Resident Representative for Bosnia and Herzegovina at International Monetary Fund (IMF), Andrew Jewell, told FENA that, overall, banks in the European Union have stronger positions in terms of capital and liquidity compared to some past crisis episodes such as the global financial crisis. However, as recent events have shown, a market mood can change suddenly and weaknesses and vulnerabilities emerge with it.
He believes that policymakers in Europe and elsewhere need to re-convince the markets of their commitment and be ready to use available instruments to preserve financial stability when and if necessary.
Jewell pointed out that policymakers have taken swift action in response to risks to financial stability, including coordinated action by major central banks to ensure US dollar liquidity.
“These activities have to some extent relaxed the tremors in the markets. However, there is still a high degree of uncertainty and therefore it is necessary to remain vigilant. The IMF closely monitors trends and events in all member countries and assesses the potential implications for global financial stability,” said Jewell.
He thinks that the banking system in Bosnia and Herzegovina is liquid, well-capitalized, and profitable and that the regulatory framework is stronger compared to the previous financial crisis and the insured deposit scheme has been expanded.
However, Jewell cautions that we should not rule out the impact of sudden changes in market sentiment and the spillover effects of earthquakes on the market elsewhere.
“In such an environment, it is important to strengthen cooperation throughout the country in predicting and solving a potential crisis. The key flaw in the so-called financial safety net is the absence of a financial stability fund. One such fund could facilitate the restructuring of a large bank and provide liquidity to banks in exceptional cases,” emphasized Jewell.
