SARAJEVO (Bosnia and Herzegovina), May 3 (SeeNews) – The World Bank said it will fund key financial reforms in banks in Bosnia and Herzegovina with a new 56.60 million euro ($61.8 million) loan.
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 lender said in a statement late last week.
The banking sector in Bosnia and Herzegovina is still dealing with the aftershocks of the global financial crisis that weakened the country’s financial system and institutions, the World Bank judged.
"Following average annual credit growth of 20% 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% in subsequent years, with access to finance remaining a constraint for enterprise development and economic growth," the lender noted.
While the banking system in Bosnia and Herzegovina remains broadly sound, significant pockets of vulnerability still exist, calling for a strengthened institutional, regulatory, and supervisory framework, it warned.
"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," Tatiana Proskuryakova, World Bank country manager for Bosnia and Herzegovina and Montenegro, said. "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.
The World Bank portfolio of active projects in Bosnia and Herzegovina includes 12 operations, totaling $557 million. Areas of support include transportation, employment, energy efficiency, local infrastructure, environment, forestry, and water management.
Bosnia and Herzegovina is made up of two entities - the Serb Republic and the Federation.
($=0.9159 euro)