The route from New Zealand to Bosnia is long and, one imagines, not often travelled. But Peter Nicholl, governor of the Central Bank of Bosnia and Herzegovina (CBBH), has made the journey. He took up the post on November 1 1997 and has since overseen the tricky task of bringing order to the country’s Financial sector. He moved to Bosnia from his position as a director of the World Bank in Washington, where he had worked from 1995. Before this, he had been both deputy governor and deputy chief executive of the Reserve Bank of New Zealand, spending 22 years with that organization.
| Nicholl: has achieved notable victories | ||||||
So how does a New Zealander end up governing a central bank in central Europe? The CBBH was set up on August 11 1997 as part of the Dayton peace accord. Under the terms of the agreement, the new central bank governor was to be appointed by the managing director of the IMF, subject to the agreement of the relevant heads of government in the ethnically diverse Bosnia and Herzegovina. The peace accord stipulated that the governor could not be a citizen of Bosnia and Herzegovina or of its neighbouring states and would hold the position for six years. Nicholl’s experience in New Zealand and at the World Bank meant he was ideally suited to direct the establishment of the new central bank. Consequently, the IMF put him forward and the recommendation was accepted.
Since taking office, Nicholl has overseen several major developments and achieved some notable victories. Not least has been the introduction of the nation’s First post-war currency, the convertible marka. It is the primary role of the central bank to protect the new currency. The marka replaced the four currencies that had previously been in circulation, the most widely-used having been the Deutschmark. The new currency is proving to be a success. When First introduced, the convertible marka could only be traded for Deutschmarks. Now it is exchanged for all eurozone currencies and is pegged to the euro.
Nicholl says: “The marka is now the dominant currency in the country.”
Alongside this, he has coordinated the abolition of Bosnia’s payment bureaux. The bureaux had previously held a monopoly on all non-cash payments in the country, limiting the opportunities open to the banks and weakening their position. Nicholl has set about closing the bureaux, a process he hopes will be completed by the end of this year, and establishing clearing houses to take over the role. The banking system is being reformed and the entry of foreign banks such as Agro-Obrtnicka Banka of Croatia and Volksbank of Austria has helped to revitalize the industry.
Vital in inspiring the confidence of the populace in the banking industry is the deposit insurance scheme that is being introduced. According to Nicholl: “The people here don’t trust the banks.” It is hoped that the scheme will instil this trust and improve the level of savings.
Nicholl says that the role has been challenging, rather than always enjoyable. “It’s been fascinating and always interesting but, at times, intensely frustrating.” His First year in the job was particularly tough, with the major problem being the nature of the country itself – one state, two “entities” and three nationalities.
This caused some difficulties. “It took eight months to get agreement on the design of the new banknotes,” Nicholl says. Two sets of notes were needed to reflect the two entities that constituted the new state. Nicholl wanted to keep the differences to a minimum but found it hard to gain an agreement. Eventually the problem was resolved. “The variations are minor and the notes are used interchangeably.
People don’t look at whose picture is on the notes any more.”
Since then, the situation has improved greatly. “It’s become more enjoyable as one could see the changes one’s brought about coming through,” Nicholl says. The central bank now has four branches across the country and Nicholl feels it is doing well. “We have an institution that works, which is still relatively unusual in Bosnia. The majority of the staff are Bosnian and all three ethnic groups work together and effectively.”
Being a foreigner in charge of one of Bosnia and Herzegovina’s most important organizations has not been a problem. Rather, Nicholl feels his background has been beneficial. “Being a New Zealander has helped. The people have no labels to put on New Zealanders.” He believes that, had a Bosnian or other European been appointed, nationality would have been an issue. Living in Bosnia and Herzegovina has been a pleasure, he says, allowing him also to get to know Europe better. Potentially he has three more years in his post but has no plans beyond that just yet.
