Bosnian banks criticized for using Euribor on domestic loans

Economist Igor Gavran has raised concerns regarding the banking practices in Bosnia and Herzegovina, specifically the use of the European Euribor as a reference interest rate for loans. Gavran argues that while Euribor is a logical benchmark for banks borrowing within the Eurozone, it is inappropriate for loans financed by domestic savings.

According to Gavran, many commercial banks in the country lend to local citizens and businesses using funds collected exclusively from domestic deposits. Because these funds are not sourced from the Eurozone market, he contends that tying interest rates to Euribor artificially maintains high borrowing costs and allows banks to achieve record profits. He suggests that banks should instead utilize the more favorable domestic reference rate published by the Central Bank of Bosnia and Herzegovina for such transactions.