Reaction of Governor Nicholl on Media Articles on Relations Between the CBBH and NBBH

The Governor of the Central Bank of Bosnia and Herzegovina, (CBBH), Mr. Peter Nicholl, commented today on reports that have appeared in the media in recent days relating to the relationship between the CBBH and the National Bank of Bosnia and Herzegovina, (NBBH). He said, "it is very unfortunate and irresponsible that facts included in a report to the Council of Ministers on the liquidation of the NBBH had been misrepresented in the media. In particular, it had been reported that loans granted to former government institutions by the NBBH prior to 1996 were done with the approval of the Governing Board of the CBBH. This is impossible since the CBBH did not commence operations until 11th August 1997.

It had also been reported that the CBBH has approved a credit of DM 30 million to the NBBH. The CBBH has not approved any credits to the NBBH, Mr. Nicholl said. However, in recent months it has become clear that the continued operation of the NBBH complicates the daily operations of the CBBH and the confidence that some people have in the currency board arrangements of the CBBH. Steps are being taken to resolve these complications but the final resolution is the liquidation of the NBBH. For this reason, Mr. Nicholl said, "the Presidency had been asked to agree to the liquidation of the NBBH and to appoint a liquidator."

Mr. Nicholl said that it had also been reported in the media that the KM had been devalued by 10%. "This is simply untrue," Mr. Nicholl said. "The KM has not been devalued. It will not be devalued. The exchange rate is set in the CBBH law at 1 KM to 1 DM. That has been the rate since the CBBH was established and it will remain the rate."

Preliminary auditing work, performed by the Arthur Anderson firm does indicate that the monetary assets of the NBBH are less than their liabilities because of loans they granted prior to 1996. It will be the job of the liquidator to confirm this and to propose solutions. Mr. Nicholl says that these solutions "will not, under any circumstances, involve financing from the CBBH."