REPERKUSIJE UTVRĐIVANJA I ODRŽAVANJA OBAVEZNIH REZERVI I UTVRĐIVANJA NAKNADE NA IZNOS REZERVE NA BANKARSKI SEKTOR BIH
REPERCUSSIONS OF DETERMINING AND MAINTAINING REQUIRED RESERVES AND DETERMINING REMUNERATION ON THE AMOUNT OF RESERVES ON THE BANKING SECTOR IN BOSNIA AND HERZEGOVINA

Author(s): Jasna Zrilić
Subject(s): Economic policy, Financial Markets, Public Finances
Published by: Finrar d.o.o Banja Luka
Keywords: Central Bank; mandatory reserves; banking sector;
Summary/Abstract: The reserve requirement is the only instrument used by the Central Bank of BiH in the implementation of monetary policy. The required reserve rate is 10% and is applied to the base consisting of deposits and borrowed funds. Starting from January 2024, there is a change in the way of maintaining the required reserve, where the part of the required reserve that refers to the basis in EUR and in the domestic currency with a currency clause is maintained in EUR. Full application of this provision is expected from October 2024, i.e. the entire mandatory reserve that refers to the basis in EUR and in the domestic currency with a currency clause is maintained in EUR. Full application the basis in EUR and in the domestic currency with a currency clause, in fu ll amount will have to be maintained in EUR. This method of maintaining mandatory reserves will have a significant impact on the banking sector in Bosnia and Herzegovina, especially on profitability, as it will reduce the possibility for banks to directly term funds abroad. Another important part of this Decision refers to the determination of remuneration for the amount of reserves. In the period from 2021 to 2024, the remuneration paid by the Central Bank of Bosnia and Herzegovina to commercial banks for funds in the reserve account (required reserve and funds exceeding the required reserve) was changed several times. In this paper, we will look at the repercussions of the amount of this remuneration on the operations of the banking sector in 2023. Changes related to the required reserve began to be implemented in 2023 in the changed market conditions related to the growth of interest rates in the Euro zone. The CBBH pays remuneration to the required reserve fu n d at the rate of 0.5% (base in BAM), 0.3% (base in foreign currency or BAM with a currency clause in EUR) and to the fu n d exceeding the required reserves at a rate of 0%. This has significantly reduced the funds that banks maintain above the reserve account in comparison to the previous period, and this is due to the fa ct that banks from Bosnia and Herzegovina achieve more significant returns when directly terming funds with banks abroad. In order to achieve economic growth and further strengthen stability by increasing the remuneration charged by the CBBH to commercial banks on reserve funds and required reserve funds, the banks would return a significant amount of funds to the country. This would open up the possibility of an increase in interest rates on deposits with an agreed maturity date, and further development of the reference rate of the average weighted cost of financing banks in Bosnia and Herzegovina. Increasing the amount of term deposits in the structure of sources of financing in the banking sector would contribute to even greater stability of the banking sector and the long-term potential for credit growth.

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