Deposit Insurance Law Back on the Agenda, Banks Can No Longer Send Surplus Funds Abroad

SARAJEVO, (Patria) - The proposal for the Law on Deposit Insurance in Banks of BiH, whose proposer is the Council of Ministers of BiH under an expedited procedure, will be finally considered at the session of the House of Representatives of the Parliamentary Assembly of BiH on June 20. The proposer recently withdrew it from the session.

The Law on Deposit Insurance in Banks of BiH introduces a number of novelties, and one of the most interesting is that banks will no longer be able to send surplus funds to their headquarters abroad.

In Bosnia and Herzegovina, most banks have been privatized and the owners are mainly banks with foreign addresses.

In order to preserve financial stability, the new banking laws provide for a resolution process that helps create a self-sustaining bank through the restructuring of bank operations, and one of the sources, under the new law, will be the Deposit Insurance Fund.

This law will enable businesses and savers, in the event of financial problems and the "collapse" of a bank, to get a large portion of their money back. Among other things, this law defines articles that determine the conditions for using the Fund, into which bank funds are deposited daily.

The Deposit Law is also cited as one of the conditions of the IMF, and in the supplementary Letter of Intent sent by representatives of institutions in BiH in January 2018, we committed to fulfilling 22 measures, including the adoption of the Law on Deposit Insurance in Banks of BiH.

The Standing Committee for Financial Stability also emphasizes the importance of adopting this law. It was pointed out that, for further harmonization of the legal framework for banking operations, the adoption of the new Law on Deposit Insurance in Banks of BiH is particularly important.

To stabilize the financial sector, but also due to IMF demands, the state and entities were obliged to adopt a set of five laws in the field of banking, aligned with European directives, as early as last year.

The main characteristic of the new Law on Deposit Insurance in Banks of BiH is the possibility of using the funds of the Deposit Insurance Fund in the process of potential restructuring and rehabilitation of banks.

Bank restructuring remains under the jurisdiction of entity banking agencies, but the decision on the Fund's participation and amount is made by the Management Board of the Deposit Insurance Agency of BiH.

For representatives of the RS, the problematic aspect in the Proposal of the Law on Deposit Insurance is the Agency's authority to conduct continuous control over bank operations, even though, under the new law, it still refers to the regulations of the entity banking agencies. Nevertheless, this is another point of dispute between the two key political actors in the RS – the SNSD and the Alliance for Change.

The new law also shortens the deadline for payment of insured deposits from 60 to 20 days, and all banks that receive an operating license from the entity banking agencies automatically become members of the Deposit Insurance Agency of BiH.