The Federation (FBiH) entity’s Banking Agency stated Wednesday that they have adopted measures to mitigate the risk caused by a possible increase in reference interest rates, inflationary pressures and other disturbances that may have negative effects on the BiH market.

The FBiH Banking Agency stated that during Wednesday's session, the Board of Directors adopted the Decision on temporary measures to mitigate the risk of rising interest rates.

“Due to the increased impact of interest rate risk, the Agency considered it necessary to act on possible negative effects on the financial system, users of financial services and the economy of BiH. Bearing in mind the supervisory and regulatory function within its competencies, the decision aims at timely management of credit risk, formation of additional reserves for expected credit losses and mitigating the consequences of a potentially significant increase in the amount of debt repayment,” the FBiH Banking Agency stated.

“Provisions of the decision particularly affect the protection of users of financial services, which implies that the bank will not increase the interest rate above a level that is considered significant if it estimates that the said increase in the interest rate will have an impact on the creditworthiness of the user of the financial service, and would also bring the user of the financial service into the status non-payment of obligations. In accordance with the above, the bank can offer such a user of the financial service the possibility of modifying the credit exposure,” the agency added, among other things.

They noted that it is necessary for banks to plan adequate management of interest-induced credit risk.