The banking agency of Bosnia & Herzegovina’s smaller entity, Republika Srpska, will initiate a procedure for the liquidation of the state-owned Banka Srpske, a move which would secure the country much needed deal with the IMF, Capital.ba reported on May 4.

The bankruptcy of the bank was one of the key requirements set by the International Monetary Fund (IMF) and which Republika Srpska had been trying to avoid for months. However, Capital.ba quoted unofficial sources as saying the entity is running out of money and desperately needs a new IMF loan deal.

“On April 27, the agency took the decision to take the banking licence [of Banka Srpske] aiming to protect the interests of its deponents and to preserve the stability of the banking system,” the banking agency said in a statement to Capital.ba.

In November last year, Republika Srpska’s banking agency, ABRS, fired the director of Banka Srpske, Zdravko Trivuncica, claiming that he had ignored a ban on accepting deposits. ABRS explained that Trivuncic had violated several regulations, but the most serious of all was that he has allowed the bank to continue to accept deposits even though the agency explicitly prohibited this as the bank’s capital was significantly below the legal threshold of BAM15mn (€7.7mn).

Before that, an audit at Banka Srpske found the bank ended 2014 with a loss of at least BAM17mn instead of the BAM298,000 profit it claimed. Following Trivunovic’s dismissal, ABRS appointed a receiver at Banka Srpske and the local government started looking for ways to save the bank from bankruptcy.

In April, the Bosnian State Investigation and Protection Agency (SIPA) launched a probe at Banka Srpske following media reports that the bank had stolen hundreds of millions of Bosnian marka worth of its clients' savings by investing them in fake companies.

This was the third police investigation into a bank headquartered in Republika Srpska. Police are also looking into events at two bankrupt banks, Bobar Bank and Pavlovic Banka.

Banka Srpske inherited the business from the Lithuania-based Balkan Investment Bank. The Lithuanian management abandoned the bank along with all the companies it owned in Republika Srpska, leaving them indebted and under investigation.