Currency Board Protected at All Times

The Governor of the Central Bank of Bosnia & Herzegovina, Mr. Peter Nicholl, who is in Switzerland assures the citizens of Bosnia & Herzegovina that the Currency Board Coverage of the KM, was protected during all phases of the liquidation of the National Bank of Bosnia & Herzegovina.
"The figures relating to the former National Bank of Bosnia and Herzegovina that were included in a letter the CBBH sent to the National BIH Parliament have caused some confusion," Mr. Nicholl said. The figures have given the impression that the so called 'gap' in the NBBH was DEM 79.4 million, rather than 39 million as previously stated.
"This was never the case," Mr. Nicholl said. "When the CBBH commenced operations in August 1997, the NBBH transferred to the CBBH the liability for all of the Bosnian Dinar banknotes that were in circulation and the reserve deposits of the commercial banks which banked with the NBBH. They also transferred an equivelant amount of foreign exchange assets. In this way the CBBH "Currency Board" was secured on its first day of operation."
Other deposits that the NBBH had from government agencies and individuals were not Central Bank liabilities and were not transferred to the CBBH. These deposits amounted to DEM 79.4 million and remained a liability of the NBBH. Over the nine months following August 1997, some of the deposits that had remained with the NBBH were transferred by the depositers to commercial banks. As this happened, the NBBH transferred further foreign exchange to the CBBH to comver the increase in commercial bank reserve deposits at the CBBH. This protected the "Currency Board", except when delays in the transfer from the NBBH led to some short term breaches in late 1997 and early 1998.
However, in April 1998 the NBBH found it was unable to transfer further foreign exchange to the CBBH even though deposits of around DEM 39 million remained in the NBBH. "This was the NBBH "Gap"," Mr. Nicholl said. It was due to loans the NBBH had made to the former government of the Republic of BiH and deposits made with Promdei Bank, Zagreb that not been recovered.
In order to continue to protect the "Currency Board", this amount of NBBH deposits was frozen in the ZPP. This "Gap" was covered by the plan of Federation Prime Minister Edhem Bicakcic's plan which involved payments from the mostly Bosniac Cantons and utility companies which were made between December 1998 and August of 1999. As these payments were made, these deposits were transferred to commercial banks and the NBBH now has no remaining deposits.
The Governor will present all of the details to the public when he addresses the BIH Parliament on this matter upon his return to Sarajevo.