The Council of the Croatian National Bank, chaired by Governor Dr. Marko Skreb, held a meeting on Wednesday, May 13, to examine the report on the situation of the Croatian banking system, and approve the annual report of the Croatian National Bank for 1997. Both documents will be submitted to the Croatian Parliament for review . At the Wednesday meeting, the Council decided that the period during which lombard credits may be used will be extended from 12 to 18 days, due to the changed dynamics of liquidity cycles caused by the introduction of the value added tax. Mr. Borislav Skegro, vice-president of the Croatian Government and minister of finance of the Republic of Croatia, attended the Wednesday meeting.

The Croatian banking system comprises 60 banks and 33 savings banks. On the whole, the situation in the banking system is much better now than it has been in the last few years. Four significant banks have successfully undergone rehabilitation, the quality of banks' operations has improved and the competition intensified. Interest rates are lower than a few years ago, and the growth of households' savings deposits, especially time deposits, in the past few years shows that confidence in the domestic banking system has increased. Stability of the macroeconomic framework has provided banks with an opportunity to develop their competitive advantage and to secure the confidence of savers and other depositors by allowing them a more complete insight into banks' operation.

However, this does not mean that the Croatian banking system is immune to risks inherent to banking industry in market economies, and that the seriousness of the Dubrovacka Banka crises should be down played. On the contrary, it is important to draw lessons from that experience in order to promote future stability in the banking system and adequate functioning of all protection mechanisms. The Council emphasized the importance of the CNB role in these areas and that improvements in banking supervision and the legal framework are a continuous process. However, the Council stressed that the central bank can not take over or be a substitute for the function of other control bodies, including internal audit and supervisory boards of banks, as well as institutions in charge of preventing and punishing criminal offenses.

Furthermore, the central bank can not be responsible for the losses incurred by depositors who have entrusted their money to financial companies not registered pursuant to provisions of the Law on Banks and Savings Banks. The public has been warned repeatedly through different announcements that those institutions do no fall within the scope of the central bank's supervision and are not included in the deposit insurance scheme provided by the State Agency for Deposit Insurance and Bank Rehabilitation.