Presentation of Governor Nicholl at the London Conference

The stability of the KM has been an important element in increasing the level of foreign direct investment coming into BH, said the Governor of the Central Bank of BH (CBBH) Peter Nicholl during his presentation to the participants of the Second Business Conference in London, which was held today, December 9, 2003. Organizers of this conference were Foreign Investment Promotion Agency (FIPA) and the Embassy of the Great Britain in BH.
According to the data which Governor presented, foreign direct investments over the first six months of this year were more than KM 247 million.
"We think that these figures actually understate the amount of foreign investment that has come into BH over the last few years. The CBBH recently initiated a survey of 900 companies in order to try and get more up to date and accurate data on foreign investment into BH", the CBBH Governor said.
During his presentation, Governor Nicholl focused on the commercial banking sector and stated that BH has an improving banking sector.
The strong growth in bank credit led the CBBH in June 2003 to take its first ever monetary policy action related to the reserve requirements.
Competition in the banking sector is now very real, helped by the arrival of some good foreign banks. Proportionately, foreign investment in the banking sector has been higher than in any other sector in BH, Governor Nicholl said.
Bank interest rates on lending have fallen substantially under the pressure of increased competition, but are still relatively high. They have fallen steadily since 2001, when they were over 20 percent, so the average short term rate in August 2003 was 10, 43 percent and the average long term lending rate was 9, 33 percent.
"I expect this downward trend in interest rates to continue", Governor said.
He stated that payments system reform, minimum capital requirements, deposit insurance, competition that was created with the arrival of foreign banks and privatization of government owned banks were the main changes that have brought improvement in the BH banking sector.
The BH banking system has still not completed its transition to becoming a modern European type banking system, but it is well on the way.
"I think that most people will be surprised by how quickly the banking system will continue to change and improve", Governor Nicholl said.
The Governor concluded his presentation at the Conference, which aims to improve and promote economic cooperation between BH and Great Britain and to attract foreign investors, with the statement that the environment for private investment has improved but is still far too complicated.
"This is where the attention of BH politicians and international consultants needs to be directed", Governor concluded.

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