Commercial Banks to Provide Payments Transactions Services 5/7/1999 Tweet In an effort to reduce the current monopoly held over the payments system by the Payments Bureaus in Bosnia and Herzegovina, a key decision has been reached which will give commercial banks a chance to provide payments services. The decision, reached between the Banking Agencies of both the Federation of BiH & the Republika Srpska with the assistance of the Central Bank of Bosnia & Herzegovina would take effect once the payment system reform law is passed. The parties in the negotiations, which took place Tuesday, May 4th, 1999 at CBBH headquarters, agreed that "low risk" & "moderate risk" transactions will be taken over by commercial banks immediately after the new payments law comes into effect. A "low risk" transaction would include: ¨ "On us" transactions reflecting the transfer of funds between two customers of the same bank and on the books of that bank. ¨ Transfers between two branches of the same bank with no intermediary involved. ¨ Transactions with the Central Bank of Bosnia & Herzegovina based on their reserve accounts. A "moderate risk" transaction would include: ¨ Interbank transactions where the following conditions exist: ¨ Bilateral relations have existed between two banks with documented analysis of each other's credit risk capacity inplace. ¨ Correspondent bank accounts in place at a level to secure the gross level of transactions between the two banks. ¨ Adequate accounting procedures to ensure that the gross level of payment orders does not exceed the deposit amount at the correspondent bank. The decision also included the eventual participation by commercial banks in "high risk" transactions. These would have to be approved by the relative banking agency and that approval will be based on certain criteria: ¨ The information technology capabilities of the bank in question. ¨ The accounting and bookkeeping capabilities of the banks. ¨ Managerment's ability to adequately oversee payment services. ¨ Additional capital requirements that may be needed to ensure a "safe & sound" payments arena. The decision reached at the meeting also addressed "higher risk" payments transactions, which all banks would be prohibited from performing without a specific license from their relative banking agency. The decision would leave it up to the Board of Directors of each individual bank to establish policies underwhich their institution would provide payment services. This policy must include internal controls and risk management provisions and at a very minimum include the following: ¨ Specific transactions the bank will perform. ¨ Specific guidelines for credit analysis of the parties with which the bank transacts. ¨ Specific information technology capabilities which the bank must have to engage these activities. ¨ Specific guidelines on how the bank will monitor its liquidity so that it will be able to meet its payment obligations. The banks internal policy must then be sent to the banking agency for comment, and if found deficient in any area, may be rejected pending amendment. The banking agency could therefore ristrict, limit or prohibit payment activities by any particular bank until its internal guidelines are approved. For any additional questions please call the CBBH office of Public Relations at 444-785 or email [email protected].
