Instruction on Reserve Account Operations for Banks

---

Based on Article 7(b) and Articles 36, 57, and 70 of the Law on the Central Bank of Bosnia and Herzegovina ("Official Gazette of BiH", nos. 1/97, 29/02, 8/03, 13/03, 14/03, 9/05, 76/06, and 32/07), the Governing Board of the Central Bank of Bosnia and Herzegovina, at its 7th meeting held on July 28, 2023, and its 8th meeting held on August 29, 2023, adopts

Instruction on Reserve Account Operations for Banks

PART ONE - GENERAL PROVISIONS

Article 1. (Subject Matter) This Instruction regulates the manner of opening, maintaining, and closing reserve accounts of banks with headquarters in Bosnia and Herzegovina (hereinafter: bank) at the Central Bank of Bosnia and Herzegovina (hereinafter: Central Bank), on which the bank holds monetary funds to fulfill mandatory reserves, procedures, activities, and measures in cases where the bank fails to fulfill the mandatory reserve, as well as in the event of the expiration of the operating license and status changes of the bank, and other rights, obligations, conditions, and manner of conduct of the Central Bank and the bank.

Article 2. (Basic Principles) (1) Every bank that has a license from the competent banking agency (hereinafter: competent agency) to conduct banking business is obliged to open a reserve account at the Central Bank, on which it holds funds to fulfill mandatory reserves, namely:

• a reserve account in BAM (convertible Mark) at the Central Bank, on which reserve funds in BAM are held to fulfill the mandatory reserve in BAM, and
• a reserve account in EUR at the Central Bank in an account abroad, on which reserve funds in EUR are held to fulfill the mandatory reserve in EUR. (2) The bank must have sufficient funds on its reserve account in BAM and its reserve account in EUR at the Central Bank (hereinafter jointly referred to as: reserve account) so that all transactions submitted to the Central Bank can be realized, and no transaction conducted by the Central Bank can serve as financial assistance to the bank.

PART TWO - Opening of Reserve Accounts

Article 3. (Application for Opening a Reserve Account) (1) The bank referred to in Article 2, paragraph (1) of this Instruction is obliged to submit an application to the Central Bank, or the organizational unit of the Central Bank competent in accordance with Article 5 of the Decision on the Establishment of Main Units of the Central Bank of Bosnia and Herzegovina ("Official Gazette of BiH", nos. 7/98, 3/99, and 8/01, hereinafter: competent organizational unit of the Central Bank), for the opening of a reserve account, and attach a certified copy of the act on the issuance of the operating license for the bank. Immediately upon acquiring legal personality status, the bank is also obliged to submit to the Central Bank:

• the original or a certified copy of the act by which the bank acquires legal personality status, and
• specimens of persons authorized to initiate changes to the bank's reserve account. (2) The Central Bank, within a period of no later than three working days from the date of receipt of the complete application from paragraph (1) of this Article, opens the bank's reserve account.

Article 4. (Authorized Persons) (1) The bank is obliged to appoint persons authorized to initiate changes to the bank's reserve account (hereinafter: authorized persons). (2) The act from paragraph (1) of this Article, which determines the persons authorized to initiate changes to the bank's reserve account, must contain the following mandatory parts:

• the bank's memorandum;
• names and surnames of the authorized persons;
• specimen signatures of the authorized persons;
• signature of the person authorized to represent and act on behalf of the bank;
• impression of the bank's seal.

Article 5. (Timeliness of Documentation and Data) (1) The bank is obliged to submit to the Central Bank without delay all changes related to documentation and data regarding authorized persons from Articles 3 and 4 of this Instruction. (2) Authorized persons are considered authorized signatories on behalf of the bank until their change, of which the bank is obliged to notify the Central Bank in accordance with paragraph (1) of this Article.

PART THREE - Maintenance of Reserve Accounts

Article 6. (Definition of Maintenance of Reserve Accounts) Maintenance of reserve accounts implies monitoring the fulfillment of mandatory reserves, as well as monitoring and executing all changes to the reserve account in terms of fund transfers: to/from the bank's reserve account to/from the settlement account in the BPRV system, to/from the bank's reserve account for other business the bank conducts with the Central Bank, between banks, and between the Central Bank and the bank.

Article 7. (Monitoring Changes to the Reserve Account) (1) All changes to the reserve account are carried out in accordance with the aforementioned Law on the Central Bank of Bosnia and Herzegovina and regulations of the Central Bank. (2) The Central Bank is obliged to promptly record data in the registers and ensure the accuracy of recorded data. (3) The Central Bank and the bank are obliged to organize the monitoring and reconciliation of all changes to the bank's reserve account to ensure the accuracy of the reserve account balance. (4) In the event of a discrepancy in the reserve account balance, the Central Bank or the bank is obliged to immediately notify the other party and take all actions and activities to determine and record the accurate balance of the bank's reserve account.

Article 8. (General Rules of Operation on the Reserve Account) (1) Changes to the bank's reserve account are made based on:

• the bank's application submitted to the competent organizational unit of the Central Bank where the reserve account is maintained, in accordance with Central Bank regulations,
• the provisions of Article 11, paragraph (1), items b), c), and d) of this Instruction. (2) The Central Bank, immediately upon receipt of the application from paragraph (1), item a) of this Article, conducts a check:
• of the regularity and timeliness of the submitted application, and
• of the existence of appropriate coverage. (3) If all conditions from paragraph (2) of this Article are met, the Central Bank makes the appropriate changes to the bank's reserve account and notifies the bank thereof. (4) If any of the conditions from paragraph (2) of this Article are not met, the Central Bank rejects the application and notifies the bank thereof. (5) If there are no additional restrictions, all bank applications will be realized accurately and promptly, in accordance with the bank's application.

Article 9. (Transfer of Funds to/from the Bank's Reserve Account in BAM to/from the Settlement Account in the BPRV System) (1) The application for the transfer of funds from the bank's reserve account in BAM to the settlement account in the BPRV system is submitted by the bank on Form 1, which is an integral part of this Instruction. (2) The application from paragraph (1) of this Article, certified with a seal and signed by an authorized person from Article 4 of this Instruction, is submitted to the competent organizational unit of the Central Bank where the reserve account is maintained electronically or by fax, and in exceptional cases by personal delivery or mail. (3) During the working day, the bank may, no later than thirty minutes before each settlement of net positions from giro clearing in the BPRV system, submit a written application for the transfer of additional funds to the settlement account in the BPRV system, and exceptionally with the consent of the competent organizational unit of the Central Bank at other times. (4) Funds located in the settlement account in the BPRV system are transferred from the settlement account in the BPRV system to the bank's reserve account in BAM at the end of the BPRV working day. (5) During the day, funds from the settlement account in the BPRV system can be returned to the reserve account in BAM based on the bank's written application for the return of funds submitted to the competent organizational unit of the Central Bank.

Article 10. (Transfer of Funds Between Banks) Transfer of funds between banks implies the transfer of funds from the reserve account in BAM of one bank to the reserve account in BAM of another bank in the case: when funds in the bank's reserve account are secured by borrowing funds from other banks to realize applications related to the obligation to fulfill mandatory reserves or due to a lack of funds for uninterrupted payment transactions, expiration of the bank's operating license, status change of the bank, when a bank participant in the BPRV system conducts payment transactions on behalf of another bank that is not technically able to send orders to the BPRV system.

Article 11. (Transfer of Funds Between the Central Bank and the Bank) Transfer of funds between the Central Bank and the bank implies the transfer of funds in the following cases: when the bank is technically unable to conduct payment transactions and is prevented from transferring funds to the benefit of the Central Bank's depositor, the bank submits an application to the competent organizational unit of the Central Bank for the transfer of funds from the reserve account in BAM to the benefit of the Central Bank's depositor; crediting, or collection of fees to the bank which are calculated as interest on the amount of funds in reserve accounts during the maintenance period of mandatory reserves; collection of fees to the bank from the reserve account in BAM for services in accordance with the Central Bank's regulation on determining the fee tariff; collection of penalty interest from the reserve account when the bank fails to fulfill the mandatory reserve, with the corresponding application of Article 66 of the Law on the Central Bank.

Article 12. (Transfer of Bank Funds Between Reserve Accounts in BAM and Reserve Accounts in EUR) Transfer of bank funds between the reserve account in BAM and the reserve account in EUR is carried out in accordance with the Central Bank's regulation that governs the manner of conducting transactions to increase and decrease funds in the reserve account in EUR, and implies: transfer of funds from the reserve account in EUR to the reserve account in BAM based on the bank's application submitted to the competent organizational unit of the Central Bank; transfer of funds from the reserve account in BAM to the reserve account in EUR based on the bank's application submitted to the competent organizational unit of the Central Bank.

PART FOUR - Procedures, Activities, and Measures in Case of Bank Failure to Fulfill Mandatory Reserve

Article 13. (Non-fulfillment of the Obligation to Determine and Maintain Mandatory Reserve) Part Four of this Instruction regulates the manner of conduct, activities, and measures that the Central Bank takes on the bank's reserve account in cases where the bank, in accordance with the Law on the Central Bank of Bosnia and Herzegovina and the Central Bank's regulation on determining and maintaining mandatory reserves and determining fees on reserve amounts, fails to fulfill the mandatory reserve during:

• one maintenance period,
• two consecutive maintenance periods,
• three consecutive maintenance periods and beyond.

Article 14. (Non-fulfillment of Mandatory Reserve During One Maintenance Period) In the event that the bank fails to fulfill the prescribed mandatory reserves during one maintenance period, the Central Bank will:

• calculate the mandatory reserves and notify the bank of the shortfall amount and the calculated penalty interest;
• after executing the calculation from item a) of this Article, notify the competent agency of the non-fulfillment of mandatory reserves, i.e., the shortfall amount and calculated penalty interest;
• collect the calculated penalty interest from the bank's reserve account to the benefit of the Central Bank's account within five days from the expiration of the previous maintenance period, with the corresponding application of Article 66 of the Law on the Central Bank. If there are insufficient funds in the bank's reserve account from which collection can be executed, the Central Bank will execute collection successively until the final collection of the entire amount.

Article 15. (Non-fulfillment of Mandatory Reserve During Two Consecutive Maintenance Periods) In the event that the bank fails to fulfill the prescribed mandatory reserves during two consecutive maintenance periods, the Central Bank will:

• on the next working day after the expiration of the second consecutive maintenance period in which the bank fails to fulfill the mandatory reserve, suspend transactions related to the reduction of the reserve account upon the bank's request and cease all payments from the settlement account in the BPRV system;
• calculate the mandatory reserves and notify the bank of the shortfall amount and the calculated penalty interest;
• after executing the calculation from item b) of this Article, notify the competent agency so that appropriate measures can be taken;
• continue to transfer the balance of the settlement account in the BPRV system to the bank's reserve account;
• collect the calculated penalty interest from the bank's reserve account to the benefit of the Central Bank's account within five days from the expiration of the previous maintenance period, with the corresponding application of Article 66 of the Law on the Central Bank. If there are insufficient funds in the bank's reserve account from which collection can be executed, the Central Bank will execute collection successively until the final collection of the entire amount.

Article 16. (Non-fulfillment of Mandatory Reserve During Three Consecutive Maintenance Periods) (1) In the event that the bank fails to fulfill the prescribed mandatory reserves during three consecutive maintenance periods, the Central Bank will:

• on the next working day after the expiration of the third consecutive maintenance period in which the bank fails to fulfill the mandatory reserve, continue the suspension of transactions related to the reduction of the reserve account upon the bank's request and payments from the settlement account in the BPRV system;
• calculate the mandatory reserves and notify the bank of the shortfall amount and the calculated penalty interest;
• after executing the calculation from item b) of this Article, notify the competent agency so that it can take appropriate steps against the bank;
• continue to transfer the balance of the settlement account in the BPRV system to the bank's reserve account;
• collect the calculated penalty interest from the bank's reserve account to the benefit of the Central Bank's account within five days from the expiration of the previous maintenance period, with the corresponding application of Article 66 of the Law on the Central Bank. If there are insufficient funds in the bank's reserve account from which collection can be executed, the Central Bank will execute collection successively until the final collection of the entire amount. (2) The measures and activities from paragraph (1) of this Article, the Central Bank will continue to implement for all subsequent consecutive maintenance periods in which the bank fails to fulfill the mandatory reserve.

Article 17. (Obligation to Submit Reports for Mandatory Reserve Calculation) Regardless of the activities and measures taken in accordance with Articles 13-16 of this Instruction, the bank remains obliged to submit reports for mandatory reserve calculation, and the Central Bank will continue to perform mandatory reserve calculations.

Article 18. (Continuation of Transactions on Reserve Accounts) In the cases from Articles 15 and 16 of this Instruction, the Central Bank will resume conducting transactions related to the reduction of reserve accounts and payments in the Central Bank's payment systems on the next working day after the bank fulfills the mandatory reserve.

PART FIVE - Closure of Reserve Accounts

Article 19. (1) The Central Bank closes the bank's reserve account when the bank's operating license ceases to be valid and exceptionally in the case of the bank's decision regarding status changes in accordance with Article 22 of this Instruction. (2) Within sixty calendar days from the date the bank's operating license ceases to be valid, the Central Bank will, after the prior return of equipment owned by the Central Bank and the settlement of all the bank's obligations to the Central Bank, close the bank's reserve account and execute the transfer of any remaining funds from the reserve account to an account designated by written application by the legally competent authority or person, depending on the reason for the cessation of the bank's operations.

PART SIX - Procedures, Activities, and Measures in the CASE of CESSATION of VALIDITY of the OPERATING LICENSE and STATUS CHANGES of the Bank

Article 20. (Cessation of Validity of Operating License) (1) Based on the act determining the cessation of the validity of the bank's operating license, the Central Bank will, as of the date the bank's operating license ceases to be valid, cease to perform mandatory reserve calculations and close the settlement account in the BPRV system. (2) Exceptionally from the provision in paragraph (1) of this Article, if the determined date of cessation of the validity of the bank's operating license is a date that has already occurred or the date when the Central Bank receives the act determining the date of cessation of the validity of the bank's operating license, the Central Bank will, on the same day or no later than the next working day after receiving the act from the competent agency, cease to perform mandatory reserve calculations and close the settlement account in the BPRV system.

Article 21. (Liquidation and Bankruptcy of the Bank) If the initiation of liquidation or bankruptcy proceedings is determined, the liquidator or bankruptcy trustee is obliged to:

• submit a specimen of their signature to the Central Bank and its competent organizational unit for the purpose of updating the signatory register and determining the authenticity of signatories when processing orders and applications of the liquidator or bankruptcy trustee and disposing of monetary funds in the bank's reserve accounts,
• ensure that the bank continues to send necessary data to the Unified Register of Business Entities' Accounts in Bosnia and Herzegovina in accordance with the Central Bank's regulation on the Unified Register of Business Entities' Accounts in Bosnia and Herzegovina,
• ensure that the bank continues to submit up-to-date data to the Central Register of Business Entities' and Individuals' Credits in Bosnia and Herzegovina until the completion of the liquidation or bankruptcy proceedings,
• ensure that the bank returns equipment owned by the Central Bank after the completion of the liquidation/bankruptcy proceedings.

Article 22. (Status Changes) (1) The Central Bank will, in accordance with the submitted act from the competent agency regarding the status change of the bank (merger, acquisition, division, or separation), take appropriate measures and define all activities necessary for the final realization of the status change. (2) The legal successor bank, based on the submitted act from the competent agency, submits an application for the opening of a reserve account, and the Central Bank, within a period of no later than three working days from the date of receipt of the complete application, opens the bank's reserve account. (3) The bank to which the operating license is issued based on status changes of banks determined by entity banking laws may, instead of opening a new reserve account, request the retention of the existing reserve account of the bank that is the subject of the status change. (4) The legal successor bank, immediately upon registration of the status change in the business entities register at the competent court, is obliged to submit the relevant act to the Central Bank in the original or a copy true to the original. (5) In the case of status change by merger or acquisition of the bank from paragraph (1) of this Article, the Central Bank will:

• transfer the balance of the reserve accounts of the merging/acquiring banks to the reserve account of the bank resulting from the merger/acquisition,
• continue to perform mandatory reserve calculations for the bank resulting from the merger/acquisition based on the Consolidated Report for Mandatory Reserve Calculation which includes the balance of deposits of the merging/acquiring banks,
• after the completion of the status change, take possession of equipment owned by the Central Bank from the bank that ceases to exist. (6) In the case of status change by division or separation of assets and liabilities of the bank from paragraph (1) of this Article, the Central Bank will:
• transfer the balance of the reserve account of the bank being divided, or whose assets and liabilities are being separated, to the reserve accounts of the banks that are legal successors in accordance with the act on division or separation of assets and liabilities,
• perform mandatory reserve calculations for the banks resulting from the division/separation based on the Report for Mandatory Reserve Calculation in accordance with the act on division or separation of assets and liabilities. (7) The bank, or banks, that are legal successors are responsible for settling all obligations of their legal predecessors, in accordance with the scope of rights and obligations assumed from their legal predecessor.

Article 23. (Appointment of Temporary/External or Special Administrator of the Bank) (1) The Central Bank, immediately upon receipt of the act from the competent agency appointing a temporary/external, special administrator, or another person who, in accordance with entity banking laws, assumes the powers of the bank's management bodies (hereinafter: appointed administrator), ceases to execute fund transfers from the bank's reserve account upon orders and requests of the previously authorized persons who are thereby deprived of their authorization. (2) For the purpose of updating the signatory register and determining the authenticity of signatories when processing orders and requests of the appointed administrator and disposing of monetary funds in the bank's reserve account:

• the appointed administrator is obliged to submit a specimen of their signature, and
• the appointed administrator is obliged to ensure that the bank continues to submit up-to-date data to the Unified Register of Business Entities' Accounts and the Central Register of Business Entities' and Individuals' Credits in Bosnia and Herzegovina.

PART SEVEN - TRANSITIONAL and FINAL PROVISIONS

Article 25. (Right of Priority of the Central Bank) In the event that the bank fails to fulfill the mandatory reserve, regardless of the maintenance period of the mandatory reserve, the Central Bank will have priority regarding the collection of uncollected penalty interest and all other claims, in accordance with the Law on the Central Bank of Bosnia and Herzegovina.

Article 26. With the start of the application of this Instruction, the Instruction on the Manner of Conduct, Activities, and Measures of the Central Bank of Bosnia and Herzegovina when a commercial bank fails to fulfill the obligation regarding the determination and maintenance of mandatory reserves and in the case of status changes of commercial banks ("Official Gazette of BiH", no. 31/14) and the Instruction on Reserve Account Operations for Commercial Banks ("Official Gazette of BiH", no. 2/15) cease to be valid.

Article 27. (1) This Instruction enters into force on the eighth day from the date of publication in the "Official Gazette of BiH", and is applied from January 1, 2024. (2) This Instruction will also be published in the "Official Gazette of the Federation of Bosnia and Herzegovina", "Official Gazette of the Republic of Srpska", and "Official Gazette of the Brčko District of Bosnia and Herzegovina".

Chairman of the Governing Board of the Central Bank Number: UV-122-02-1-1499-4/23 of Bosnia and Herzegovina Sarajevo, August 29, 2023

GOVERNOR

dr. Senad Softić

FORM 1

---

Name of the competent organizational unit of the Central Bank to which the application is submitted

Application for Transfer of Funds from the Bank's Reserve Account in BAM to the Settlement Account in the BPRV System

Name of the Bank:

Application for Withdrawal (circle the type of application)

Initial withdrawal for day [1]: Date of withdrawal: Amount of withdrawal:

Withdrawal for period [2]: Validity period: from to [3] Amount of withdrawal for each day of the period:

Additional daily withdrawal: Date of additional withdrawal: Amount of additional withdrawal:

---

Date of submission of application: M.P. Signature of authorized person

The application for initial withdrawal must be submitted before the start of the BPRV working day on which the transfer of funds is performed. ↑ The application for withdrawal for a period must be submitted before the start of the BPRV working day of the first day of the validity period. ↑ The application for withdrawal for a period ceases to be valid upon the expiration of the validity period indicated in the form, upon revocation by the bank, upon receipt of a new application for withdrawal for a period, and in the event of notification of a change in the person authorized to initiate changes to the bank's reserve account. ↑