|Responsibility E. Cooperation with Other Authorities|
|Central banks, market regulators, and other relevant authorities should cooperate with each other, both domestically and internationally, as appropriate, in promoting the safety and efficiency of FMIs.|
|Key Consideration 1|
Relevant authorities should cooperate with each other, both domestically and internationally, to foster efficient and effective communication and consultation in order to support each other in fulfilling their respective mandates with respect to FMIs. Such cooperation needs to be effective in normal circumstances and should be adequately flexible to facilitate effective communication, consultation, or coordination, as appropriate, during periods of market stress, crisis situations, and the potential recovery, wind-down, or resolution of an FMI.
|The CBBH, banking agencies, and securities commissions in the entities have an interest in promoting the safety and efficiency of the payment system in BiH.
- The CBBH: The central bank has operational and oversight responsibilities of the RTGS system. It maintains the settlement account of banks in the payment system.
- Entity Banking Agencies: The FBA and BARS are responsible for banking supervision in each respective entity. They regulate and supervise commercial banks, which are RTGS participants, to ensure that they do not pose potential risks. They provide advanced notice to the CBBH, which makes decisions to suspend a bank from the RTGS system. They are also tasked to oversee the financial integrity of internal payment systems to prevent its use in money laundering.
- Entity Securities Commissions: The Securities Commission of the FBiH and the Securities Commission of the Republic of Srpska both have oversight responsibilities for the CSDs and SSSs that operate in their respective jurisdictions.
The CBBH and CSDs in the FBiH and the RS have cooperated to improve the efficiency of cash settlements after securities trading, which have involved meetings with the central banks and CSDs in Serbia and Croatia.
|Key Consideration 2|
If an authority has identified an actual or proposed operation of a cross-border or multicurrency FMI in its jurisdiction, the authority should, as soon as it is practicable, inform other relevant authorities that may have an interest in the FMI’s observance of the CPMI-IOSCO Principles for financial market infrastructures.
|The RTGS system settles on domestic currency payments and has no interdependencies with cross-border or multi-currency FMIs.|
The CBBH and the National Bank of Serbia (NBS) have signed an Agreement on Clearing of Payments in Foreign Exchange in 2007. The NBS acts as the clearing operator to enable international payment clearing services in euros to be provided by commercial banks in BiH and Serbia. Multilateral net positions are calculated by each central bank and settled through a giro account held by commercial banks at the NBS. Final settlement is effected in an overseas commercial bank (Deutsche Bank AG Frankfurt). The agreement seeks to establish more efficient, faster and economical payment systems between natural persons and legal entities both jurisdictions. This provides the basis of daily cooperative oversight and contacts between the authorities. A similar agreement was signed between the CBBH and the Central Bank of Montenegro in September 2007.
|Key Consideration 3|
Cooperation may take a variety of forms. The form, degree of formalization and intensity of cooperation should promote the efficiency and effectiveness of the cooperation, and should be appropriate to the nature and scope of each authority’s responsibility for the supervision or oversight of the FMI and commensurate with the FMI’s systemic importance in the cooperating authorities’ various jurisdictions. Cooperative arrangements should be managed to ensure the efficiency and effectiveness of the cooperation with respect to the number of authorities participating in such arrangements.
|Forms of cooperation|
The Memorandum on the Principles of Coordination of Banking Supervision and Cooperation and Exchange of Data and Information of June 2008 establishes the basis for cooperation between the CBBH and banking agencies in the entities. Information on issues that relate to banking supervision and activities are shared by the banking agencies to the CBBH. Information pertaining to the strengthening of monetary and financial stability is shared with the banking agencies by the CBBH. Specific provisions that are applicable to payment systems include the following:
- Article 7 establishes that the exchange of data and information should include: (i) the situation in individual banks and the situation in the banking sector; (ii) licensing, banking supervision and regulations governing banking supervision; (iii) maintenance of required reserves; (iv) financial stability reporting and analysis; (v) prevention of money laundering and terrorist financing and funds frozen on that account; (vi) payment operations; (vii) the credit register and register of transaction accounts; and (viii) other financial organizations subject to supervision by the banking agencies;
- Article 8 states that the exchange of data and information on the situation in individual banks and the banking sector should include: (i) serious weaknesses in a bank’s operations as observed, which may have detrimental effects and/or undermine the future survival of the bank and impact on the financial sector; (ii) maintenance of required reserves; (iii) data on banks’ capital and shareholders; and (iv) financial stability indicators for the banking system and individual banks as necessary;
- Article 10 establishes that the exchange of data from the monetary area should include data and information on the maintenance of required reserves and measures in the event of a bank’s failure to observe reserve requirements. The central bank shall notify the banking agencies of the measures it has undertaken due to a bank’s failure to observe reserve requirements, in line with a specific instruction providing for the procedure for undertaking certain measures; and
- Article 13 establishes cooperation in respect of payment operations, which should entail the observance of operational rules in the area of payment operations such as proposed measures to improve payment operations.
The Memorandum of Understanding on the Establishment of the Standing Committee for Financial Stability of December 2009 provides a broader framework for cooperation across five authorities, including the Fiscal Council, CBBH, BARS, FBA, and the BiH Deposit Insurance Agency. The memorandum notes that the parties commit themselves to open, full, constructive and timely cooperation. Cooperation between the Parties both in normal times and financial crises will involve: (i) setting up an appropriate framework for cooperation with the aim to prepare common assessments on threats to financial stability; (ii) preparing common solutions and actions to manage potentially detrimental effects of a crisis; (iii) exchanging information relevant for the analysis of threats to financial stability, and the preparation, management and resolution of a financial crisis, including assessments of the situation in order to allow the parties to promptly assess the systemic nature of the crisis; (iv) coordinating joint public communication; and (v) establishing contingency plans, including stress testing and simulation exercises.
The CBBH has no formal cooperative arrangements with securities commissions in the entities.
|Efficiency and effectiveness of cooperation|
Under the Memorandum on the Principles of Coordination of Banking Supervision and Cooperation and Exchange of Data and Information, the CBBH and EBAs meet on quarterly basis at the minimum or as required. The CBBH Governor serves as the chairperson of the meetings. The PSD could propose an agenda on payment systems to be discussed at such meetings.
|Key Consideration 4|
For an FMI where cooperative arrangements are appropriate, at least one authority should accept responsibility for establishing efficient and effective cooperation among all relevant authorities. In international cooperative arrangements where no other authority accepts this responsibility, the presumption is the authority or authorities with primary responsibility in the FMI’s home jurisdiction should accept this responsibility.
|Not applicable. There are currently no FMI links.|
|Key Consideration 5|
At least one authority should ensure that the FMI is periodically assessed against the principles and should, in developing these assessments, consult with other authorities that conduct the supervision or oversight of the FMI and for which the FMI is systemically important.
|Not applicable. There are currently no FMI links.|
|Key Consideration 6|
When assessing an FMI’s payment and settlement arrangements and its related liquidity risk-management procedures in any currency for which the FMI’s settlements are systemically important against the principles, the authority or authorities with primary responsibility with respect to the FMI should consider the views of the central banks of issue. If a central bank of issue is required under its responsibilities to conduct its own assessment of these arrangements and procedures, the central bank should consider the views of the authority or authorities with primary responsibility with respect to the FMI.
|Not applicable. There are currently no FMI links. The RTGS system settles only in domestic currency. The CBBH has primary responsibilities and conducts its own assessment of the RTGS system.|
|Key Consideration 7|
Relevant authorities should provide advance notification, where practicable and otherwise as soon as possible thereafter, regarding pending material regulatory changes and adverse events with respect to the FMI that may significantly affect another authority’s regulatory, supervisory, or oversight interests.
|EBAs provide advanced notification to the CBBH regarding the financial conditions of a commercial bank, which may have an adverse impact on the payment system. See Responsibility E (Key Consideration 3) for details.|
|Key Consideration 8|
Relevant authorities should coordinate to ensure timely access to trade data recorded in a TR.
|Key Consideration 9|
Each authority maintains its discretion to discourage the use of an FMI or the provision of services to such an FMI if, in the authority’s judgment, the FMI is not prudently designed or managed or the principles are not adequately observed. An authority exercising such discretion should provide a clear rationale for the action taken both to the FMI and to the authority or authorities with primary responsibility for the supervision or oversight of the FMI.
|CBBH RTGS Operational Rules (Section 1.3.9) empowers the CBBH to restrict settlement operations between individual RTGS participants and suspend operations of the RTGS system on prolonged or brief period of time if such action is in the best interest of the CBBH and the RTGS participants. In such situations, execution of payment orders shall be suspended or restricted and the Central Bank may not be held responsible for such suspension or restriction.|
|Key Consideration 10|
Cooperative arrangements between authorities in no way prejudice the statutory or legal or other powers of each participating authority, nor do these arrangements constrain in any way an authority’s powers to fulfill its statutory or legislative mandate or its discretion to act in accordance with those powers.
|The Memorandum on the Principles of Coordination of Banking Supervision and Cooperation and Exchange of Data and Information establishes the basis for cooperation between the CBBH and banking agencies in the entities. Article 2 states that ‘The purpose of this Memorandum is to strengthen coordination of banking supervision, which shall be based on the principles of mutual cooperation, trust and observance of work independence.’|
|Key Conclusions for Responsibility E||The CBBH and entity banking agencies cooperate on cross-cutting issues between the payment system and banking supervision under a memorandum of understanding. However, advanced notification and coordination between competent authorities on the planned closure of a problem bank and its consequential suspension from the payment system could be further improved to prevent the unwinding of payments following a court order. Although the CBBH and entity securities commissions have a common interest in promoting safe and efficient FMIs, there is no formal cooperation.|
|Assessment of Responsibility E||Broadly Observed|
|Recommendations and comments||Improve the advanced notification from the entity banking agencies to the CBBH in order to coordinate the timely closure of a bank and its suspension from the payment system. Establish a memorandum of understanding between the CBBH, entity banking agencies, and entity securities commissions to collaborate on the development, regulation, supervision, and oversight of FMIs, respecting the mandates of each competent authority.|