Modernization of Payments System in Bosnia and Herzegovina Nears Important Year-end Change

The Central Bank of Bosnia and Herzegovina announced today that it has signed a contract with Logica of London and Halcom of Ljubljana for computer equipment and software. This equipment and software will enable a new bulk clearing house to be established by the CBBH that will handle the large volume of small value payments that in the future will go through the commercial bank system in BiH. This is another important step in the transfer of the payments system from the Payments Bureaus to the banking sector.

The legal monopoly on domestic non-cash payments that the Payments Bureaus had was removed some months ago. That was the first step. Commercial banks have to apply to their respective entity Banking Agency for authorization to carry out domestic payments. Around 28 banks have already received partial authorizations. This is the second step. The CBBH is building new clearinghouses to process the bank-initiated payments. This is the third step.

Under the banking reform law in BiH, from January 2001, licensed banks in all parts of the country will be able to make payments for their physical and legal customers without going through the Payments Bureaus and the Payments Bureaus will be closed. From that date on, the commercial banks will operate the domestic non-cash payments system and the CBBH will operate the clearing systems for those payments. That will be the final step in the transformation of the payments system in BiH.

The contract signed today with the two companies is the second contract signed by the CBBH relating to the new clearinghouses. The first contract signed with Logica in May 2000 covered high value and priority payments usually made by legal persons. The Logica/Halcom contract signed today will apply to retail type transactions made by citizens that in most countries are handled by a bank to bank clearing house. The CBBH renewed three tenders. The Payments Bureaus were invited in these tenders but did not do so. Under the new payments system, customers of banks will be able to instruct their banks where they have their accounts to issue payments orders for paying their obligations. The paper payment orders written by customers will be converted into electronic files for exchange by on-line connections with other banks in the country through the new clearinghouse. The CBBH will initially operate the Clearinghouse in its main units in Banja Luka, Mostar and Sarajevo but may add other cities in the country later if the volume of payment orders requires. Clearinghouses have long been recognized as the most efficient way to exchange payments between banks in market economies.

The change in the law in BiH is similar to that made in Croatia and Slovenia and permits a fully competitive banking system, such as that available throughout all of Europe. Commercial banks are now getting ready for the new situation by applying for authorizations and acquiring equipment and training staff for the changeover. Halcom and Logica joined forces two years ago to support the central bank in Slovenia by installing and maintaining similar computer equipment. This experience will help make a smooth transition here in BiH. The CBBH, in cooperation with the National Payments Council, has been responsible for charting the course of payments system modernization. More public announcements will be made in the coming months to keep the public informed about the new services.