Central Bank Governor participates on Summit of Governors in Montenegro

June 15, 2019 2:00 PM

The Governor of the Central Bank of Bosnia and Herzegovina (CBBH), Senad Softić, Ph.D. participates in the Summit of Governors, Finance Ministers and Directors of Taxation Authorities of the countries from the region, which is held in Bečići, Montenegro. This year’s theme of the Summit is “The Financial and Monetary Stability of the Region under Slow Economic Growth in the Euro Zone”.

During his presentation, in the session entitled “Monetary Policy and the Stability of the Banking Systems in Terms of Low Inflation and Interest Rates,” the Governor placed a special emphasis on the need for coordination between monetary and fiscal policy, and on the importance of permanent structural reforms with a special focus on reform of labor market and educational system.

Speaking about the impact of the monetary policy of the FED and the European Central Bank (ECB) on the countries of the region, Governor Softić pointed out that the ECB has a particularly high impact on the region. The CBBH has recently made a decision to change the negative interest rate to excess liquidity of commercial banks in order to bring them in line with those of the ECB.

Analyzing the current policies of the ECB and the FED, all panelists agreed that it is very difficult to predict when the low interest rates’ era could end. Accordingly, the Governor emphasized, central banks must act proactively in addressing potential risks together with other participants in the financial stability network.

One of the topics of today’s discussion was the role of international financial institutions, especially the International Monetary Fund (IMF). Governor Softić said that this institution is ally to central banks in preserving the stability of the financial system, and as part of the cooperation,  the central banks receive significant technical assistance, and he pointed out that, regardless of the program and cooperation with the IMF, all responsibility for implementation of measures is on local institutions .

Speaking about the challenges that central banks would face in the medium and long term future, the Governor stressed that the key challenge central banks would face is preservation of the independence, so as the confidence of the public, which implies confidence in a stable currency and a stable financial system. In addition, the pressure on the central bank’s capital should be mentioned, which is a consequence of poor conditions for financing in international markets, lasting for several years now. Also, monetary authorities are facing the potentially huge changes brought by the digitization of finances. However, it is necessary to keep the focus on the core functions of central banks, Dr. Softić concluded.

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