Implementation of Basel II standards in commercial banks in B&H

Based on the study of primary and secondary data from the selected sample of commercial banks, a preliminary statement of the state of the banking system in B&H has been made for the purpose of determining the current level of application and making the appropriate recommendations concerning the continuation of the implementation of Basel II standards. It has been noted that all banks in the sample give high priority to those standards, that they already have certain knowledge of the area and that they provide constant training to their employees with the aim of enabling full implementation of those standards. It has also been determined that the regulatory authorities in B&H have not done enough on adopting new regulation related to the area and that operating results of the banks are not satisfactory, especially in terms of rate of return and capital adequacy of banks. Thus, it is recommended that the banks in B&H, in addition to their regular activities, collect new sources of funding, especially their own funds or fresh equity since the attraction of other sources does not make much sense without it. Also, the regulatory authorities (banking agencies) should adopt new regulation (decrees), and impose the implementation of new standards in the banking industry together with drafting of specific instructions for the application of individual regulation, preparation of different formats of reports (specific layout of forms) and the implementation of standards and instructions in the banks.