Bosnia and Herzegovina strengthens banking sector with World Bank support: New loan of 56.60 million euros

With a new loan of 56.60 million euros, approved today by the World Bank, key financial sector reforms in Bosnia and Herzegovina (BiH) will be supported. The banking sector strengthening project will help BiH improve regulation and supervision of banks, overcome weaknesses in the banking sector, establish a framework for bank restructuring, and strengthen the management and operations of entity development banks, writes Patria.

The banking sector in BiH is still facing the consequences of the global financial crisis, which weakened the financial system and financial institutions in the country. After an average annual loan growth of 20 percent in the period 2004-2008, the growth of loans to the private sector began to decline at the end of 2009. Since then, loan growth has been only 2-3 percent annually, and access to financing has been a constraint on business development and economic growth. Although in a broader sense the banking system in BiH remains reliable, there are still significant weaknesses that require strengthening of the institutional, regulatory, and supervisory framework.

"Maintaining financial sector stability is a fundamental condition for macro-financial stability, which is in turn a prerequisite for economic growth," says Tatiana Proskuryakova, World Bank Country Manager for Bosnia and Herzegovina and Montenegro. "Through this project, the World Bank will provide both advisory and financial assistance to maintain the stability and development of the financial sector in BiH, which will also benefit citizens."

This project is designed to ensure that proposed activities in the banking sector are fully aligned between the entities, creating a unified business environment for banks. This will provide stability, transparency, and predictability for banks and supervisory authorities, creating a more stable and resilient financial sector from which both businesses and citizens will benefit equally.

Complementary technical assistance is also provided through the World Bank's Financial Advisory Services Center in Vienna (FinSAC) and with the support of the British Embassy in Sarajevo.

The World Bank's portfolio of active projects in BiH includes 12 projects with a total value of 557 million dollars. Areas of support include transport, employment, energy efficiency, local infrastructure, environment, forestry, and water management.