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Bosnia-Herzegovina Commercial Banking Report Q1 2011
Business Monitor International, Jan 2010, Pages: 52
Bosnia-Herzegovina Commercial Banking Report provides industry professionals and strategists, corporate analysts, banking associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Bosnia-Herzegovina's commercial banking industry.
Since Q108, we have described numerically the banking business environment for each of the countriessurveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER),a measure that ensures we capture the latest quantitative information available. It also ensures consistencyacross all countries and between the inputs to the CBBER and the Insurance Business EnvironmentRating, which is likewise now a feature of our insurance reports. Like the Business Environment Ratingscalculated by BMI for all the other industries on which it reports, the CBBER takes into account thelimits of potential returns and the risks to the realisation of those returns. It is weighted 70% to the formerand 30% to the latter.
The evaluation of the Limits of Potential Returns includes market elements that are specific to thebanking industry of the country in question and elements that relate to that country in general. Within the70% of the CBBER that takes into account the Limits of Potential Returns, the market elements have a60% weighting and the country elements have a 40% weighting. The evaluation of the Risks toRealisation of Returns also includes banking elements and country elements (specifically, BMI’sassessment of long-term country risk). However, within the 30% of the CBBER that take into account therisks, these elements are weighted 40% and 60%, respectively.
Further details on how we calculate the CBBER are provided at the end of this report. In general, though,three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elementsof the Limits of Potential Returns are by far the most heavily weighted of the four elements. They accountfor 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higherthan the country elements of the Limits of Potential Returns, it usually implies that the banking sector is(very) large and/or developed relative to the general wealth, stability and financial infrastructure in thecountry. Conversely, if the market elements are significantly lower than the country elements, it usuallymeans that the banking sector is small and/or underdeveloped relative to the general wealth, stability andfinancial infrastructure in the country. Third, within the Risks to Realisation of Returns category, themarket elements (ie: how regulations affect the development of the sector, how regulations affectcompetition within it, and Moody’s Investors Service’s ratings for local currency deposits) can bemarkedly different from BMI’s long-term risk rating.
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