Central Bank of Bosnia and Herzegovina
Central Bank of Bosnia and Herzegovina: Features, History, Mission, and More
- Introduction
The Central Bank of Bosnia and Herzegovina (CBBH) is a pivotal institution in the country’s financial system. As the monetary authority, it plays a central role in maintaining currency stability, regulating the monetary base, and safeguarding the nation’s financial structure. Established in the aftermath of the Bosnian War, the CBBH has evolved into a credible and professional institution, ensuring economic stability and supporting sustainable development in Bosnia and Herzegovina.
In this article, we provide a detailed look into its history, features, departments, monetary policies, and governance, as well as updated data to help researchers, economists, and curious readers gain full insight.
- History of the Central Bank of Bosnia and Herzegovina
The Central Bank of Bosnia and Herzegovina was established under the Law on the Central Bank of Bosnia and Herzegovina, which came into force on June 20, 1997. This law was part of the arrangements following the Dayton Peace Agreement, which brought an end to the Bosnian War in 1995.
Before the establishment of the CBBH, the monetary system was fragmented, with several quasi-central banks operating in different ethnic entities. This led to monetary instability, multiple currencies in circulation, and an erosion of public confidence in the financial system.
The formation of the Central Bank marked a turning point in Bosnia and Herzegovina’s monetary integration, ushering in a Currency Board Arrangement (CBA) and bringing monetary discipline through fixed exchange rate mechanisms.
- About the Central Bank
The Central Bank of Bosnia and Herzegovina operates as an independent monetary institution. It is not subordinate to any government and maintains its autonomy from political influences. Its primary objective is to maintain monetary stability under the principles of the Currency Board Arrangement, meaning the domestic currency (Convertible Marka – BAM) is pegged to the euro at a fixed exchange rate.
The CBBH issues the national currency, manages foreign reserves, ensures payment systems function efficiently, and provides analytical data and reports to support economic development.
- Mission Statement
The mission of the Central Bank of Bosnia and Herzegovina is:
“To maintain monetary stability by pursuing policies consistent with the Currency Board Arrangement, foster confidence in the national currency, ensure the smooth functioning of payment systems, and contribute to financial sector development in Bosnia and Herzegovina.”
- Vision
The CBBH envisions itself as:
“A credible, efficient, and transparent institution that promotes financial stability, economic growth, and public trust through sound monetary policies and professional conduct.”
- Core Values
The Central Bank of Bosnia and Herzegovina upholds several core values:
- Independence – Free from political influence.
- Transparency – Clear, timely, and accurate communication.
- Accountability – Responsible and ethical conduct.
- Professionalism – High standards in performance and behavior.
- Stability – Promoting macroeconomic balance.
- Integrity – Upholding the highest standards of honesty and trust.
- Features of the Central Bank
Here are the key features of the Central Bank of Bosnia and Herzegovina:
| Feature | Description |
| Currency Board Arrangement | Fixed exchange rate system |
| No Lender of Last Resort Function | Does not provide loans to banks |
| Independence | Free from external influence |
| Transparency | Regular reports and disclosures |
| Dual Entity Governance | Accommodates Republika Srpska and the Federation of Bosnia and Herzegovina |
| Euro Peg | Pegged at 1 EUR = 1.95583 BAM |
- Headquarters and Branches
The main headquarters of the Central Bank of Bosnia and Herzegovina is located in:
Sarajevo, the capital city.
Branches:
- Banja Luka
- Mostar
- Brčko
Each branch plays a role in supporting regional monetary operations and communication.
- List of Governors
Here is a list of Governors who have served at the Central Bank of Bosnia and Herzegovina:
| Name | Tenure |
| Peter Nicholl | 1997 – 2004 |
| Kemal Kozarić | 2005 – 2015 |
| Senad Softić | 2015 – Present |
Each of these governors contributed significantly to strengthening monetary governance in the country.
- Year of Establishment
️ 1997
This was a critical year for Bosnia and Herzegovina’s economic rebuilding, as the CBBH helped integrate the country’s diverse financial systems and launched a unified national currency.
- Present Foreign Currency Reserves
As of 2024, the foreign currency reserves of the Central Bank of Bosnia and Herzegovina stand at approximately:
EUR 8.2 Billion
These reserves are vital for maintaining the fixed exchange rate under the Currency Board and for instilling confidence in the BAM.
- Legal Framework and Regulation
The CBBH operates under:
- Law on the Central Bank of Bosnia and Herzegovina
- Monetary Law
- Foreign Exchange Operations Law
- Banking Laws of the Entities
The Central Bank regulates the monetary base but does not supervise commercial banks, which is handled by Entity Banking Agencies.
- Monetary Policy
Bosnia and Herzegovina Monetary Policy: An In-Depth Guide
The monetary policy of Bosnia and Herzegovina is uniquely structured due to its post-conflict economy and reliance on stability. Unlike many countries with an active central bank setting interest rates and adjusting the money supply, Bosnia and Herzegovina operates under a Currency Board Arrangement (CBA)—a system that ensures strict monetary discipline.
What is the Monetary Policy of Bosnia and Herzegovina?
Monetary policy in Bosnia and Herzegovina is passive and rule-based, guided by the Currency Board system under the Central Bank of Bosnia and Herzegovina (CBBH).
Key Characteristics:
- Fixed Exchange Rate: The Convertible Marka (BAM) is pegged to the Euro (EUR) at a rate of 1 EUR = 1.95583 BAM.
- Full Reserve Backing: Every unit of domestic currency in circulation is fully backed by foreign exchange reserves.
- No Open Market Operations: The Central Bank does not conduct interest rate adjustments, purchase securities, or offer short-term credit to commercial banks.
- No Lender of Last Resort: The CBBH does not bail out financial institutions.
Objectives of Monetary Policy
While traditional central banks aim to balance inflation and economic growth, the main objective of Bosnia and Herzegovina’s monetary policy is:
To ensure currency stability and public confidence through the Currency Board system.
This goal translates into:
- Low and predictable inflation
- A stable exchange rate with the euro
- Protection of foreign reserves
- Promotion of a sound banking environment
️ How the Currency Board Works
Under the Currency Board Arrangement:
- The money supply (BAM) can only increase if there’s an increase in foreign currency reserves.
- This limits the central bank’s ability to “print money” without backing, thereby controlling inflation and public debt.
This system has helped Bosnia and Herzegovina achieve macroeconomic stability and gain investor confidence despite limited policy flexibility.
Tools of Monetary Policy in Bosnia and Herzegovina
Since the CBBH doesn’t use conventional monetary tools, it focuses on:
- Managing foreign reserves with precision
- Operating a reliable payment system
- Providing high-quality monetary and financial data
- Supporting financial sector development through cooperation with entity-level banking agencies
Inflation and Economic Impact
Thanks to the Currency Board, inflation in Bosnia and Herzegovina has remained relatively low. However, because the country doesn’t control its own interest rates or currency supply, it cannot:
- Stimulate growth during recessions
- Quickly respond to external shocks (like COVID-19 or the Eurozone crisis)
- Engage in quantitative easing or credit expansion
Instead, fiscal policy (government spending and taxation) becomes the key tool for economic response.
Comparison with Active Monetary Policy Countries
| Feature | Bosnia and Herzegovina | Active Policy Countries |
| Interest Rate Setting | ❌ Not Applicable | ✅ Central Bank Sets Rate |
| Currency Float | ❌ Fixed to Euro | ✅ Usually Floating |
| Money Supply Control | ❌ Passive | ✅ Active |
| Inflation Targeting | ✅ Indirect | ✅ Direct Targeting |
✅ Benefits of Bosnia and Herzegovina’s Monetary Policy
- Stability and Confidence
Maintains consistent currency value and reduces inflation risk. - Transparency
Easy to predict money supply growth due to the currency-reserve link. - Trust Building
Crucial in a post-conflict society to restore financial credibility.
❗ Challenges of the Current System
- Limited flexibility in crisis response
- No monetary stimulus options
- Vulnerability to external shocks in the Eurozone
- Dependence on fiscal reforms and foreign capital flows
Integration with the EU
Bosnia and Herzegovina’s fixed exchange rate and monetary stability align well with EU accession goals. However, Euro adoption will require:
- Meeting convergence criteria
- Enhancing fiscal discipline
- Strengthening institutions
Until then, the Currency Board Arrangement remains the foundation of monetary policy.
Related Terms to Know
- CBBH – Central Bank of Bosnia and Herzegovina
- BAM – Convertible Marka (local currency)
- EUR – Euro (anchor currency)
- CBA – Currency Board Arrangement
- Key Departments
The CBBH consists of several specialized departments:
- Monetary Sector Department
- Research and Statistics Department
- Foreign Exchange Reserves Management
- Internal Audit
- Legal Department
- Human Resources and Administration
- Payment Systems Department
- Information Technology Division
Each department plays a role in maintaining the financial and operational integrity of the institution.
- Functions of the Central Bank
The Central Bank of Bosnia and Herzegovina performs the following key functions:
- Issuance of Currency (BAM)
- Foreign Reserve Management
- Maintaining Exchange Rate Stability
- Operating Payment Systems
- Publishing Financial Statistics
- Providing Economic Analysis
- Promoting Financial Inclusion
- Acting as Fiscal Agent for the Government
- Hosting Foreign Financial Institutions
- Exchange Rate Policy
Under the Currency Board Arrangement, the exchange rate is fixed:
1 EUR = 1.95583 BAM
This policy has served as the cornerstone of monetary credibility in Bosnia and Herzegovina since 1997. It helps maintain investor confidence, ensure trade competitiveness, and combat inflationary pressures.
- Number of Employees
As of the latest data in 2024:
Approximately 350 employees
These include economists, financial analysts, IT specialists, legal experts, statisticians, and administrative staff. The Central Bank prioritizes training, professional development, and gender inclusivity in its human resource policies.
- Official Website
The official website provides access to:
- Press releases
- Economic reports
- Statistical data
- Regulatory documents
- Financial publications
- Employment opportunities
The site is available in Bosnian, Croatian, Serbian, and English to accommodate diverse users.
Currency of Bosnia and Herzegovina (BAM): Complete Guide
The Convertible Marka (BAM) is the official currency of Bosnia and Herzegovina, introduced as part of the country’s post-war financial restructuring. It is pegged to the euro under a strict monetary framework, helping ensure economic stability and confidence in the country’s financial system.
Quick Facts about the BAM
| Feature | Details |
| Currency Name | Convertible Marka |
| Currency Code | BAM |
| Symbol | KM |
| Subunit | 1 BAM = 100 feninga (pfennig) |
| Issuing Authority | Central Bank of Bosnia and Herzegovina (CBBH) |
| Exchange Rate | Fixed: 1 EUR = 1.95583 BAM |
| Currency Type | Pegged (Currency Board Arrangement) |
| Introduced | 1998 (in coins), 1999 (in notes) |
History of the BAM
The Convertible Marka (BAM) was introduced to replace the Bosnian dinar and other parallel currencies (like the Croatian kuna and Yugoslav dinar) circulating during and after the Bosnian War.
- The BAM was introduced in 1998 as part of the Dayton Peace Agreement economic reforms.
- It initially pegged to the German mark (DEM) at 1:1.
- When Germany adopted the euro, BAM automatically switched to a euro peg (1 EUR = 1.95583 BAM), maintaining the same rate as the DEM.
️ Issuing Authority: Central Bank of Bosnia and Herzegovina (CBBH)
The Central Bank of Bosnia and Herzegovina (CBBH) has exclusive authority to issue the BAM. Its responsibilities include:
- Printing banknotes and minting coins
- Managing foreign reserves
- Maintaining the fixed exchange rate with the euro
- Regulating the monetary base under the Currency Board Arrangement
CBBH operates under a strict Currency Board system, ensuring every BAM in circulation is backed 100% by euro reserves.
Banknotes and Coins
Banknotes in Circulation:
| Denomination | Description |
| 10 BAM | Historic and cultural figures |
| 20 BAM | Ethnic and literary leaders |
| 50 BAM | Academic and religious icons |
| 100 BAM | National and civic heroes |
| 200 BAM | (Less common) High-value note |
Each note has distinctive colors and security features, including watermarks, security threads, and microprinting.
Coins in Circulation:
| Denomination | Name |
| 5 feninga | Pfennig |
| 10 feninga | Pfennig |
| 20 feninga | Pfennig |
| 50 feninga | Pfennig |
| 1 BAM | Marka |
| 2 BAM | Marka |
| 5 BAM | (Rarely used) |
Exchange Rate: BAM to Euro
Under the Currency Board, the exchange rate is fixed at:
1 EUR = 1.95583 BAM
This means the BAM does not float on the open market, and the Central Bank must hold enough euro reserves to match every BAM in circulation. This system:
- Prevents inflation
- Builds trust in the currency
- Attracts foreign investment
Security Features of BAM Banknotes
To prevent counterfeiting, BAM banknotes include:
- Holographic strips
- Color-changing ink
- Embedded watermarks
- Raised printing
- Ultraviolet features
These features align with European central bank standards for anti-forgery protection.
Inflation and Stability
Thanks to the fixed exchange rate and the strict Currency Board system, Bosnia and Herzegovina enjoys:
- Low inflation rates
- Stable currency value
- Limited monetary policy flexibility
The BAM cannot be devalued or printed freely—its supply is entirely based on euro reserve availability.
Use of BAM in Daily Life
- BAM is accepted across the entire territory of Bosnia and Herzegovina.
- Many businesses also accept euros, especially in border areas and tourist zones.
- Credit and debit cards are commonly used in urban areas, though cash remains dominant in rural settings.
Is the Euro Coming Soon?
While BAM is pegged to the euro, Bosnia and Herzegovina is not yet part of the Eurozone. Full adoption of the euro will depend on:
- EU accession process
- Economic convergence
- Fiscal reform and integration
Until then, BAM remains the official and stable national currency.
Currency Conversion Tools
To convert BAM to EUR or other currencies, you can use:
- CBBH official currency converter: https://www.cbbh.ba
- Google Finance or XE.com
- Bank ATMs and Forex platforms
Summary Table
| Item | Detail |
| Currency Name | Convertible Marka (KM) |
| ISO Code | BAM |
| Subunit | Fening (1 BAM = 100 feninga) |
| Pegged to | Euro (EUR) |
| Fixed Rate | 1 EUR = 1.95583 BAM |
| Introduced | 1998–1999 |
| Issuer | Central Bank of Bosnia and Herzegovina |
| Currency System | Currency Board Arrangement |
The Convertible Marka (BAM) is a symbol of stability and trust in Bosnia and Herzegovina’s post-war economy. Managed carefully by the Central Bank and backed 100% by euros, the BAM has helped preserve financial order, anchor inflation, and support investor confidence. While euro adoption may be a long-term goal, the BAM remains one of the most stable currencies in the Balkans.
- Conclusion
The Central Bank of Bosnia and Herzegovina stands as a model of post-conflict economic recovery and monetary discipline. Through its transparent operation, fixed exchange rate system, and non-inflationary policy stance, the CBBH has cultivated stability and trust in the country’s financial system.
From managing billions in foreign reserves to ensuring reliable payment systems, the CBBH is an essential player in the country’s economic ecosystem. Its commitment to professionalism, independence, and transparency serves as a benchmark for central banking in emerging economies.