BANKING SYSTEM

As main causes of the banking system’s crisis we can state the inheritage of former system, manner of transformation and privatization, and impact of economic policy which in conditions of monetary dependence (till the end of 1991), war and impossibility to raise adequate resources, used banking system as alternative source of financing the realization of goals of state. Especially dangerous turned to be the role of banks in the process of transformation, not only for the banking system, but for economy and Croatian society in general. Banking system first as passive and than as active participant in the process of privatization, essentially contributed to multiplication of problems of Croatian economic system, what reflected in cummulated losses, illiquidity etc. For financial recovery it was made internal public debt of the Republic of Croatia of 5,5 milliard of USD (the final amount of financial recovery costs when interests and taken over external debt are added will be much higher, probably about 13 milliard of USD), 3,2 milliard of which accounts to “old foreign exchange savings”, or means which banks spenta long ago through their investments, and to which they regularly charged interests and capital, or transformed them into shares in firms later. To get an idea what means are inquestion, let us say that officially spent amount for financial recovery of banks so far (5,5 milliard USD settled up by the mean rate kuna/USD of 8,2765 in 2000 ) is more than 2,2 times higher than total amount of unsettled registered cash orders in December 2000 (20,3 milliard kuna), or more than 40 percent higher than the present value of equipment of all Croatian firms on December 31, 1999 (30,9 milliard kuna). Was it more reasonable to reorganize firms – this fundamental economic subject ofentire economy – and return to it excessivelly taken means and indirectly restore banks, than to start the reverse logic.