Slovenian bank saga finally draws to an end

Croatia has moved another step forward on its way to EU membership after negotiations were opened on the free movement of capital.  Talks began following a breakthrough on foreign currency deposits held by Croatian citizens in Ljubljanska Banka (LB) in Slovenia. It may be the final chapter of a long-running and complicated story which started before Croatia and Slovenia existed as independent states. In fact, the difficulties surrounding LB are part of the problematic inheritance caused by the collapse of Yugoslavia. 

Ljubljanska Banka is more than a mere bilateral problem. It is an issue of regional importance because the bank now has subsidiaries in almost all the sovereign states that once constituted Yugoslavia. In the 1970s, Slovenia was the most developed and westernised republic inside Yugoslavia. Some of the country's trademarks gained such favour with the public that they were used instead of product names: 'Fructal' stood for 'juice,' for example, and 'Radenska' came to replace 'mineral water.' LB was popular among clients as a prestigious Slovenian brand and was known as a quality bank. It all ended in 1991. When the former Yugoslav People's Army (JNA) attacked first Slovenia and then Croatia, LB immediately pulled out of those markets. When the Zagreb branch was closed, savers were only given a short notice to pick up their deposits in Ljubljana. As a result, most of the foreign currency deposited by savers from Croatia, Serbia and Bosnia and Herzegovina (BiH) remained in LB's coffers – an outcome the bank did not consider a problem.

The clients viewed it differently. BiH was at war and diplomatic relations between Slovenia and Serbia had ceased, but Croats started to file lawsuits against the bank. In response, the government in Ljubljana passed a constitutional law in 1994 which set up the New Ljubljanska Bank (NLB). The Slovenian government transferred all finances, assets and claims from LB to NLB and left the debts at what little remained of the original bank. But Slovenian savers followed the Croats' example and started to go to court in Ljubljana. In 1998, the Slovenian government passed a new law that banned legal actions against LB in Slovenia. This was when the problem of deposits in LB developed into a sizeable diplomatic burden on Slovenia's relations with Croatia and BiH especially. In Croatia, there are around 130,000 savers with around €160 million in deposits; in BiH, 165,000 savers hold about €140 million.

Both Croatia and BiH argued that it was up to Slovenia – specifically LB – to pay out to clients due to the private 'bank/saver' relationship. But Slovenia maintained that the deposit problem had to be resolved within the framework of succession talks on the former Yugoslavia, the main argument being that the central bank of the former federal state guaranteed all foreign currency deposits. Serbia tended to support that position. The succession agreement was signed in Vienna in 2001. It covered several issues related to all accessible assets of the former Yugoslavia. The paper was finally ratified in 2004 and took effect in the same year.

News source: waz.euobserver.com link: article