SARAJEVO (Reuters) - Bosnian police arrested 10 people on Thursday suspected of criminal activities which cost the country's banking sector around 123 million Bosnian marka ($71.2 million) or over 10 percent of the central government's budget.
Now defunct Bosnian lender Bobar Banka, based in Bosnia's autonomous Serb Republic, was shut late in 2014 after its shareholders failed to come up with a recovery plan after big losses were found.
Clients, including major state firms, were at risk of losing some of their 250 million marka in deposits.
The police operation was carried out on orders of the state prosecutor in the towns of Banja Luka, Bijeljina and Zvornik, the State Investigation and Protection Agency (SIPA) said in a statement.
"The individuals, acting as an organized criminal enterprise, are suspected of committing a series of irregularities in the business operation of the Bobar Banka by extending multi-million loans and illegal collaterals to different businesses," the state prosecutor's office said in a separate statement.
The suspects are believed to have made illegal gains in the amount of 123 million marka, which account for more than 10 percent of the overall state institutions' budgets, it added.
Problems in the bank, based in the northeastern town of Bijeljina, were reported after its majority owner Gavrilo Bobar, a former Bosnian Serb businessman and member of the region's parliament, died.
The suspects mainly extended loans to companies from its owner's business group, also named Bobar and to bank's shareholders, which were late with payments, according to the prosecutor.
The Serb Republic banking sector posted a loss of nearly 80 million marka in 2015, down from 28.1 million marka profit in 2014, its worst result in five years, according to the region's banking agency's preliminary data.
Tackling the problems in the Serb Republic's banking sector is a key condition set by the International Monetary Fund to resume talks on a new loan arrangement for Bosnia, after its previous loan deal expired in June last year, officials have said.
Reporting by Maja Zuvela; Editing by Daria Sito-Sucic and Jeremy Gaunt