Amendments to the CBBH Law Proposed

Changes that the CBBH is proposing in the implementation of the Reserve Requirements (RR) regulations that the CBBH imposes on commercial banks were discussed during a meeting with all commercial banks of the BH Federation, which was co-hosted by the Central Bank of BH (CBBH) and the FBH Bankers' Association. The meeting was held on April 2, 2003 in the CBBH Head Office in Sarajevo.

The proposed changes, which will require amendments to the Article 36 of the CBBH Law, include a broadening of the RR base to all deposits and borrowed funds, including foreign deposits, instead of only KM, which was the case until now. This would bring the KM into the equal position to foreign exchange currencies. The commercial banks generally supported this change.

Another proposal is the elimination of the KM cash banks hold in their vaults as an eligible asset for fulfilling the RR of banks. The commercial banks had some concerns about this proposed change. It is also proposed that the minimum range RR rate that the Governing Board of the CBBH can set should be lowered to below 10 percent, instead of the current 10 to 20 percent. The range would be specified in the CBBH Law as 'up to 20%'.The current RR imposed on banks is 10%. Both of the proposed changes to the implementation of the RR would have the effect of tightening if the ratio level is not reduced below 10%. The banks were informed that the analysis of the appropriate level for the new RR was still not complete and the Governing Board of the CBBH has not yet taken a decision. Commercial banks therefore have the opportunity to make submissions to the CBBH on this issue.

The copy of the proposed amendments to the Article 36 of the CBBH Law will be circulated to all commercial banks for their comments. Representatives of the commercial banks that were present at yesterday's meeting stated they will need the adjustment period for implementation of new RR regulation. The CBBH Governing Board will consider their views before taking any decisions. This proposal will be sent to the State Presidency by the CBBH. The CBBH will request that it is passed through the parliamentary procedure under urgency.

At the end of the meeting, an initiative was raised for setting up a Working Group that would deal with all relevant issues relating to the banking laws in BH. The Working Group will include representatives of the CBBH, both entity Bankers Associations, both Entity Banking Agencies, and both Entity Ministries of Finance and the State Ministry of the Treasury.

The CBBH will hold a similar meeting with RS banks in Banja Luka on 9 April.