The Council of the Croatian National Bank, chaired by governor dr. Marko Škreb, decided at the meeting held on Wednesday, March 22 2000, attended also by Mr. Ivan Vrljić, Assistant to the Finance Minister of the Republic of Croatia, to propose to the Commercial Court in Zagreb the initiation of bankruptcy proceedings over Hrvatska gospodarska banka d.d. Zagreb and Agroobrtnička banka d.d. Zagreb. The findings of temporary administrators appointed to these banks confirmed the results of previously conducted bank examinations: bad management, especially non-compliance with credit policy regulations and measures prescribed by the CNB, caused their considerable insolvency. When deciding on the solution to the situation in the aforementioned banks, the CNB Council examined all legally available possibilities, taking into consideration depositors' interests and the cost of each solution to the government budget. The Council concluded that the bankruptcy is the most appropriate solution, since there was no interest for the recapitalization of the bank, since other banks, being informed in detail about the situation in Hrvatska gospodarska and Agroobrtnička banka, showed no interest in a take-over and since the rehabilitation of the banks would not have been feasible. Members of the CNB Council emphasized that the proposal for the initiation of bankruptcy proceedings does not exclude the possibility that these banks are taken over by investors, naturally, if respective authorities are submitted serious, financially adequate offers. Total savings in Hrvatska gospodarska banka amount to HRK 286 million and in Agroobrtnička banka to HRK 146 million. The amount of saving deposits covered by the deposit insurance scheme accounts for 77.44 percent of total savings in Hrvatska gospodarska banka and for 86.12 percent in Agroobrtnička banka.

At its Wednesday meeting, the Council of the Croatian National Bank proposed to competent commercial courts the initiation of bankruptcy proceedings over Razvojna banka Dalmacija d.o.o. Split and Adria štedionica d.o.o. Zagreb. Both financial institutions were not able to fulfill their financial obligations due to blocked giro-accounts. Also, their operation was marked by numerous irregularities which were not corrected, despite measures prescribed by the CNB.

Having examined the reports prepared by the central bank supervisors, the CNB Council decided on appointing temporary administrators to Istarska banka d.d. Pula and Cibalae banka d.d. Vinkovci. The operation of Istarska banka was marked by considerable irregularities. For the purpose of eliminating the irregularities, the CNB prescribed to Istarska banka measures such as to produce a plan for selling treasury stock to a strategic investor and a plan for recapitalization of the bank, to sell bank's shares owned by the Globus group and to restrict the growth of lending. Commissioner who was appointed to the bank after, at the end of June last year, bank's capital adequacy fell below ľ of the prescribed amount found that a number of aforementioned measures was implemented, however, that the bank failed to recapitalize and sell its investments. Since Istarska banka encountered difficulties with liquidity, the CNB granted to it a liquidity loan. The loan was paid back with certain difficulties. On-site control of the bank conducted in November and December last year showed that potential losses of Istarska banka exceeded the amount of its guarantee capital. In order to find an adequate solution which would guarantee stable operation of the bank, CNB management held a number of meetings with members of the management board of Istarska banka until the end of February this year. An adequate solution was, however, not found. Supervisors' reports on the operation of Cibalae banka pointed at numerous irregularities in its operation. The CNB ordered the bank to correct these irregularities by, among other things, making adequate provisions for unidentified losses, producing the plan for the sale of treasury stock, selling bank's shares owned by Globus group and reducing its lending. Since the prescribed measures were not consistently implemented and the bank faced serious liquidity problems, in June 1999 the CNB appointed a commissioner to the bank. Cibalae banka was also granted a liquidity loan, a part of which is still outstanding. The analysis of the bank's financial reports at the end of last year showed that that its potential losses exceeded the amount of guarantee capital. Meetings which representatives of the Croatian central bank had with members of the management board of Cibalae banka for the purpose of defining the activities for improving the situation in the bank ended without adequate solutions.

Having examined the data on the operation of Istarska banka and Cibalae banka showing that the banks are considerably insolvent and estimating that the CNB has undertaken activities offered by the regulation in order to help stabilizing the situation in the banks, the CNB Council concluded that the appointment of temporary administrators to Istarska banka and Cibalae banka - prescribed as a measure for banks facing the described problems - would prevent that banks encounter even more serious problems in the near future and adequately protect the interests of their creditors and depositors.

At the Wednesday meeting the CNB Council decided to revoke the operating license from the representative office of Societe Generale and Krapinsko-zagorska banka d.d. Krapina, because these two financial institutions did not adapt their operation to the new Banking Law within the legally prescribed framework. Krapinsko-zagorska banka will be taken over by Privredna banka Zagreb. In addition, the CNB Council decided to revoke operating licenses from several saving banks, due to their non-compliance with laws, regulations and measures prescribed by the CNB as well as due to the fact that, because of their risky and inadequate operation, there lingers the danger that they would not orderly fulfill their financial obligations toward creditors or obligations arising from operation with deposits. Thus, the license was withdrawn from: Štedionica za razvoj i obnovu d.o.o. Zagreb, Gold štedionica d.o.o. Split, Štedionica Mediteran d.o.o. Split, Investicijsko-komercijalna štedionica d.d. Zagreb, Štedionica Dugi pogled d.o.o. Zagreb and Zagrebačka štedionica d.d. Zagreb.

At the Wednesday meeting. the Council of the CNB granted operating license to the representative office of Bayerische Hypo- und Vereinsbank AG Munchen, and approved the acquisition of Zagrebačka banka - Pomorska banka d.d. Split by Zagrebačka banka d.d.