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The Central Bank of Bosnia and Herzegovina

The Central Bank of Bosnia and Herzegovina. MARKET OF GOVERNMENT SECURITIES IN BIH Presentation by: Ljubiša Vladušić Vice Governor of the Central Bank of BiH. Regional Investment Forum 2005 Sarajevo, 9 November 2005. Capital Market in BiH :.

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The Central Bank of Bosnia and Herzegovina

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  1. The Central Bank of Bosnia and Herzegovina MARKET OF GOVERNMENT SECURITIES IN BIH Presentation by: Ljubiša Vladušić Vice Governor of the Central Bank of BiH Regional Investment Forum 2005 Sarajevo, 9 November 2005

  2. Capital Market in BiH: • Participants in the market: Commissions for Securities, stock exchanges (Sarajevo and Banja Luka); registries of securities, brokerage houses and commercial banks • B&H Capital Market Council – the body coordinated by the CBB&H which unites all the market participants: the CBB&H, Ministry of Finance and Treasury of B&H, Entity Ministries of Finance, Commissions for Securities of both Entities, commercial banks and the stock exchanges. 2

  3. Capital Market and Stock Exchanges in B&H (1) 3

  4. Capital Market and Stock Exchanges in B&H (2) The total turnover on stock exchanges in B&H in 2004 € 148.806.343,31 Sarajevo stock exchange Banja Luka stock exchange € 51.541.416,73 € 97.264.926,57 BLSE 35% SASE 65% 4

  5. Legal Framework of the CBBH Engagement in Operations with Government Securities • The Law on Debt Issuance, Debt and Guarantees of Bosnia and Herzegovina  • Agreement with the Ministry of Finance and Treasury of B&H on performing fiscal agent tasks for securities  • Entity Laws on Debt Issuance, Debt and Guarantees • Contracts with Registry of Securities in FBiH and Central Registry of Securities of RS • Contracts with Sarajevo and Banja Luka stock exchanges • Contracts with commercial banks • Operative rules for trading in government securities 5

  6. Technical Pre-conditions for Operations with Government Securities • Hardware • Software • Network Infrastructure • Hardware and software – donation of the USA Government, through agency US Treasury 6

  7. Participants in the Market of Government Securities in Auctions (1) • Auction Ministry of Finance and Treasury of BiH Registries Banks Central Bank of BiH 7

  8. Participants in the Market of Government Securities in Continuous Trading (2) • Continuous Trading Ministry of Finance and Treasury of BiH Banks Registries Stock Exchanges Central Bank of BiH 8

  9. Process of Trading in Securities (1) BiH Ministry of Finance and Treasury The Central Bank of BiH BLSE Trading platform CBBH payment system SASE Bank A - seller Bank B - buyer Registry in RS Registry in F BiH 1. Bank A sells bonds to bank B through the trading platform of the CBBH or through the stock exchange. The trade starts by entering data on offer for purchase and sale by the seller and the buyer. In order to effect the trade, the entered data on sale and offer have to match. 9

  10. Process of Trading in Securities (2) BiH Ministry of Finance and Treasury The Central Bank of BiH BLSE Trading platform CBBH payment system SASE Bank A - seller Bank B - buyer Registry in RS Registry in F BiH 2. After the parties agree on trade, the transaction is “locked” until the end of the day. The information on trade will be sent to the registry and at the same time, the payment order will be issued. The ownership of bonds in the registries will not be changed until the payment is fully effected. 10

  11. Process of Trading in Securities (3) BiH Ministry of Finance and Treasury Central Bank of BiH BLSE Trading platform CBBH payment system SASE Bank A - seller Bank B - buyer Registry in RS Registry in F BiH 3. After the registry (registries) receives the data on trade, these data are entered in the system of the registry, without changing the ownership status. The transaction then has the unresolved status until it is confirmed that the payment has been performed. 11

  12. Process of Trading in Securities (4) BiH Ministry of Finance and Treasury Central Bank of BiH BLSE Trading platform CBBH payment system SASE Bank A - seller Bank B - buyer Registry in RS Registry in F BiH 4. After the registries receive confirmation on the effected payments, they perform the final registration of ownership of government securities for a new owner. 12

  13. Important Rules of the Trading Process Itself • The participant in trade is registered in one registry, NOT IN BOTH OF THEM! • Direct participants in trade (banks) have to have accounts in the CBBH for payment and settlement. • Other participants in trade (trading through Sarajevo and Banja Luka Exchanges) have to perform payment and settlement through direct participants (banks). • There can be no change of ownership before the payment is completed. 13

  14. Which are the Most Important Objectives in Establishing Market of Government Securities ? • Take-over of liabilities based on old foreign exchange savings • Take-over of liabilities based on war debt • Impact on banks’ interest rate policies • Providing funds for budget users in periods of unequal inflow of funds from taxes • Mobilization of domestic savings and investing in public projects of various levels of authorities 14

  15. Conclusions • Completing the preparation of legal and regulatory framework for the market of government securities • Market of government securities as a new instrument of capital market for local and foreign investors • Market of government securities as a means of mobilizing and engaging local savings for capital investments 15

  16. Thank You for Your Attention! Contact: The Central Bank of Bosnia and Herzegovina Ljubiša Vladušić Vice Governor 25 Maršala Tita St., 71000 Sarajevo, Bosnia and Herzegovina tel.: +387 33 278 116, 278 100 fax: +387 33 278 271 E-mail: ljvladusic@cbbh.ba 16

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