1. SECURITIES MARKET IN BH Sarajevo, January 25, 2005 PETER NICHOLL, CENTRAL BANK OF BOSNIA AND HERZEGOVINA

2. 2 Market participants: Securities Commissions, stock exchanges (Sarajevo and Banja Luka); Securities Registries, broker houses and commercial banks. Capital Market Council of BH – body under the leadership of the CBBH, unifying all market participants: CBBH, Ministry of Finance and Treasury of BH, Securities Commissions of both entities, commercial banks and entities’ stock exchanges. Basic issue: lack of legal regulations. The Law on Indebting, Debt and Guarantees of BH is currently in the Parliamentary proceeding. Securities market: Market’s participants

3. 3 According to the proposed Draft Law, the CBBH will perform the role of the fiscal agent for internal securities of BH in accord to the Agreement which it will sign with the BH Ministry of Finances and Treasury. Future initiatives: Development of money market in BH; regional connecting of stock exchanges of the Southeast Europe. Securities market: CBBH role

4. 4 Securities market: Trading process of securities (1) BLSE SASE Bank A (Buyer) Bank B (Seller) Central bank of BH Trading platform Payment Official registry State Ministry of Finances and Treasury BHF Registry RS Registry 1. Bank A sells its stocks to Bank B, or the trade is carried out through Stock Exchanges. Trading starts with data input into the trading platform on the offer for buying/selling by seller and buyer. In order to perform trading, the input data on buying/selling must correspond to one another. 1.1.

5. 5 2. After parties agree on trading, transaction is “locked” until the end of the day, or until the delivery and payment process is completed. Information on the trading will be sent to the Registry, (or to Registries if the buyer and seller are recorded in different registries) and the payment order will be issued at the same time. Securities’ ownership in Registries will not change before the payment is completed in full. 2.2. Securities market: Trading process of securities (2) BLSE SASE Bank A (Buyer) Bank B (Seller) Central bank of BH Trading platform Payment Official registry State Ministry of Finances and Treasury BHF Registry RS Registry

6. 6 3. After the Register (Registries) receive(s) the data on trading, those data are stored in the system of Register, but without changing the ownership status. At that point, the transaction has the unsolved status until the official Register confirms that the payment has been completed. 3.3. Securities market: Trading process of securities (3) BLSE SASE Bank A (Buyer) Bank B (Seller) Central bank of BH Trading platform Payment Official registry State Ministry of Finances and Treasury BHF Registry RS Registry

7. 7 4. After Registries receive confirmation on executed payments, they check whether the both banks are registered in their Registry. In addition to registering of banks, Entities’ Registries will open one account for other Registry (in cases when buyer and seller are not registered in the same Registry). 4.4. Securities market: Trading process of securities (4) BLSE SASE Bank A (Buyer) Bank B (Seller) Central bank of BH Trading platform Payment Official registry State Ministry of Finances and Treasury BHF Registry RS Registry

8. 8 Each trading participant has to be registered in one Registry, NOT IN BOTH! Each trading participant has to have the account in the CBBH for the purpose of payment and settlement. Stock exchanges have to perform their clearing through commercial banks. Changes of ownership cannot take place before the payment is completed. Securities market: Important rules of trading process