Chapter I Establishment, Objectives and Tasks of the Central Bank

CHAPTER I Establishment, Objectives and Tasks of the Central Bank

Article 1. Establishment of the Central Bank

1. The Central Bank of Bosnia and Herzegovina is hereby established, under the name Central Bank of Bosnia and Herzegovina (hereinafter: "Central Bank"). It is headed by the Board of Governors and may not grant loans by creating money, and in this respect it operates as a currency board.

2. Under the laws of Bosnia and Herzegovina, the Federation of Bosnia and Herzegovina, and the Republika Srpska, the Central Bank is a legal entity with full powers. The Central Bank has the capacity to conclude contracts, to acquire and dispose of movable and immovable property, and to be a party to legal proceedings.

3. The headquarters of the Central Bank is in Sarajevo. However, it decentralizes its activities in other locations of the joint institutions of Bosnia and Herzegovina. The Central Bank establishes and maintains the central office and main units in the Federation of Bosnia and Herzegovina and the Republika Srpska: these main units do not have a legal status or powers independent of the Central Bank. One or two main units are established in the Federation of Bosnia and Herzegovina and one in the Republika Srpska. They perform their obligations in accordance with the decision of the Board of Governors and the Governor and, in accordance with this Law, may operate through accounts opened with the relevant institutions responsible for the payment system. The Board of Governors of the Central Bank may establish representative offices and contact offices abroad and appoint representatives and correspondents. It may also establish representative offices under the jurisdiction of the main units in places in Bosnia and Herzegovina, in accordance with its decisions.

4. The Central Bank has a seal with the image of the coat of arms of Bosnia and Herzegovina and the words: "Central Bank of Bosnia and Herzegovina". Each main unit has a seal with the words: "Central Bank of Bosnia and Herzegovina", and the name and seat of that main unit. The seals of the Central Bank and its main units include coats of arms, in accordance with the Law on Coats of Arms of Bosnia and Herzegovina.

Article 2. Objectives and Basic Tasks of the Central Bank

1. The objective of the Central Bank is to achieve and maintain stability of the domestic currency (Convertible Mark) by issuing the domestic currency under an arrangement known as a currency board.

2. The duties, tasks and obligations of the Central Bank are performed through its central office, main units and other branches.

3. The basic tasks of the Central Bank, which are performed under the jurisdiction of its Board of Governors, are: a. to define, adopt and control the monetary policy of Bosnia and Herzegovina through the issuance of the domestic currency (Convertible Mark) at an exchange rate of 1 to 1 against the German Mark and with full coverage in freely convertible foreign exchange funds, as well as through other functions it has under this Law; b. to hold and manage the official foreign exchange reserves of the Central Bank in a safe and profitable manner; c. to assist or establish and maintain appropriate payment and clearing systems; d. to issue regulations for the implementation of activities established in Article 2, paragraph 3, point a of this Law; e. to coordinate the activities of agencies responsible for issuing banking licenses and supervising banks in the Entities in the manner determined by the Board of Governors of the Central Bank, including monthly meetings of the heads of these agencies with representatives of the Central Bank and the submission of monthly reports by these agencies to the Central Bank regarding their activities and developments in financial institutions under their jurisdiction; f. to implement monetary policy in accordance with Article 2, paragraph 3, point a of this Law; g. to receive deposits from Bosnia and Herzegovina and commercial banks to meet requirements for mandatory reserves. The Central Bank may also hold deposits of the Entities and other public institutions, as well as other reserves of commercial banks, if they wish; h. to put into and withdraw from circulation the domestic currency (Convertible Mark), including banknotes and coins as legal tender, strictly adhering to the rules of the currency board defined in Article 2, paragraph 3, point a of this Law.

4. In particular: (a) The Board of Governors of the Central Bank has exclusive jurisdiction over the tasks listed under (a), (b), (c), (d) and (e) of paragraph 3 of this Article, while the remaining tasks are to be performed by the central office, main units and other branches of the Central Bank.

(b) Other basic tasks of the central office of the Central Bank and the main units are: (I) to conduct foreign exchange operations at the request of banks whose seat is in the region covered by the main unit, and (II) to collect data relating to economic and financial activities in the region where their seat is located.

Article 3. Independence of the Central Bank

Within the powers established by this Law, the Central Bank is fully independent from the Federation of Bosnia and Herzegovina, the Republika Srpska, and any public agency and body, and for the purpose of objective implementation of its tasks, unless otherwise provided by law, the Central Bank shall not receive instructions from any other person. The independence of the Central Bank shall be respected and no one may unlawfully seek to influence any member of the decision-making body of the Central Bank in the performance of its duties to the Central Bank, nor to interfere in the activities of the Central Bank.

Article 4. International Cooperation

1. The Central Bank represents Bosnia and Herzegovina at all intergovernmental meetings, bodies and organizations regarding monetary policy and other matters within its jurisdiction.

2. The Central Bank may provide banking services on behalf of foreign governments, foreign central banks and monetary authorities, and on behalf of international organizations in which it or Bosnia and Herzegovina participates.

3. The Central Bank may participate in international organizations working to strengthen financial and economic stability through international monetary cooperation.

4. As the representative of Bosnia and Herzegovina, the Central Bank may assume responsibility and execute transactions related to the participation of Bosnia and Herzegovina in international organizations.