Authorities in BiH and Banking Agency Most Responsible for Citizens' Agony Due to Banks

Foreign banks in Bosnia and Herzegovina operate very successfully. Their work should be supervised by the entity Banking Agencies. Authorities should create a stronger banking system in Bosnia and Herzegovina, strengthen domestic banks, but the scene often shows a completely different scenario.

This is demonstrated by the example of governments and public institutions borrowing from foreign commercial banks, conducting payment transactions through foreign banks, while Bosnian banks languish in mediocrity.

Furthermore, citizens of BiH are increasingly feeling the "displeasure" of banks. The affair with Swiss franc loans is still active and vivid. The Association "Swiss" claims that as many as 27 citizens of BiH have committed suicide due to debts and enormous loan installments! The culprit for this situation has never been adequately and publicly identified.

Experts claim: it is imperative to quickly identify who in the chain of responsibility is to blame for everything that happened with such loans issued by Hypo bank, which restructured and is now called Addiko bank.

Many place the burden of responsibility on the Banking Agency, which receives a significant portion of its funds from the banks themselves, whose controller it actually is. Additionally, the Agency generates revenue from regular operations, consisting of supervision fees (administrative and variable), as well as fees for granting consents and approvals, and other acts (other fees), which banks, MFIs, and leasing companies pay to the Banking Agency.

Professor at the Faculty of Economics in Sarajevo and a Member of the House of Representatives of the Parliament of the Federation of BiH, Dženan Đonlagić, has long warned that there is a justified suspicion about the independence of the Banking Agency of the Federation of BiH, given its funding method.

- There is a danger of lobbying influence from banks there - Đonlagić clearly states.

Few people are willing to talk about these direct influences of banks. Macroeconomist Dr. Adisa Omerbegović-Arapović points out that the Banking Agency cannot be a good policeman if it is maintained by those it is supposed to supervise.

- The Banking Agency must have the legal power to overcome the interest of citizens in a stable financial system over the particular interests of a bank. Unfortunately, this relationship has already been called into question, and with all its powers and mechanisms, it was unable to prevent what happened with several banks in RS that entered bankruptcy proceedings. However, through the report of the Central Bank of BiH, we also saw that there are still several banks with non-performing loans, even around 50 to 70 percent. This means that there is still so much systemic risk that has accumulated, and the agency that was supposed to prevent it was in power then - says Omerbegović-Arapović.

She adds that the Agency must be a state institution, but that it should not be biased. However, this connection does exist.

Government Borrowing from Foreign Banks

Government borrowing in BiH from foreign banks is not uncommon, but why are BiH banks being skipped?

- These arrangements should be on a free market, meaning all banks should have an equal chance to access such a relationship. It is obviously profitable for them to do so now, to lend to the state, as they consider it safe. However, I fear that this is done out of interest because they know that a government that would not receive this money from banks would very quickly find itself unable to service its debt, which also means unpaid salaries and pensions for those in the public sector, and that means the collapse of banks. So, it is a very concrete interest relationship where both parties have an interest in entering into something like this. It is not so common in the world for commercial banks to lend to the state. That is too much systemic risk for a bank, and again the question arises as to who has the privilege to earn interest from the state - says Omerbegović-Arapović.