Bosnia and Herzegovina to Strengthen Banking Sector with World Bank Support

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WASHINGTON, April 28, 2017 — Key financial reforms to banks in Bosnia and Herzegovina (BiH) are being given a boost by a new, €56.60 million loan, approved today by the World Bank. The Banking Sector Strengthening Project loan will help the country improve bank regulation and supervision, address weaknesses in the banking sector, establish a bank resolution framework, and enhance the governance and operations of the entity development banks.

The banking sector in BiH is still dealing with the aftershocks of the global financial crisis that weakened the country’s financial system and institutions. Following average annual credit growth of 20 percent between 2004 and 2008, private-sector credit growth turned negative at the end of 2009. Growth then fell to an annual average of just 2-3 percent in subsequent years, with access to finance remaining a constraint for enterprise development and economic growth. While the banking system in BiH remains broadly sound, significant pockets of vulnerability still exist, calling for a strengthened institutional, regulatory, and supervisory framework.

“Maintaining the stability of the financial sector is a fundamental condition for macro-fiscal stability, which in turn is a key prerequisite for economic growth,” says Tatiana Proskuryakova, World Bank Country Manager for Bosnia and Herzegovina and Montenegro. “Through this project, the World Bank is providing both advisory and financial assistance to support the stability and development of the financial sector in BiH, which will have broad benefits for citizens.”

The project is designed to ensure that the activities proposed for the banking sector are fully aligned among the entities, creating a uniform environment for banks to operate in. This will provide stability, transparency, and predictability for banks and supervisors, creating a more stable and resilient financial sector that will benefit businesses and citizens alike. 

Complementary technical assistance is also provided with the help of the World Band Financial Sector Advisory Centre in Vienna and the British Embassy in Sarajevo.

The World Bank portfolio of active projects in BiH includes 12 operations, totaling $557 million.  Areas of support include transportation, employment, energy efficiency, local infrastructure, environment, forestry, and water management.

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