculiar by classifying the deposits on the liability side by their inclusion in money supply into: Deposits Included in Broad Money and Deposits Excluded from Broad Money. Deposits Included in Broad Money comprise transferable and other deposits by all domestic resident sectors except the central government deposits and banks' deposits. Deposits Excluded from Broad Money comprise deposits of nonresidents and the central government deposits, as well as deposits of resident banks.

Table 5.   Consolidated Balance Sheet of Federation of BH Commercial Banks

The Consolidated Balance Sheet of Federation of BH Commercial Banks comprises consolidated balance sheets of commercial banks with headquarters on the territory of the Federation of Bosnia and Herzegovina under jurisdiction of the Main Unit Sarajevo and the Main Unit Mostar. As of end-October 2011, 19 banks from FBH and the FBH Development Bank were covered by the regular monetary sector statistics. The note from Table 4 applies for all items.

Table 6. Consolidated Balance Sheet of Republika Srpska Commercial Banks

The Consolidated Balance Sheet of Republika Srpska Commercial Banks comprises consolidated balance sheets of commercial banks with headquarters on the territory of Republika Srpska which are under jurisdiction of the Main Bank of Republika Srpska CBBH, Banja Luka. As of end-October 2011, 10 banks from Republika Srpska were included in the regular monetary sector statistics published by CBBH. The note from Table 4 applies for all items.

Table 7.   Lending Interest Rates of Commercial Banks

Lending interest rates of commercial banks represent average monthly interest rates of commercial banks on new short- and long-term credit approved for private enterprises, associations and households during the reporting month, in annual terms. The annual data represent the averages for the last month in the reporting year. The basis for calculation of weighted averages are the amounts of new loans approved during the reporting month at the appropriate interest rate. Until December 2006, the data on interest rates on loans in KM included interest rates on loans in KM and on loans in KM with a currency clause. Since January 2007, the scope of data collection on weighted average interest rates was expanded to include loans to the same sectors in KM, in KM with a currency clause (pegged to EUR), loans in foreign currency and credit card loans to households, following the same methodology. The data on average interest rates on loans to private enterprises and households in foreign currency are submitted by few banks, therefore such data cannot be considered as relevant data for BH averages.

Table 8.   Deposit Interest Rates of Commercial Banks

Deposit interest rates of commercial banks represent average monthly interest rates of commercial banks on new demand deposits and term and savings deposits of private enterprises, associations and households, in annual terms. The annual data represent the averages for the last month in the reporting year. The basis for calculation of weighted averages is the amounts of deposits collected during the reporting month at the appropriate interest rate. Since January 2007, the scope of data collection on weighted average interest rates was expanded to include deposits of the same sectors in KM, in KM with a currency clause (pegged to EUR), and deposits in foreign currency, following the same methodology. The data on average interest rates on deposits of private enterprises and households in KM with a currency clause are submitted by few banks, therefore such data cannot be considered as relevant for BH averages.

Table 9.   Total Deposits and Loans

Total deposits are deposits of all resident sectors with banks that are involved in financial activities and that issue liabilities covered by the national definition of broad money. Deposits are divided into: Transferable and Other Deposits. Transferable Deposits are available on demand without fees and restrictions, may be directly utilized for payments to third parties, including special savings accounts which permit transfer of funds to transferable deposits. Other Deposits permit automatic withdrawal of funds, but not payments to third parties, savings and term deposits, other deposits – other. Accrued interest is included with deposits. Following the previous methodology, on the basis of original contracted maturity, deposits were divided into demand deposits and term and savings deposits. Outflow of a considerable portion of deposits from the former categry Demand Deposits to the current category of Other Deposits is evident, due to previously mentioned features of these deposits.
   Total loans are loans approved by commercial banks to all resident sectors. By maturity, loans to all sectors are divided into short-term (up to 1 year) and long-term loans (in excess of one year). Accrued interest is included with loans. While in the previous statistics all loans to the general government sector were classified only as short-term loans in accordance with the structure of the reporting format, with the introduction of the new reporting format, loans are divided by original maturity into short- and long-term loans for all sectors, including the government sector. This resulted in outflows of a greater portion of short-term loans to the general government sector to long-term loans, which affected the loans-by-maturity data series.

Table 10.   Sectoral Structure of Commercial Bank Deposits

This table of deposits with commercial banks represents total transferable and other deposits in KM and foreign currencies, divided by resident sector in accordance with the classification of institutional units into sectors. Deposits of resident banks are not included.

Attachment 10.a   Analytical Overview of Commercial Bank Deposits

In order to ensure easier acces to the data for analysis of deposits, a substantive attachment in excel format was prepared, providing a data series on deposits of resident sectors with commercial banks for the period from January 2006 onward. This attachment contains breakdowns of deposits by maturity, currency and sector classifications. Deposits with currency clauses pegged to euro, CHF or some other foreign currency are recorded in the column «KM».

Table 11.   Household Deposits by Maturity

In view of considerable analytical value of the data on maturity structure of household deposits (which is not available from new reporting forms), and the great share of household deposits in total deposits, we publish an additional statistical set: overview of household deposits by maturity divided into: transactional deposits, demand deposits, short-term deposits up to 1 year and long-term deposits in excess of 1 year. Deposits include deposits in KM and in foreign currency. Inclusive of the data for September 2011, this was quarterly statistics, but starting from the October 2011 data, this data is on monthly basis. The total household deposits by maturity in the above mentioned supplemental report until September 2011 had lower values in comparison with the total household deposits from the monetary data series, because they excluded special purpose deposits and interest. Starting with the October 2011 data, these previously eliminated items will be excluded and in this wasy the differences will be eliminated.

Table 12.   Sectoral Structure of Commercial Bank Loans

An overview of the sectoral structure of commercial bank loans represents total short- and long-term loans on gross base in KM and foreign currencies approved to resident sectors, except loans to resident banks.

Attachment 12.a   Analytical Overview of Commercial Bank Loans

In order to ensure easier access to credit analysis data, a substantive attachment was prepared in excel format, providing a data series on loans to resident setors by commercial banks for the period from January 2006 onward. In this attachment, loans are divided by maturity, currency and sectoral classification.
Loans with a currency clause pegged to euro, CHF or another foreign currency are recorded in the column «KM».

Table 13.   Currency Structure of Commercial Bank Deposits and Loans

The currency structure of commercial bank deposits and loans represents the average of total deposits and loans by currency.
Deposits and loans with a currency clause pegging them to another foreign currency, euro, CHF or other foreign currency are recorded in the column «KM» (together with loans or deposits in domestic currency).
From September 2004, the change in the currency structure of loans resulted from implementation of recommendations of the IMF Mission for Monetary and Financial Statistics in BH from May 2004, requiring all loans approved in KM, but including a currency clause (pegged to any foreign currency) to be classified as loans in KM (in domestic currency).
Until September 1999 we did not possess data on the currency structure of deposits and loans in Republika Srpska, so that the total amount of deposits and loans in Republika Srpska for this period is included in the column «Total».

Table 14.   Purchase and Sale of KM

As the only mechanism for currency issue is connected with KM purchase and sale transactions, it is necessary to monitor their trends. The data on purchases and sales of KM are monitored on the daily basis, but the data are published on the monthly basis. Cumulative daily sales and purchases of KM provide the balanse of purchases and sales in the reporting month. The amount of the Cumulative Balance at the end of a reporting period is calculated when the balance of purchases and sales in the currend month is added to the cumulative balance from the end of the previous period.

Table 15.   Average Required Reserves

   The BH Central Bank uses required reserves as the only instrument of monetary policy. According to valid regulations (as of end-December 2011), deposits and borrowed funds, regardless of the currency, constitute the base for calculation of required reserves. The base for calculation of required reserves does not include funds borrowed by banks from nonresidents, on the basis of written contracts, from 1 November 2008. The base for calculation of required reserves does not include entity governments’ funds earmarked for development projects, as of 1 May 2009. The accounting period (period for calculation of required reserves) is ten days, it begins every month on the first, eleventh and twenty-first day of the month, and ends on the tenth, twentieth and last day of the month. The Required Reserves Rate applied by the Central Bank is: 14 per cent on deposits and borrowed funds with the contracted maturity up to one year and 7 per cent on deposits and borrowed funds with the contracted maturity in excess of one year. The Central Bank calculates the compensation fee due to a bank on the amount of funds the given bank holds in the reserve account with the Central Bank.
   During previous years, the Required Reserves Rate, the bases for calculation of required reserves, fees and other elements fluctuated, which is evident from the following:

- From 11 August 1997, the Required Reserves Rate was 10 per cent, only deposits and funds borrowed in KM from domestic sectors, except banks, were included in the base for calculation of the required reserve. The funds with which the bank maintained the required reserve were that bank's deposits with CBBH, balances of the reserve accounts as of the end of each day and the average amount of cash in bank vaults. The fee was 2.5 per cent, and it applied to holding required reserve funds in excess of 5 per cent over the base for calculation of required reserves up to the amount of its average minimal reserves.
- From 17 May 2000 the mode of setting the reimbursement rate for required reserves changed. The reimbursement rate was set on the basis of arithmetic mean of interest rates on «overnight» deposits in EUR charged by CBBH for the period of maintaining the required reserves.
- From 1 January 2001 the base for calculation of required reserves was expanded to include, in addition to deposits and borrowed funds of residents, also the deposits and borrowed funds of nonresidents, while the Required Reserves Rate remained at 10 per cent.
- From 1 June 2003, there were the following changes in the calculation of required reserves: the Required Reserves Rate was lowered from 10 per cent to 5 per cent, the base for calculation of reserved rate included deposits and borrowed funds in domestic and other currencies expressed in KM, while cash in bank vaults was excluded from funds for maintaining required reserves.
- From 1 September 2004, the Required Reserves Rate was increased to 7.5 per cent, and from 1 December 2004 to 10 per cent.
- From 1 December 2005, the Required Reserves Rate was 15 per cent. The reimbursement rate was set on: - the amount of funds the bank was required to maintain as required reserves at the rate of 0.5 per cent, - at the amount of funds in excess of required reserves on the basis of the arithmetic mean and/or the weighted average of interest rates charged by the Central Bank during the same period on deposits invested for up to one month.
- From 1 January 2008, the Required Reserves Rate was increased from 15 per cent to 18 per cent.
- From 11 October 2008, the Required Reserves Rate was reduced from 18 per cent to 14 per cent.
- From 1 January 2009 the Required Reserves Rate was 14 per cent on deposits and borrowed funds with the contracted maturity up to one year, and 10 per cent on deposits and borrowed funds with the contracted maturity in excess of one year.
- From 1 May 2009, the Required Reserves Rate on deposits and borrowed funds with the contracted maturity in excess of one year was 7 per cent.
-   From 1 April 2009 the reimbursement rate was set on the basis of:
-   amount of funds a bank was required to hold as required reserves at the rate of 0.50 per cent.
-   amount of funds in excess of required reserves at the rate set on the basis of the average interest rates charged by the Central Bank during the same period in the market on deposits invested for up to one month.
-   From 1 February 2011 the Required Reserves Rate on deposits and borrowed funds with the contracted maturity of up to one year was reduced from14 per cent to 10 per cent, while the Required Reserves Rate on deposits and borrowed funds with the contracted maturity in excess of one year remained unchanged at 7 per cent.
-   From 1 August 2011 the mode of calculation of the bank reimbursement rate on the funds held with the CBBH by the banks was changed – on the amount of required reserves – 70 per cent and on the amount in excess of required reserves – 90 per cent of the rate determined on the basis of the weighted average of interest rates charged by CBBH in the market during the same period on deposits invested for up to one month.

Table 16.   Payment Transactions

From 1 January 2001, commercial banks, together with CBBH, conduct payment transactions in BH. During the previous period, the payment transactions had been carried out by payment bureaus. The Central Bank provided most modern systems for conducting interbank payment transactions through RTGS and giro clearing. RTGS (Real Time Gross Settlement System) is a system for real-time clearing, which means that the instruction is cleared immediately upon sending from one bank to the other and the client has funds immediately available. The giro clearing system conducts multilateral settlements in three daily cycles. RTGS permits settlement of all instructions, in accordance with the needs of clients, while settlement of instructions exceeding KM 10,000 are required, and the giro clearing system permits settlements only for instructions not exceeding KM 10,000.
The data on transactions conducted by giro clearing and RTGS systems are published both by number and by value of transactions. Monthly data represent the cumulative total of transactions conducted, by number and by value, for the reporting month. The annual data represent the cumulative total of transactions conducted, by number and value, in all months of the reporting year.

Table 17.   Foreign Currency Reserves

Gross foreign currency reserves comprise the balances of balance sheet items on the short-term asset side of CBBH (gold, CBBH SDR allocations, foreign currency in CBBH vault, transferable deposits in foreign currency with nonresident banks etc.) and investment in securities since July 2006 by decision of the CBBH Investment Committee. Net foreign currency reserves represent the difference between gross foreign currency reserves and liabilities to nonresidents. The monetary liabilities of CBBH comprise cash outside monetary authorities and deposits of residents with monetary authorities. Net foreign assets of CBBH represent the difference between net foreign currency reserves and CBBH monetary liabilities.

Table 18. Overview of Average Mid-point Exchange Rates

   Average mid-point exchange rates for the reporting month are calculated on the basis of the mid-point exchange rate for the given currency in the official exchange rate list published by CBBH. The weights for calculation of the monthly average exchange rate are days of validity of the exchange rate list in the reporting month. Both monthly average mid-point exchange rates and quarterly and annualy average mid-point exchange rates for certain currencies are calculated.

SECTOR OF OTHER FINANCIAL INSTITUTIONS (OFI)

Methodological Basis

Compilation and presentation of the Statistics of Other Financial Institutions (OFI) is conducted in accordance with the basic rules from the IMF Monetary and Financial Statistics Manual (MFSM 2000) and the Guide for Compilation of Monetary and Financial Statistics (2007). Use of the above rules and concepts, as well as the unique approach to identification, classification and recording of balances of financial and nonfinancial assets and liabilities of the financial sector promotes consistency with other sets of macrostatistics and permits comparison between countries. The OFI sector statistics, produced retroactively by CBBH by the new IMF methodology, starting from 2006, was published in the International Financial Statistics (IFS), December 2011 issue, which was an official corroboration of the quality of the newly produced statistics for the Other Financial Institutions sector in BH.
The monetary statistics published by CBBH from August 1997 until September 2011 included the data of the BH Central Bank and BH banks. Starting from the October 2011 data, the monetary statistics was expanded to include the statistics of the Other Financial Institutions (OFI) sector in BH, thereby ensuring availability of the data for the entire financial sector in BH, produced in line with the IMF methodology. The OFI sector in BH is comprised of: insurance companies, investment funds, leasing companies, microcredit organizations, brokerages and securities exchanges.
The statistics of the OFI sector constitutes a new statistical set compiled and published by CBBH, with the annual data available retroactively from 2006. The statistics of the Other Financial Institutions sector, compiled and published by the BH Central Bank, produces harmonized data on the balances of financial and nonfinancial assets and liabilities of all institutional units of the OFI sector from BH, which were established in accordance with applicable legal regulations for the OFI sector, which have headquarters and conduct their activities on the BH territory.
   Other financial institutions (OFI) conduct financial intermediation and support functioning of various segments of the financial system, do not collect deposits and their operations are regulated by applicable entity legislation.

Data Sources

Data sources for compilation of the Other Financial Institutions (OFI) sector statistics in BH are all institutions from the following subsectors: insurance companies, investment funds, leasing companies, microcredit organizations, brokerages and securities exchanges. As of end-2010, 113 institutions from the OFI sector in BH were covered by the regular systematized CBBH statistics. The number of OFI institutions fluctuated during previous years in accordance with institutional and status changes.

Data Compilation and Presentation

Activities on initiation of the OFI sector statistics began in 2006, with gradual incorporation of the above mentioned subsectors in the systematized statistics, so that five-year long data series were established, since until 2010 the OFI sector statistics was compiled on annual basis. Since June 2011, the OFI sector data collection was organized on semi-annual basis, with a tendency to move to quarterly statistics, following the IMF requirements, once appropriate conditions are in place.
   Compilation of the data for preparation of the OFI sector statistics from the above mentioned reporting units is conducted through the 4SR Report. The 4SR Report represents the balance sheet on gross base for the given reporting period prepared in accordance with the IMF methodology. This report should, when possible, incorporate data for all units in the financial institutions sector, except for deposit-taking institutions covered by the 1SR and 2 SR reports (the BH Central Bank and all BH banks).
       The data is collected and submitted to the Monetary and Financial Statistics Section of the BH Central Bank, in accordance with an agreed schedule, electronically in excel format, and in other electronic formats as needed.
   In addition to the 4SR Report, the OFI sector institutions submit to the BH Central Bank, for a given reporting period, also copies of their balance sheets and their income statements for the same reporting period, prepared in accordance with the applicable legal regulations in BH, which permits partial verification of the correctness of the 4SR Report.
   Compilation of Standard Reporting Forms of balance sheets and consolidated surveys is organized through two levels:

1.   The first level of compilation implies data collection through Standard Reporting Form 4SR on the asset and liability position of each individual reporting unit. Aggregation of reporting units into subsectoral balance sheets is the next phase. Subectoral balance sheets include detailed data on the balances of financial and nonfinancial assets and liabilities of specific subsectors: insurance companies, investment funds, leasing companies, microcredit organizations, brokerages and securities exchanges. Further aggregation of all subsectoral balance sheets produces the overall OFI sector balance sheet.
   2. The second level of compilation refers to consolidation of the data from sectoral balance sheets into a Consolidated Survey of the OFI Sector. The Consolidated Survey of the OFI Sector is produced by consolidation of mutual claims and liabilities between institutional units of the OFI sector. The Consolidated Survey of the OFI Sector in BH is not published due to recognized weaknesses related to sectorization in 4SR reports, with the note that future efforts will be made to ensure official publication of consolidated data of the OFI sector.
   The dissemination of data for the entire OFI sector in BH, as well as separately for each subgroup, is conducted through the CBBH Internet site, starting from the data published in December 2011. The data will also be presented in publications under preparation by CBBH.

Data Revision

Revision of published data is conducted in the first following reporting period in the event of submission of new corrected information and data by reporting units and methodological changes in the compilation procedures of balance sheets and consolidated surveys.
Revised data is marked with a footnote explaining the change that occurred. Revision of data in data series is conducted from the time of the occurrence of the change which caused the change to the data series, if necessary conditions are present.
If a change in presentation occurs, such as: publication of a new indicator, instrument etc, the historical data series is revised from the moment of introduction of the new indicator, if necessary conditions are present.

Rules, Concepts and Principles for Compilation of Balance Sheets and Consolidated Surveys

   In the process of compilation of the 4SR Standard Reporting Form (balance sheeet) for the OFI sector and of consolidated surveys, the same rules and concepts as for the monetary sector statistics are observed, and these are available on the CBBH Internet site, in the folder Statistics/Financial Sector in BH/Monetary Statistics/Instruction for Compilation and Presentation of Monetary and Financial Sector Statistics on the Basis of Standard Reporting Forms.

Classification of financial assets and liabilities by financial instruments in Standard Reporting Forms

The framework structure of the balance sheets of the Central Bank (1SR), banks (2SR) and OFI (4SR) comprises the following financial instruments. Certain instruments will appear in a given statement, depending on the type of the reporting unit:

Assets
   Monetary gold and SDRs,
   Currency and deposits,
   Securities, other than shares,
   Loans,
   Shares and other equity,
   Insurance technical reserves
   Financial derivatives,
   Other claims.
   Nonfinancial assets.

Liabilities
   Currency in circulation,
   Deposits included in Broad money,
   Deposits excluded from Broad money,
   Securities, other than shares, included in Broad money,
   Securities, other than shares, excluded from Broad money,
   Loans
   Insurance technical reserves
   Other liabilities
   Shares and other capital

More detailed explanations of the features of financial instruments, as well as the reporting forms, are available at the CBBH website, folder Statistics/folder Financial Sector/New Methodology/Instruction for Compilation and Presentation of Monetary and Financial Sector on the Basis of Standard Reporting Forms/Reporting Forms 1SR, 2SR 2SR – Expanded and 4SR.

Classification of institutional units by sectors for preparation of Standard Reporting Forms

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