CBBiH as a Banking and Fiscal Agent

The Law on the Central Bank of Bosnia and Herzegovina, in Chapter VII, regulates the relations of the Central Bank with other public institutions, writes the BiH news agency Patria. Articles 52-56 of this Law regulate the role of the CBBiH as:

- banker, advisor, and fiscal agent
- consultations and reporting on public sector borrowing
- depository and paying agent
- fiscal agent functions
- notifications that Bosnia and Herzegovina must submit to the Central Bank.

We present several interesting clarifications from the Law on the Central Bank of Bosnia and Herzegovina, which were analyzed for the Patria agency by CBBiH experts.

This law mandates the Central Bank to act as the banker and fiscal agent for Bosnia and Herzegovina and public agencies designated by the Presidency of Bosnia and Herzegovina, provided that no transaction carried out by the Central Bank can serve as financial assistance, including a loan, for or on behalf of Bosnia and Herzegovina.

After the establishment of institutions at the level of Bosnia and Herzegovina, the Ministry of Finance and Treasury of BiH, the Indirect Taxation Authority of BiH, and the Deposit Insurance Agency of BiH, the Central Bank of Bosnia and Herzegovina concluded Agreements on performing banking and fiscal agent services, for which it performs this role. For institutions at the entity level, such as the Federal Ministry of Finance, it performs the same role for the Government of Brčko District, while for banking agencies and securities registries in both entities, it performs depository and paying agent services.

"The Central Bank of Bosnia and Herzegovina, within the framework of BiH's relations with international financial institutions, is the depository for the International Monetary Fund (IMF) and the World Bank."

In accordance with the Law on the Central Bank, the Central Bank may accept deposits at its headquarters or main branches in convertible marks and foreign currency from BiH institutions and public agencies designated by the competent BiH ministry, as well as from international financial institutions. The Central Bank of Bosnia and Herzegovina, within the framework of BiH's relations with international financial institutions, is the depository for the International Monetary Fund (IMF) and the World Bank.

As a depository, the Central Bank of Bosnia and Herzegovina receives deposits and makes payments up to the limits of deposited funds upon the orders of depositors for these accounts. The Central Bank of Bosnia and Herzegovina pays interest on such deposits at a market-oriented rate after deducting administrative costs.

In accordance with the Agreement concluded with the Deposit Insurance Agency of BiH, the Central Bank of Bosnia and Herzegovina keeps records of the securities portfolio of this institution, which is managed by a portfolio manager according to the agreement between the Deposit Insurance Agency of BiH and a foreign portfolio manager.

The Law on the Treasury of BiH Institutions established the Unified Treasury Account within BiH institutions. The Unified Treasury Account covers all accounts opened with the Central Bank of Bosnia and Herzegovina, as well as with commercial banks, through which payments are made and funds of the BiH institutions' budget and budget users are held. In addition to budget accounts, the Central Bank of Bosnia and Herzegovina, upon the order of the Ministry of Finance and Treasury of BiH, opens and manages off-budget accounts in convertible marks and foreign currency accounts, as well as accounts for recording succession funds.

The Law on Payments to the Unified Account and Revenue Distribution stipulates that the Indirect Taxation Authority of BiH (ITA), on behalf and for the account of the state, entities, and the district, opens and maintains a unified account consisting of accounts with one or more commercial banks for collecting individual revenues and accounts with the Central Bank of Bosnia and Herzegovina. Accounts with the Central Bank of Bosnia and Herzegovina are used for recording, holding, and distributing revenues to the state, entities, and the district for maintaining minimum reserves and for holding and distributing road toll revenues in the amount of 0.10 KM for highways.

The ITA, on behalf of the revenue beneficiaries, has concluded an agreement with banks selected through a tender, regarding the daily collection and transfer of collected revenue to the unified account at the Central Bank of Bosnia and Herzegovina. The deposit account with banks serves for the collection and transfer to the account at the Central Bank of Bosnia and Herzegovina of all collected revenues. In addition to revenue collection accounts, the Authority has separately opened one or more accounts with commercial banks for the purpose of refunding funds from reserves. Banks report to the Authority daily via electronic means on all individual payment transactions executed.

"The Ministry of Finance and Treasury of BiH, the Indirect Taxation Authority of BiH, entity finance ministries, the Government of Brčko District, and the Central Bank of Bosnia and Herzegovina, as a banking and fiscal agent, operate in a connected manner."

The Central Bank of Bosnia and Herzegovina carries out the daily distribution of total collected revenues upon the order of the ITA. Collected revenues and road tolls are distributed and remitted daily to accounts opened by revenue beneficiaries in accordance with the procedures prescribed by law and any additional instructions issued by the ITA Steering Board. If the entities and the Brčko District settle all their obligations regarding the financing of international commitments, the portion of revenue calculated for each entity and district is fully paid to that entity or district. The amount remitted to the state budget for servicing external debt represents the amount determined in the state budget for each entity and district for the current year. The Ministry of Finance and Treasury informs the Authority about the amounts to be deducted from the remaining portions of the Federation, Republika Srpska, and Brčko District, and on which working days these deductions will be made.

No later than the first working day of the quarter, the Ministry of Finance and Treasury of BiH provides the ITA with a repayment plan approved by the ITA Steering Board. The ITA forwards this plan to the Central Bank for its activities related to servicing external debt. The state of Bosnia and Herzegovina regularly services its obligations to the IMF and other external debt in accordance with the repayment plan and the funding plan.

From all of the above, it is evident that the Ministry of Finance and Treasury of BiH, the Indirect Taxation Authority of BiH, entity finance ministries, the Government of Brčko District, and the Central Bank of Bosnia and Herzegovina, as a banking and fiscal agent, operate in a connected and coordinated manner in all segments related to the financing of institutions at all levels, both in terms of revenue collection and distribution, and in servicing all obligations of Bosnia and Herzegovina.