Phase 3 Base 2
Transcript of Phase 3 Base 2
-
8/13/2019 Phase 3 Base 2
1/2
BOSNIA AND HERZEGOVINA
FEDERATION OF BOSNIA AND HERZEGOVINA
THE BANKING AGENCY OF
THE FEDERATION OF BOSNIA AND HERZEGOVINA
Phase 3: 20172018
This phase is a final time framework based on a assumption that the FBA and banking
system in the Federation of BiH (BiH) have successfully implemented steps from the twoprevious phases, that they function in a safe and stable manner and that they are largely
complied with the standards of the European Union. During this time period, the banking
system has to be generally prepared for implementation of advanced approaches from
the Basel II. Based on the above- mentioned it is expected that it will take two years or
less for implementation of the activities from this phase and once they are done by the
end of 2018, implementation of the Basel II will be successfully completed.
The activities to be completed in this Phase include:
- Final adjustment of risk weights in order to be fully harmonized with the requirementsfrom the Basel II and EU directives;
- Continuous investments in professional development and required technologies;- Adjustments with the requirements for advanced risk and capital measurements for group
of banks that are eligible for application of the measurement system of the highest level
such as: according to the Internal Rating Based Approach (IRBA) for credit risk,
Internal Model Approach for market risk, and Advanced Measurement Approach for
(AMA) for operational risk according to the principle bank by bank, and depending on
the level of capacity for risk management that each individual bank has achieved;
- To ensure the capacity building within the FBA for giving approvals to banks forapplication of the most complex approaches according to which, as a rule, banks express
the smaller requirements for capital, and in that process close cooperation and coordination
with regulators from the EU countries and international organizations will be of great
importance;
- It is necessary to check and revise earlier adopted regulations in order to update them andto be implemented in a more efficient and sustainable manner;
- To establish a system for risk management in banks based on the exposure towardssecurities markets in BiH and abroad; by selecting banks whose exposure based on this risk
exceeds 25% of total assets (conduct an assessment of the materiality principle of these
exposures in relation to the capacities of banks to manage this risk and probably to decrease
or increase this percentage);
- Full usage of ratings by credit rating agencies that are preconditions for calculation ofrequired capital in banks;- Usage of ratings by credit rating agencies of corporate emissions of bonds and shares of
banks in the BiH market;
- Compliance with IOSCO standards in all activities and exposures related to securities.* * *
By the end of 2018 it is expected that both FBA and banks in the Federation will fully
implement the new capital framework Basel II, at least in its form which is in force at the
moment of adoption of this Strategy. However, taking into account new indications mostly
caused by the global financial crisis and detection of already conspicuous weaknesses of this
international document, particularly in the part of the most advanced and the most risk
-
8/13/2019 Phase 3 Base 2
2/2
1
sensitive approaches for risk measurement, it is realistic to predict its significant
modifications.
Taking into account the scope and complexity of planned activities, needs for engaging
significant resources of the FBA and other resources, both human and financial, and already
announced modifications of the current Basel II framework which will take place in the next
years, intensity and extent of technical assistance, situation and trends in the banking systemof the Federation of BiH and BiH, it is realistic to predict that there will be certain
divergences in achieving goals determined by this document. The FBA will carry out its
activities (by areas and timeline) in a way to be successful, realistic and if it is possible within
shorter timelines than predicted. It will also make efforts that no other factors influence their
implementation except ones that are beyond its control.
Adopted
On the session of the Management Board of the FBA
On December 29, 2008