Transparency: Central Bank of Bosnia and Herzegovina

Central banks are sometimes referred to as ‘islands of excellence’ – the technical nature of their work and their constant international interaction means they strive to meet the highest standards of competence and integrity. Some institutions enjoy domestic political support as they adopt international standards. Others find their political and bureaucratic counterparts resistant to change or unable to implement it.

The Central Bank of Bosnia and Herzegovina (CBBH) operates in one of these less propitious environments. Overall, Bosnia and Herzegovina is difficult to govern. The leaders of the country’s three major ethnic groups, which fought a civil war in the early 1990s, share power as set out in a peace treaty that introduced a complex constitutional setup that often results in disagreement and stalemate.

Bosnia and Herzegovina was ranked the third-worst country in Europe in anti-corruption charity Transparency International’s 2022 Corruption Perceptions Index. Exposing corrupt practices is a key step to addressing the issue – so launching a credible anti-corruption strategy in the Bosnian context is no small achievement. Doing so means not only departing from the ways of local officialdom, but also changing the wider social contract.

Coming into compliance

The CBBH has boosted its transparency over the past few years, notably expanding its communications to the public. Since 2021, it has established or expanded its use of social media channels (including Twitter, Facebook, LinkedIn and Flickr), and held regular breakfast sessions with journalists to discuss a selection of policy areas and decisions. It has also drafted online guides for remittances and online payments, and implemented a pilot financial education scheme in the country’s secondary schools.

The CBBH first established a ‘compliance function’ in 2020. Although commercial banks were required to have compliance and anti-money laundering facilities, Bosnian law did not require the central bank to have its own set of similar internal controls.

Sanja Romić-Bajramović, the CBBH’s compliance officer, tells Central Banking that the International Monetary Fund suggested establishing a compliance office within the CBBH. She then underwent training for compliance management and, in 2022, for anti-bribery management.

The central bank adopted a new code of ethics. These were the first rules to cover conflicts of interest, as well as gifts and hospitality, and heralded a ‘zero-tolerance’ policy for corruption.

The code provides guidance for employees who find themselves facing a conflict of interest. It includes instructions for how to act when one cannot immediately escape the conflict, which can be hard to do in small countries with relatively few professionals.

Alongside the code of ethics, the central bank added its ‘ethical line’, a “protected online system” that allows anonymous reporting of corruption or suspicious activities. Both central bank employees and third parties can use the service to report suspected corruption, 24/7.

An independent body oversees the ethical line separately from the central bank, with data about people who file reports held on a server in Ireland. Enes Kurtović, the central bank’s communications manager, says not even Bosnian police can identify those filing reports.

Romić-Bajramović adds that the ethical line meets both European Union and ISO 37001 standards, including the EU’s Whistleblower Directive. Kurtović and Romić-Bajramović say that the EU, which Bosnia and Herzegovina has applied to join, will require all institutions to have a similar anonymous reporting line, but so far only the CBBH and ministry of defence in fact do in the country.

The central bank worked with several external partners, including the Swiss embassy, through its bilateral assistance and capacity building programme. It also worked with the IMF, which advised on the new code of ethics, and a local compliance consultancy, Net Consulting.

Pioneering is hard work

The CBBH’s whistleblower policies were an especially novel departure for a Bosnian public institution. Bosnia and Herzegovina does not have a national whistleblower law, and institutions struggle to safeguard whistleblowers.

Romić-Bajramović says that “99% of institutions” only meet mandatory minimum compliance requirements for whistleblower facilities. However, this can often mean little because these minimum requirements are wholly inadequate, she says. These facilities can be as simple as an email address or telephone facility, with no guarantee of anonymity.

“We wanted to be a leader among our public institutions in Bosnia and Herzegovina,” says Romić-Bajramović. “It is most important for us as a public institution to build integrity [and serve] as a model for other parts of the public sector.”

Kurtović adds that “it’s quite challenging” to introduce and implement an anti-corruption procedure where such policies are unusual. “We had many, many barriers to overcome”, including the lack of a compliance culture within the central bank, he says.

“We are really proud of it, because it’s something new in the environment in Bosnia”, as well as in neighbouring countries, Kurtović adds.

An unlikely model

Since the ethical line became operational, the CBBH has received eight reports of irregular – but not necessarily corrupt – behaviour. Kurtović says the central bank cannot discuss specific details, but that it conducted “internal investigations” in all cases. Some complaints proved unfounded. “All the reports of unethical behaviour were resolved within the deadlines specified by the rule book and by the authorised staff,” Kurtović tells Central Banking.

Although reports of suspicious activities have increased from almost zero previously, Kurtović sees this as a positive development: “People say that if there is nothing reported, then the institution does [anti-corruption policy] well.” But he believes low levels of incidence reports may reflect a lack of suitable facilities to safely report wrongdoing, rather than imply that there are no problems.

So far, the central bank’s efforts to promote its new ethical facilities are at an early stage. Romić-Bajramović has given a presentation to other state agencies, and is working with Transparency International, which is based in Berlin, and has more than 100 branches worldwide.

Nevertheless, Kurtović believes that the central bank has taken a huge step despite, he says, the fact that “people are not really willing to talk”, and if they do, the state is often silent. “Having something like this [the whistleblower facility] is a huge thing”, he says.

The Central Banking Awards 2023 were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Joasia Popowicz, Ben Margulies, Riley Steward, Jimmy Choi and Blake Evans-Pritchard.