The goals of banking operations are moving in the triangle of profitability, liquidity, and safety. It is difficult (of course not impossible) to achieve all three business goals at the same time, as some goals are mutually exclusive. If high profitability is set as a business objective, it requires the conversion of additional cash into loans, which reduces liquidity. Safety, in the broadest sense, refers to the bank capital to asset ratio. If equity is larger the bank is safer for creditors and depositors, as capital owners can lose more, and the loss must be high in order to exceed the capital. On average, at the global level, the capital ratio is approximately 10%, and in 2017 it is 10.7%. Austrian banks, probably due to excellent risk management and optimization of liabilities, only 7.5% of assets (2017) finance with the capital, while in the Bosnian banks capital ratio is almost two times greater 13.3% (Q2 2018). In the last 7 years, the capital ratio in BH is approximately 14% and is not significantly changed. Regulatory requirements in BH and Austria are different and this can explain a part of the difference in the capital ratio, and part of the difference belongs to the poorer quality of loans in BH in relation to Austria. If credit portfolio is inferior (higher bad loans i.e. NPL) capital requirements should be higher. The global crisis has forced banks ( perhaps regulation contributed also ) from completely different markets (Austria, BH, Croatia) to increase the safety of their business. Croatia and BH have approximately the same capital ratio.
Higher safety has its price because capital is the most expensive source of financing and the relative increase in capital in relation to assets increases the cost of financial intermediation. This is one of the reasons (of course, not the only and not the main!) why the costs of banking services in BH are higher than in Austria. If the assets of Bosnian banks are valued in accordance with banking regulations, then according to the capital ratio, our banks are safer for creditors than Austrian banks. Banks are waiting for a new recession with a higher level of capital, which means that the regulator and banks have learned lessons from the global crises.