1. „Steps on the road to the EU Integrations” European Integrations Department Central Bank of Bosnia and Herzegovina

2. 2 *see details Current State of Affairs B&H Potential Candidate Country Conditions of Progress Report to be fulfilled Phase 1 B&H Potential Candidate Country Application for EU membership Phase 2 B&H Candidate Country without Open Negotiations Positive Avis of the Commission Phase 3 B&H Candidate Country European Council decides to open negotiations with a view to EU accession

3. EU Institutional Framework The Treaty establishing the European Community sets the following: Council of the European Union Council of the European Union European Commission European Commission European Parliament European Parliament European Council European Council Court of Justice of the European Community Court of Justice of the European Community European Court of Auditors European Court of Auditors 3

4. EU Accession Criteria Any European state based on principles of liberty, democracy, respect for human rights and fundamental freedoms, and rule of law can apply for membership to the EU (Act 49. Treaty on EU) 4

5. Copenhagen criteria Criteria established by the Copenhagen European Council in 1993 and strengthened by the Madrid European Council in 1995 Political: establishing of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities and acceptance of the EU political objectives; Economic: functioning of market economy with solid market elements and the capacity to cope with competitive pressure and adjustment to market mechanisms within the Union; Legal: ability to accept the obligations arising from the EU membership, including acceptance of the EU acquis communautaire 5

6. Economic and Monetary Union (EMU) 1992, Maastricht, Treaty on the European Union (EU) signed setting the foundation for Economic and Monetary Union (EMU) establishing economic and financial discipline criteria with aim of introducing single European currency 6 *see details

7. Maastricht (Convergence) criteria Article 121, Treaty on EU, criteria for full membership in the EMU: Inflation rate should not be higher than 1.5 % of the average inflation in the three EU member states with the lowest inflation rates Budget deficit should not exceed 3% of GDP Public debt should not exceed 60% of GDP Average nominal long-term interest rate should not exceed 2 percentage points in respect to interest rates of the three EU countries with lowest inflation rate Stability of exchange rate and implementation of ERM II (exchange rate mechanism): at least two years before the adoption of EUR, the exchange rate of the currency to EUR must fluctuate within the allowed limits +/-15% in relation to the central parity 7 *see details

8. ESCB / Eurosystem European Central Bank (ECB) – at the center of the ESCB and Eurosystem European System of Central Banks (ESCB) – ECB and central banks of all the Member States Eurosystem: ECB and national central banks of the EU Member States that have introduced euro Eurosystem and ESCB will coexist until there are Member States outside the euro area 8 *see details

9. Euro Area Entry The country's entry into the euro zone is governed by the Treaty Establishing the European Community, specifically in Article 122. The relevant provisions regulate the decision on cancelling the right to derogation for the introduction of euro by the ECOFIN Council at the proposal of the Commission and after consulting the European Parliament and the European Council. The decision depends on the conclusions of Convergence Reports (fulfillment of the Maastricht criteria) as well as the compatibility of national legislation with the EU legislation. After the decision on cancelling the derogation right, the Council of the EU decides on the exact date of euro area entry and on fixing the conversion exchange rate of the national currency vis-à-vis euro. 9 *see details

10. European System of Central Banks (ESCB) National Central Banks (NCB) of the states outside of euro area: National Central Banks (NCB) inside the euro area (Eurosystem): Denmark Sweden United Kingdom Czech Republic Bulgaria Latvia Litvania Hungary Romania Poland Belgium Germany Greece Spain Irland Italy Luxemburg Netherlands Austria Portugal Finland Slovenia France Cyprus Malta Estonia Slovakia European Central Bank (ECB) 10 Last update in August 2012

11. ESCB / Eurosistem: Main Objectives Primary objective: to maintain price stability (Treaty on EU, Article 105 (1)) "Price stability is defined as an annual increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%.“ (The ECB’s Governing Council, 1998), maintaining inflation below 2% (The ECB’s Governing Council, 2003). Support to economic policies in the EU 11 *see details

12. ESCB / Eurosystem: Basic Tasks According to the Treaty on EU (Article 105(2)) and the Statute of the ESCB (Article 3.1.): To define and implement the single monetary policy To conduct foreign exchange operations To hold and manage official foreign reserves of the participating Member States To promote smooth operations of payment systems 12 *see details

13. ESCB / Eurosystem Committees (1/2) International Relations Committee (IRC) Monetary Policy Committee (MPC) Financial Stability Committee (FSC) Committee on Cost Methodology (COMCO) Banknote Committee (BANCO) Eurosystem/ESCB Communications Committee (ECCO) Internal Auditors Committee (IAC) Accounting and Monetary Income Committee (AMICO) 13 *see details

14. ESCB / Eurosystem Committees (2/2) Legal Committee (LEGCO) Market Operations Committee (MOC) Payment and Settlement Systems Committee (PSSC) Information Technology Committee (ITC) Eurosystem IT Steering Committee (EISC) Statistics Committee (STC) Risk Management Committee (RMC) Budget Committee (BUCOM) Human Resources Conference (HRC) 14 *see details

15. The road to EU/EMU Membership 15 *see details

16. Central Bank of Bosnia and Herzegovina in the European Integration Process (1/3) Institutional structures after the entry into force of the Interim Agreement on Stabilization and Association on 1 July 2008 Subcommittee for Trade, Industry, Customs and Taxes Subcommittee for Agriculture, Food Safety and Fisheries Subcommittee for Internal Market and Competition Subcommitee for Economic – Financial Issues and Statistics Subcommitee for Judiciary and Internal Affairs Subcommitee for Innovations, Technical Development and Social Politics Subcommitee for Transport, Environment, Energy and Regional Development 16 *see details

17. Central Bank of Bosnia and Herzegovina in the European Integration Process (2/3) The CBBH continuously works on the strenghtening of its institutional capacities in compliance with the EU central banking standards and CBBH participates, within its competences, in preparation of the following documents and reports: BH Progress Report, which monitors, on a yearly basis, the country’s progress towards the European integration, including: 1.Analysis of the BH political criteria, 2.Analysis of the BH economic criteria, 3.Analysis of the BH capacity for the implementation of the European standards (in relation to acquis communautaire, Stabilization and Association Agreement, European Partnership) 17

18. Central Bank of Bosnia and Herzegovina in the European Integration Process (3/3) Economic-fiscal Programme is considered as a preparation for the Pre-accesion Economic Programme, which is a mandatory document for the candidate countries for the EU Membership, that enables preparation of Convergence Programme after the EU accesion Action plan for the implementation of IA and SAA Gradual harmonization of the CBBH legislation with the acquis communautaire Use of the pre-accession financial assistance of the EU Establishment and enhancement of the cooperation with the EU institutions 18

19. CBBH Cooperation Programmes with the ECB & Eurosystem CARDS 2006. ECB-Eurosystem Needs Analysis Programme (implementation Feb - Sept 2007) involving 7 areas: 1) Banking Supervision (coordianting role); 2) Economic Analysis and Research; 3) Statistics; 4) Financial Stability; 5) Payment Systems; 6) Internal Audit and 7) Monetary Policy under CBA IPA 2007. Capacity building in the field of HR Management in the CBBH (implementation Sept 2009 – Feb 2010) IPA 2008. Implementation of the recommendations from Needs Assesment Programme – ECB and CBBH Technical Cooperation (Implementation Apr 2010 – Sept 2011) involving 6 areas: 1) Statistics; 2) Economic Analysis and Research; 3) Financial Stability; 4) Harmonisation of Lagislation with EU; 5) EU Integrations Coordiantion and 6) Improvement of IT Sevices of the CBBH IPA 2009. Strenghtening macro and micro prodential supervision in EU candidate and potential candidate countries IPA 2012. – 2013. Multi-Annual Indicative Planning Document provides support for the BH programmes for the area of statistics where CBBH participates actively by contributing to the building of statistics capacities and to the overall better state of statistics in BH 19 For more information about the EU Fonds, we recommend the website of the Directorate for European Intergations: http://www.dei.gov.ba/http://www.dei.gov.ba/ *see details

20. 20 Thank you for your attention 20