The economic crisis, which did not leave Bosnia and Herzegovina (BiH) unaffected, and the increasingly present problems with the collection of accounts receivable made the companies in BiH turn to factoring, a modern financial tool that provides liquidity. Very frequently, slow collection of claims may be a problem, especially for small and medium-sized enterprises that have difficulties in accessing short-term loans and in providing collateral for loans and often face the problems of financing liquid capital. Due to all this, factoring is a high-quality instrument for "extinguishing" illiquidity as by cession of claims the company obtains cash in a very short period. This paper aims to establish the importance of factoring as a modern financing tool in keeping liquidity, competitiveness, and export capacities of small and medium-sized enterprises in BiH and to indicate advantages and disadvantages of factoring as a modern form of financing compared to traditional financing forms. Financing by factoring is directly related to the subjects in factoring activities, factoring item as well as to the costs, elements, and risks of factoring. It is therefore very important to accentuate the differences between financing by factoring and by short-term loans.

Investment into people through education, professional training in accordance to bank’s needs, and work on “nurturing” the readiness to challenges and changes are all significant starting points for achieving bank competitiveness. Identifying the dominant forms of employee training and determining the level of employee satisfaction by the existing training programs, which is the basic goal of this paper, enable bank managers to obtain valid information on appropriate changes of certain training programs and development of employees. The paper presents the results of the empirical research conducted in a subject BiH bank, aimed at defining the methods of employee training that are characteristic of the banking sector and the level of employee satisfaction by training programs they attend. The research included 172 employees of the subject bank. The authors believe that the critical analysis of the employee training and development methods applied in the banking sector as well as the criteria for selecting the programs for the realization of these methods can lead to widening the scientific knowledge in the field of human resource management in banking and to creating specific recommendations for bank managers which they can/need apply in their practice in order to improve the entire business operations.

Abstract: The purpose of this paper is to investigate the level of SME banking development in Bosnia and Herzegovina (BH). By using a structured questionnaire, the authors discuss perceptions of the banking sector representatives in BH regarding SME banking and their future plans for the management of credit risk associated with financing the SME sector. One of the main findings of this research is that the SME sector is becoming a strategic sector for BH banks and banks are willing to increase their involvement with SME clients. Authors also present results on current level of banks’ exposure to SMEs, types of financial services offered to SME’s clients by BH banks, drivers of banks’ involvement with SMEs, obstacles to further development of banks’ involvement with SMEs. Based on the banks’ responses and results of research conducted, suggestions to policy makers are given, such as tax reforms, interest rate subventions to SMEs, improvement of judiciary, simplifying administrative procedures. Also, some recommendations are given to banks, such as the need for better understanding the requirements of SME clients providing them more personal approach and creating a partnership, as well as lobbying the government bodies to change regulations governing SME sector. Keywords: Financial system; Small and medium-sized enterprises (SMEs); SME banking; Comparative experiences; Bosnia and Herzegovina (BH)

In the countries with developed financial markets, unlike in Bosnia and Herzegovina (BiH) and other emerging market countries (EMCs) with the so called bank-centric financial systems, corporate bonds are a rather significant alternative to the usage of bank loans for financing the development needs of the real sector of the economy (corporate sector). The new architecture of world’s financial stability with Basel III as its integral part additionally emphasizes this importance for both banks and companies. Besides, in the countries with developed financial markets it is probably needless to mention the need for high quality debt securities. This is especially true due to the conditions of stronger institutional investors on the market, such as pension funds that can realistically be expected to become the leading financial institutions of the 21st century, and ever increasing need of institutional investors, funds in particular, for high quality forms of assets and portfolio diversification. In EMCs in which pension reforms have still not been completely implemented or completed, considering a drastic fall in the ratio of the insured based on contribution payment and the number of pensioners, the existing situation is almost non-sustainable. Therefore, the transformation of pension funds in accordance to the two or three pillar structure and the emergence of voluntary pension funds as financially powerful institutional investors have no alternative. Certainly, in terms of corporate bonds and their issue on the one hand, and investing in them on the other, in EMCs and thus also in BiH there are some important aspects to be observed when analyzing their influence on the decisions on financing or investing (liquidity, interest rate level, clarity and implementation of regulations, etc.).

Current business environment and growing exposure to a wide range of risks require companies (especially the large ones) to raise a question of risk management, start treating it as a particular business function that needs special attention and for which they have to seek proper solutions within their organizational structure. This particularly affects the coal industry, where risk exposure is rather evident and makes risk management one of the key management issues in general. A central point of the analysis includes companies in the coal industry of the Federation of Bosnia and Herzegovina (F BiH), where the management needs to be greatly concerned about protection against risks that affect this industry much more than other industries, in particular pure risks (those that involve only the possibility of loss and no possibility of gain). And if we add the so-called emerging or “newly developing” risks, which are still unknown even to risk management experts, it is clear that management of large companies have to take care of risk management culture development and seek adequate organizational solutions. On the basis of the conducted empirical research, the paper will show and appropriately explain the descriptive analysis results, accordingly used for establishment of the level of risk management efficiency in the coal mines of the F BiH and identification of certain weaknesses, whose elimination could significantly improve the process and increase the level of economic protection for these companies.

The ever increasing globalization of financial institutions’ business activities and liberalization of capital markets inevitably lead to the increase in both diversity and intensity of the institutions’ types of risk. Risk management is of the essential importance to the institutions, especially banks, because of the fact that their risky activities are the source of creating wealth for their stockholders. In terms of Islamic banking, risk management is still not sufficiently developed. Certain specific qualities in risk management in Islamic banks emerge due to a special way in which they run the business. Nowadays, Islamic banks mainly use conventional products for risk management, adopting them to their business in accordance to the Shari’ah. Regarding the Islamic finance and banking in Bosnia and Herzegovina, it is still based on the activities of the bank that, although being a “hybrid” Islamic bank, is the only Islamic bank on the territory of South-Eastern Europe. This paper surveys the specifics of its risk management.

Banks worldwide are looking for new and creative ways to operate and achieve competitive advantages under the global recession conditions. The recession effects have forced the banks to look into more effective utilisation of internal resources and their potential. Human resources are recognised as the key element in successful business navigation through difficult market conditions, including competition with other banks and non-banking financial institutions. This is even more important for the banks operating in developing countries, where the effects of the recession are considerably harsher. Many studies have acknowledged the direct link between productivity and the level of employee satisfaction. This work aims to establish and recognise some of the main factors associated with the job satisfaction of banking employees in the Federation of BiH and provide useful guidance to bank managers in this region and beyond, as a contribution to their continuous improvement efforts in business and people management during these challenging times. The research is predominantly based on the survey conducted in the banking sector of the Federation of BiH in 2013. The survey sample covers 529 respondents that represent 7.4% of the overall banking employee sector base of 7,130. The analysis of survey results, supported by empirical research and the review of related literature, revealed that job satisfaction amongst the bankers is determined by a wide spectrum of factors such as: demographic characteristics, management and supervision, monetary compensation, non-monetary recognition, work environment, job responsibility and type of tasks, social atmosphere at work and general satisfaction with life.

Small and midsized enterprises (SMEs) represent the primary moving mechanism of new jobs creation and increase of gross domestic product. They are the foundation of European economy and their contribution for achieving the European Union strategies for sustainable growth. Fostering development and growth of SMEs is a priority among the goals of national economies for developed countries of the world as well as for countries in transition. Financial system plays important role for achieving these goals with a main purpose of preserving the stability of national economy. For the last few years, the main focus of the financial system towards real sectors is expanding. From the market observed as to complex for risk management, SME sector became strategic goal for financial institutions worldwide. Due to the information technologies development, banking sector is increasing its support for development and growth of SMEs through the increase of financial support and also through the consulting services as a response to the challenges faced by this sector. This paper has two main objectives. The first one is point out the importance of SME banking, as the important contributor to bank profitability, in developed part of the world(focusing on the USA and EU) and in some countries of Western Balkans. The second objective is to investigate the level of SME banking development in Bosnia and Herzegovina. Using a structured questionnaire, in this paper authors will discuss perceptions of banking sector in B&H towards their orientation to SME sector and futures plans for their support as well as managing credit risk associated with financing SME sector. Keywords: financial system, small and medium enterprises (SMEs), SME banking, comparative experiences, Bosnia and Herzegovina.

This paper discusses development of financial derivatives markets in emerging market economies, focusing on the use of financial derivatives in risk management purposes of non-financial firms in Bosnia and Herzegovina. For achieving the research goals authors collected data on the derivatives market structure and types of derivative instrument traded, focusing commercial banks, because of the authors’ prior knowledge of the derivatives market. Additionally, in order to assess the current state and development perspectives of derivatives usage by the non-financial firms, authors conducted a research on the random sample of non-financial firms, using data from the Foreign Trade Chamber of Bosnia and Herzegovina as well as the information from lists of derivatives users-clients provided by some banks of Bosnia and Herzegovina. The research shows that derivatives market in the country exists as an over-the-counter market, where banks play dominant role and offer different types of derivative instruments. Three types of derivatives are being offered: currency forwards, currency swaps, and interest rate forwards. The main reason for the poor offer is low demand, lack of non-financial firms’ knowledge about benefits of derivatives, and low number of business operations on the global markets by the non-financial firms.

Current business environment and growing exposure to a wide range of risks require companies (especially the large ones) to raise a question of risk management, start treating it as a particular business function that needs special attention and for which they have to seek proper solutions within their organizational structure. This particularly affects the coal industry, where risk exposure is rather evident and makes risk management one of the key management issues in general. A central point of the analysis includes companies in the coal industry of the Federation of Bosnia and Herzegovina (F B&H), where the management needs to be greatly concerned about protection against risks that affect this industry much more than other industries, in particular pure risks (those that involve only the possibility of loss and no possibility of gain). And if we add the so-called emerging or "newly developing" risks, which are still unknown even to risk management experts, it is clear that management of large companies have to take care of risk management culture development and seek adequate organizational solutions. On the basis of the conducted empirical research, the paper will show and appropriately explain the descriptive analysis results, accordingly used for establishment of the level of risk management efficiency in the coal mines of the F B&H and identification of certain weaknesses, whose elimination could significantly improve the process and increase the level of economic protection for these companies.

Any banking activity involves a certain level of risk. Regardless of the fact that risk has always been present in banks, active risk management in conventional banking started only in the 1990s, specially after the collapse of Barings PLC, the bank with more than 200-year-old tradition, while such practice is still underdeveloped in Islamic (interest-free) banking whose practical implementation in the world started only in the 1970s. However, in the times of the recent sub-prime mortgage crisis and a large number of collapses and near collapses, multibillion losses and write-offs all banks, whether conventional or Islamic, saw the necessity for active risk management. Specific features of banks in Bosnia and Herzegovina and their way of managing risks are conditioned by a particular legal framework. This framework regulates primarily the conventional banks, but it indirectly affects the Islamic bank as well, since it does not allow the bank to offer all types of products and services which are generally present in Islamic banking. Since, to our knowledge, not a single specific comparative research into conventional and Islamic banks has been done in this part of the world, the aim of this paper is to provide an insight into risk management practiced by BiH banks, and to determine the dependence of their financial performance on the process of active risk management.

The main objective of this paper is to determine the scope of the use of derivatives by companies in B&H for specific purposes of financial risk management. The aim is to provide a comparative analysis with companies from Slovenia and Croatia in order to determine if companies in B&H use the hedging instruments appropriately, and to suggest possible improvements of their practices for managing financial risks. The basic goals of the paper are to explore if companies in B&H use derivatives for risk management purposes to the same extent as Slovenian and Croatian companies and to determine if B&H companies properly hedge their financial risks. The paper also aims to give suggestions to B&H companies for improvements of their risk management practices in order to ensure more efficient and effective financial risk hedging by using derivatives, primarily available through banks on B&H financial markets.

The Western Balkan countries are characterised by a long period of transition to the market economy followed by their intention to integrate into the European Union. There are many benefits encouraging them to integrate and, in this paper, we are going to show the impact of the integration into the European Union on their financial services market, with the focus on the insurance market. Building the higher level of competitiveness through the legal and institutional standardisation will result in development of the insurance markets of these countries in many aspects. The best way to see it is to look at correlation between their level of integration into the European Union and the level of the insurance market development they reached.