The Bosnian State Investigation and Protection Agency (SIPA) arrested the head of Republika Srpska’s banking agency along with nine others on March 31, on accusations of issuing illegal loans and guarantees on behalf of the bankrupt Bobar Bank.

The arrests added more tension in the relations between Republika Srpska and Bosnia & Herzegovina’s state-level judicial authorities. In December last year, the entity decided to end cooperation with national courts, prosecutors and SIPA following raids in the town of Novi Grad, although a few days later the government stepped down and decided to restore its cooperation with SIPA.

Bobar Bank went bankrupt in 2014, as its shareholders failed to draft a recovery plan after major losses were uncovered.

The arrested are accused of granting multi-million loans and extending illegal guarantees for various activities, in violation of the procedures and guarantees stipulated by Republika Srpska’s banking law. The total amount of the illegally issued loans and guarantees was estimated at BAM123mn (€62.9mn).

SIPA did not elaborate on the names of those arrested, but local daily Nezavisne Novine reported that among them was the head of Republika Srpska’s banking authority, Slavinica Injac, as well as Snezana Vujnic, who is director of the entity’s state-owned Investment and Development Bank.

According to a statement on SIPA’s website, the ten arrested were members of a “criminal enterprise responsible for reckless lending and the illegal issue of guarantees to companies founded by the owner of Bobar Bank and other legal entities related to the bank.”

Following the arrests, Republika Srpska’s president Milorad Dodik said that SIPA had used unnecessary force. He added that he was sure that all employees of the banking agency and the Investment and Development Bank had carried out their work according to the law.