Bosnia’s Federation To Issue Its Own Pre-war Savings Compensation Bonds - Media

The plan comes after Bosnia’s constitutional court ruled over the weekend that the Serb Republic bond, whose legality was initially contested by representatives of Bosnia’s central authorities, was compatible with relevant laws, daily newspaper Nezavisne Novine quoted the Federation’s Finance Minister, Vjekoslav Bevanda, as saying.

Bosnia, divided by the 1992-95 war, consists of the highly autonomous Muslim-Croat Federation and Serb Republic, which have their own governments, parliaments and fiscal systems, and has weaker corresponding central institutions overarching them.

The central finance ministry planned to issue bonds compensating pre-war hard-currency deposit holders for all of Bosnia in March this year, but the Serb Republic issued its own in February, causing legal turmoil and drawing criticism from the international community. The issue was brought before the constitutional court, which on Saturday rejected all claims against the constitutionality of the bond.

There is nothing left for the Federation to do but to issue its own bonds, Nezavisne quoted Bevanda as saying. It’s a pity that there isn't a blanket compensation scheme for deposit holders in all of Bosnia, as that would be a better decision, but we have been preparing for this scenario as well, he said.

The Serb Republic bond issue is worth some 209.7 million marka ($155.2 million/107.2 million euro) divided into bonds with a nominal price of 1.00 marka each. The bonds have a maturity of five years, carry a coupon of 2.5% and can be traded on the Banja Luka Stock Exchange (BLSE).

After the decision of Bosnia’s constitutional court at the weekend, the bond’s trading price rose almost four percent to 76.07% of par on Monday, Nezavisne reported. The bond was traded at 77.00% of par by 0919 GMT on Tuesday, according to BLSE data.

Many depositors in the former Yugoslav Federation, of which Bosnia was part until 1992, lost their foreign currency savings held with local banks during the wars in Yugoslavia in the 1990s. The six successor states of former Yugoslavia recognised as their own state debt the lost deposits held by banks registered on their respective territories.

Last year, Bosnia's central parliament adopted a law for the settlement of debt to bank depositors. The law put the estimated value of the debt at some 1.98 billion marka but the compensation claims for old foreign currency savings placed by former depositors are substantially below that figure.

(1 euro = 1.95583 Bosnian marka)