Bosnia says will switch peg if euro fails

(SARAJEVO) - Bosnia's central bank said Thursday it will switch the peg of its convertible mark to another "stable" foreign currency in case the euro collapses, but hopes there won't be a need.

"In case of a non-desirable scenario, regarding the model of Bosnia's monetary policy, we would seek a possibility to index the local currency to another stable foreign currency," the central bank's press office said in a statement.

It added that the "stability, the level of economic relations and foreign exchange with that country would be crucial" for the decision on a possible new currency.

Bosnian convertible mark is now pegged to euro at an exchange rate of one mark for 0.51 euros ($0.68).

"Our monetary system has once already survived a currency transformation, when German mark was revoked," the bank added.

The central bank said it had not noticed fresh euro savings withdrawals by citizens from commercial banks.

"The citizens are asking for more information on the situation in the eurozone and its consequences on Bosnia, as well as the security of their savings," it added.

But Josip Nevjestic of the Deposit Insurance Agency of Bosnia (AOD) told AFP that unusual amounts of exchanges of private euro savings have been registered in the past days.

"There are no deposit withdrawals, but conversions, from euros into Swiss franks or other currency" in the past ten to twelve days, he said.

Private deposits in Bosnia's commercial banks reached some 16 billion marks (8.2 billion euros) at the end of September, with around 3.5 billion euros in savings, he said.

More than 60 percent of the savings are in euros, the rest is in local currency, he added.

The AOD insures all deposits up to 18,000 euros.

European banks, mostly Austrian ones, control about 90 percent of the bank market in Bosnia.