CBBH Governor at the 6th Meeting of the Governors of the Central Banks from the Region

Sarajevo, March 27, 2018

The Governor of the Central Bank of Bosnia and Herzegovina (CBBH), Senad Softić, Ph.D. participated in the 6th meeting of the Governor of the Central Banks from the Region and the Leaders of the Financial Sector, held in Rovinj, Republic of Croatia, on March 27, 2018. This meeting, organized by Business Magazine “Lider” and the Croatian National Bank, this year, focuses on the discussion about challenges faced by the economies of the countries from the Region in the light of the normalization of monetary policy in the euro area, as well as the resolution of accumulated non-performing loans (NPL).

Addressing the potential effects of monetary policy normalization, the regional governors' discussion attempted to answer the question of how much the expected tightening of global financial conditions would affect the macroeconomic performance of the emerging market, especially from the perspective of fiscal efficiency and financial stability. Being aware of the fact that the potential growth of interest rates could slow the credit and economic activity and the possible rise in NPLs, the aim was to see to what extent domestic companies and consumers are exposed to interest rate risk and which measures are likely to be available.

“The CBBH, due to a Currency Board arrangement, cannot influence the level of interest rates in the country. Out of the macro prudential measures, only the required reserves are available to the CBBH. We continuously monitor and analyze the potential effects of monetary policy of the world's leading economies. Depending on the type of risk, liquidity risk in the banking sector or the risk of uncontrolled cross-border outflow of foreign exchange liquid assets, the CBBH will use the required reserve instrument in all its segments, if necessary”, Governor Softić said, adding that if sooner or later, the growth of interest rates occurs, we expect it to be gradual, and should not represent a significant brake on economic development.

“Small and open economies, such as Bosnia and Herzegovina' one, should primarily focus on structural reforms, increase economic efficiency, make export competitive and resilient to external shocks”, Governor Softić concluded his address.