Reserve Requirement Rate Increased to 15%

The Governing Board of the Central Bank of Bosnia and Herzegovina (CBBH) has decided to increase the Reserve Requirement Rate of commercial banks from 10% to 15%.

The a.m. decision of the Governing Board was made after the analysis of the credit growth and its influence on the foreign trade deficit. The total average of credit growth in all sectors is around 26%, while the credit growth of households and private sector was 30% to 35%. Foreign trade deficit could, until the end of this year, amount to KM 7, 1 billion.

Policy of Remuneration the CBBH that pays to commercial banks for the Reserve Requirement and funds above the Reserve Requirement will be changed as well. Remuneration at 1% rate will be paid by the CBBH to commercial banks for amount of Reserve Requirement funds. For those funds exceeding Reserve Requirement, remuneration will be paid based on average interest rates which were achieved by the CBBH on overnight deposits over the same period of time. Implementation of this Decision will commence on December 1, 2005.

The Governing Board of the CBBH has also made the Decision on changes of Foreign Reserves Investment Policy. These changes will bring diversification of portfolio, so 25% of portfolio will be invested into first-class rated securities with maturity date up to three years, while 75%, as it was the case until now, into cash deposits with the maturity ranging from 24 hours to one year. Exposure with one bank can be 15% instead of previous 20%.

Financial results of the CBBH for the first nine months of this year are positive. In fulfillment of the Financial Plan for the first nine months total income was higher by 14%, or by KM 8 million, compared to Plan.

Expenditures were 4% less, or by KM 1, 5 million compared to Plan, while profit was by 48% higher compared to Plan, which shows that the profit will influence further capitalization in the CBBH, as well as the part of the profit which the CBBH gives to the State.

Financial Reports, which, among other things ,include Profit and Loss Statement and the Balance Sheet will be delivered to BH Presidency. Profit and Loss Statement shows that CBBH income, compared to the same period last year, were by 26% higher, which is exactly how higher the profit was as well.

The CBBH predicts that the current trend of operations will be held until the end of this year.