News in English     | 28.01.2020. 13:56 |

Softić: It is important for country like BiH to have stable banking system

FENA Sanda Hrkić

SARAJEVO, January 28 (FENA) - The Professional Risk Managers Association of BiH (UPRMBiH) gathered international and domestic financial experts as well as managers in the field of banking at the 2nd Regional Conference on Risk Management.

The aim is to raise questions about the importance and impact of the country's credit rating and new regulatory framework in banking on sustainable credit offer and demand, primarily on SME financing.

UPRMBiH Chairman and Sparkasse Bank BiH Board Member Amir Softić explained that medium and small businesses are a key generator of annual added value in the business sector of all small open economies, including Bosnia and Herzegovina.

“That is why it is important to consider how state risk and credit rating affect the offer and demand of credit money and to what extent the new regulatory framework will affect its development,” he said.

On the one hand, a country's credit rating determines the level of credit demand and may have the effect of reducing the level of credit supply. On the other hand, the new regulatory framework should prevent the concentration of the banking system's exposure to riskier financial structures. This is important at a time of low interest rate monetary policy that naturally encourages banks to compensate for low interest rates and the decline in net interest income as they take on higher levels of risk.

“If we know that, at the same time, the global economy is experiencing a slowdown, it is clear that for a country like BiH it is important to have a stable banking system and sufficient credit demand that would prevent negative fluctuations within the business cycle,” he stressed.

Softić says the banking sector is in the final stage of alignment with European directives, and in that sense "we can expect definitely higher capital requirements."

“We can also expect some possible tightening of credit standards, at least when it comes to clients with lower credit ratings,” he said.

He believes it is important to ensure a better investment climate, based on better political as well as legal stability, and to clear real sector companies from obstacles that prevent them from obtaining loans.

Resident Representative of the International Monetary Fund in BiH Andrew Jewell said that the macroeconomic and financial situation in Bosnia and Herzegovina is stable, but political uncertainty and weak growth in Europe pose negative risks.

“The IMF is ready to negotiate a new program with the BiH authorities as soon as a new Federation of BiH government is formed. It is certain that the new program will focus on reforming the health sector, increasing transparency and oversight of state-owned enterprises,” he stressed.

He points out that 'he has already had discussions with officials at the state level as well as in the Republika Srpska and the Federation of BiH, they are all interested in concluding the new program.'

"It's up to them to make the next move," he said.

Sessions are planned for the second day of the conference, which should also result in concrete proposals for solutions in specialized banking topics.

(FENA) A. B.

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