New RR Regulations to Take Effect From June 1

The Governing Board of the Central Bank of BH (CBBH) held the meeting in Sarajevo on 23 April 2003, during which it decided that the new Reserve Requirement Regulation would take effect from June 1, 2003.

That would give the commercial banks a month to adjust to the new requirements.

The CBBH Board discussed the detailed decisions they need to take to complete and publish a new Reserve Requirement Regulation and agreed on the definition of the new base that will be incorporated into the new regulations.

They also agreed that the CBBH would pay interest on the current basis on the whole of the reserve deposits a bank holds at the CBBH. This will significantly increase the amount of interest banks will earn on these deposits at the CBBH.

The CBBH Board congratulated and thanked the Presidency of BiH, and the Speakers and members of the House of Representatives and the House of Peoples for their strong support for the amendments to Article 36 of the CBBH Law that the Board had proposed and for passing the amendments promptly.

The amendments to Article 36 of the Law had four elements. The first is related to an extension of the reserve base to include foreign currency deposits as well as KM deposits. The second one is related to the removal of KM cash held in bank vaults as an eligible asset for meeting a bank's reserve requirement. The third change is related to a change in the range of reserve ratios the CBBH could set from 10-20% to 0-20%. The fourth change is giving the authority to the CBBH Governing Board to determine the amount of compensation the CBBH will pay banks on their reserve deposits at the CBBH.
The Board also discussed the level of the reserve ratio that would be set in the new Regulations. The Letter of Intent the BiH authorities will sign with the IMF obliges the CBBH to consult the IMF on this part of the Regulations. The CBBH is also considering views it has received from the commercial banks.

The Board hopes to complete these consultations over the next few days and to announce the ratio level and publish the completed regulation next week.

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