The examination of the documentation of Dubrovacka banka d.d. Dubrovnik conducted so far has shown that potential losses of the bank exceed 1.5 billion kuna. A part of this amount, that is 533 million kuna, can be covered by provisions against potential losses, and 472 million kuna by the guarantee capital of the bank. However, one third of bank's potential losses still remains uncovered by financial resources of the bank. This means that Dubrovacka banka does not only have difficulties with liquidity, but also with solvency.

Taking into consideration the abovementioned findings and having in mind the importance of Dubrovacka banka for the economy of the southernmost part of Croatia and for the Croatian financial system as a whole, the Croatian National Bank has decided to propose to the Government of the Republic of Croatia the initiation of the rehabilitation and restructuring of this bank, despite the fact that the majority of bank shares are privately owned. It has been estimated that the decision on bank rehabilitation and restructuring shall contribute to normalization of the situation in Dubrovacka banka, to the protection of depositors, as well as to the stability of the whole Croatian banking system. As already made public, the Croatian Council for Strategic Decisions agreed with the proposal of the Croatian National Bank on the eve of the discussions with the Croatian Government authorized for making the final decision.

The Council of the Croatian National Bank discussed the situation in Dubrovacka banka at its meeting on March 18, 1998, and required from the Management Board of Dubrovacka banka to submit to the CNB their own bank rehabilitation and restructuring program. However, the program has not been submitted yet. In order to prevent further damage, the uncertainty about the future of the Bank which is the fifth biggest bank in Croatia (measured by the size of its assets), as well as possible negative consequences for the confidence in the Croatian banking system as a whole, the CNB proposed that the procedure for initiating the process of rehabilitation and restructuring of the bank be speeded up. Should Dubrovacka banka submit its bank rehabilitation and restructuring program in the legally prescribed period, it shall be taken into consideration during discussions on further measures to be introduced for the purpose of ensuring stable and sound operation of Dubrovacka banka.

In the meantime, the Croatian National Bank provides its support to maintaining of the continuity of bank's operation through liquidity injections. The use of these resources is supervised by a special representative of the Croatian National Bank. Simultaneous to deciding on measures for ensuring sound operation of the bank in the future, authorized institutions conduct control of its operations. Their aim is to obtain a complete insight in data related to operations of Dubrovacka banka, as well as to identify those responsible for current difficulties of the bank.