The issue of unpaid foreign currency savings of Croatian citizens in the former Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb has again come under the spotlight in connection with the intended entry of Nova Ljubljanska banka or its qualified co-owner into the Croatian banking system. This, as the Croatian National Bank has stated previously, is unacceptable, until at least resolution is found to the issue of that part of debts of Ljubljanska banka to Croatian citizens which involves the so-called untransferred foreign currency savings. The Slovene side would not accept such an option in the past. In defending their rejective position, some Slovene officials have gone so far as to ignore or distort irrefutable facts, or even, as we witnessed in the last few days the attempts of Slovene individuals in prominent positions, to threat to block Croatia's entry into the European Union (which, as the latest news suggest, has been denied) or to dismiss Croatia on the basis of offensive disqualifications. In view of this situation, it is worth underlining some of the key Slovene positions regarding this issue and examine the extent of their "foundation in facts", leaving aside at this point the contradictory nature of some of them.

Position 1 - The Slovene side has no obligations towards Croatian depositors since they made their deposits in branch offices of Ljubljanska banka in the territory of Croatia.

Ljubljanska banka established its branch office in Croatia in December 1969. The last in the line of changes in status and organisation that this branch underwent since its establishment took place towards the end of 1989, after a decision was made at the shareholders' meeting of Ljubljanska banka d.d. Ljubljana to change it to Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb, a branch without legal personality. The branch office acts for the account of its parent bank while the parent bank guarantees for the liabilities of its branch with its entire assets, without limitation (which is not a feature specific of Croatia only but an international standard applied throughout Europe). This means that depositors of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb, which had no legal personality, were and remained in a contractual relation with the parent Ljubljanska banka d.d. Ljubljana.

Position 2 - The obligations of Ljubljanska banka terminated with Yugoslavia's dissolution, depositors' foreign currency savings had been guaranteed by the former Yugoslavia, and Nova Ljubljanska banka has nothing to do with Ljubljanska banka.

Deposit guarantees are activated (again, not something specific to this case only) when a bank goes into bankruptcy, which was not the case with Ljubljanska banka. This bank continued to operate under the same name for several years after the break-up of the former Yugoslavia and was later transformed to Nova Ljubljanska banka. This was done after courts, both in and outside Slovenia, started ruling in favour of the first depositors who initiated court proceedings to retrieve their savings. Evidently, the purpose of this transformation was to help Nova Ljubljanska banka to rid itself of the obligations of its predecessor towards depositors outside Slovenia. In this "transformation" Nova Ljubljanska banka took over practically the entire assets of Ljubljanska banka, including, naturally, all its depositors in Slovenia. Moreover, the July 1994 Constitutional Act, on which this operation was based, made it impossible for non-Slovene depositors to collect their claims on the basis of court decisions.

Position 3 - The obligations of Ljubljanska banka towards Croatian depositors would already have been settled had it not been for the Croatian National Bank which made the operations of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb, or the entry of Nova Ljubljanska banka impossible.

However, the facts speak of the opposite. Following Croatia's (and Slovenia's) independence, Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb had to adjust its status with the new circumstances if it were to proceed with its operations. This meant its recapitalisation and filing an application to obtain operating licence from the Croatian National Bank. This was never done. Instead of the recapitalisation of the branch office by its parent bank, it has been suggested that Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb be recapitalised largely by funding from the Croatian Fund for Development. Obviously, the Croatian side was not interested in this model of revitalisation of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb. As a token of its good will, however, and confident that the parent bank will ultimately find a mutually acceptable resolution, the Croatian National Bank tolerated some degree of operations of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb for a number of years. More specifically, it allowed the bank to perform domestic payment system services in connection with collection of its claims and servicing of its liabilities. It was not before 14 July 2000 that the giro account of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb was finally closed. This had left the Slovene side a whole ten-year period to resolve the status of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb in accordance with applicable Croatian legislation and international practice as well as the issue of unsettled obligations towards Croatian depositors. This was not done and now repayment of savings is made conditional upon previous, direct or indirect, entry of Nova Ljubljanska banka into the Croatian financial market. It is worth mentioning here that Bosnia and Herzegovina permitted the entry of Nova Ljubljanska banka into the country's banking system, but obligations towards depositors have nonetheless remained unsettled.

Position 4 - By permitting its citizens to transfer their savings from the branch offices of banks with a head office registered outside Croatia to the Croatian banks, the Republic of Croatia has assumed an obligation to all depositors, including to those who still have valid savings books of Ljubljanska banka.

After gaining autonomy, the Republic of Croatia permitted its citizens, with an aim of gaining the citizens' confidence in its banking system, to choose either to remain in a direct contractual relationship, under private law, with banks outside the territory of Croatia or to transfer their claims to the Republic of Croatia which would in turn guarantee a gradual repayment of savings over a ten-year period. In no case is the obligation of the Slovene bank extinguished. More specifically, in the case of untransferred savings, a direct obligation to depositors has remained, while in the case of transferred savings, which was in the meantime repaid by charging the Croatian government budget, a title to the claim has been transferred to the Republic of Croatia. Approximately two-thirds of the total foreign currency savings in Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb were transferred and about one-third of depositors believed that they would obtain their money in a much faster and easier way if they retained their valid savings books of Ljubljanska banka d.d. Ljubljana. Consequently, according to the available data, the Croatian citizens have a direct claim of about DEM 312 million of principal plus interest, on the basis of untransferred savings in Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb, while the claim of the Croatian government for the repaid transferred savings is almost double.

Position 5 - Slovenia did not benefit from the branch offices of Ljubljanska banka in Croatia, so why expect Slovenia to have any obligations to their depositors?

No person has ever founded a bank to benefit the local population and enterprises, but for its own business interests, which was also the case with Ljubljanska banka.
The available data show that the total amount of foreign currency savings deposited by all banks from Slovenia (including Ljubljanska banka system in Slovenia and other banks) with the National Bank of Yugoslavia exceeded by only about twenty percent the deposited amount originating from foreign currency savings with Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb. In terms of the collected foreign currency savings, Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb was stronger than any other bank in the former Yugoslavia and it was the second largest bank within the LB System in terms of assets. This is a rather convincing evidence of the importance of that branch office for the entire operation of the largest Slovene bank, and in particular for the collection of foreign currency, which was very important at that time, regardless of whether it was used within the own banking system or redeposited with the NBY.

Position 6 - The dinar amounts provided by the National Bank of Yugoslavia to Ljubljanska banka d.d., Ljubljana in the form of interest-free loans, in exchange for the foreign currency savings of Croatian citizens, have been used for extending loans to Croatian companies through Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb.

It is neither depositors' concern nor can they have any influence on a bank's decisions as to whom it will provide loans from its funds. It is therefore inconceivable that in any civilized country in the world the liabilities of a bank to its depositors would be challenged on the grounds that their money has been used for financing a loan to a company which has failed to repay it.

But aside from that, it should be noted that, according to the data of Ljubljanska banka d.d Ljubljana - Main Branch Office Zagreb, its balance sheet at the end of 1989 stood at USD 809 million. In the structure of liabilities, total savings deposits of citizens participated with as much as 83 percent and foreign currency deposits with 76 percent or USD 611.6 million (the rest related to capital accounts and interbank transactions). In the structure of assets, claims on the National Bank of Yugoslavia, based on foreign currency deposits of citizens, accounted for as much as 74 percent; credit transactions with the parent bank accounted for 14 percent, while placements to the business sector and citizens from Croatia and Slovenia accounted for only 12.6 percent!

Position 7 - When liabilities and claims of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb are considered, they are at least mutually offset or the Croatian debt is even higher!

In that context we learnt about an interesting detail in Slovene media these days: in the balance sheet of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb as at the end of 2005 the liabilities to 132 thousands foreign currency depositors are recorded as amounting to EUR 172 million. Doubtful claims of Ljubljanska banka d.d. Ljubljana - Main Branch Office Zagreb - mostly on legal persons - are, on the other hand, recorded as amounting to EUR 484 million, with a remark that «this amount is so high due to high Croatian default interest». The default interest was obviously not accrued when the current value of not repaid savings deposits was calculated. It seems that the value of money also depends on the person that should (re)pay it.

Position 8 - The Republic of Croatia does not respect international agreements, in this case Annex C to the Agreement on Succession Issues, signed by ministers of foreign affairs of successor states to the former SFRY in Vienna on 29 June 2001.

When it comes to liabilities arising from foreign currency savings, the representatives of Slovenia interpret the Agreement by referring to the «territorial principle» under which every successor state to the former Yugoslavia must accept guarantees for total savings deposits collected in its current territory, regardless of the bank in which the savings were deposited. With such interpretation they completely ignore the fact that that very Agreement stipulated the key according to which the Slovene share in financial assets and liabilities of the former SFRY of 16 percent was also fixed on the basis of Slovene share in citizens' foreign currency deposits with the former National Bank of Yugoslavia. These included citizens' deposits in branch offices of Ljubljanska banka d.d. Ljubljana in all republics of the former Yugoslavia! Without these deposits Slovenia's share in the distribution of assets would be considerably lower (about 13.26 percent). Thus, the distribution of assets should be made according to one principle, while the liabilities towards depositors should be met according to a different one?!

Position 9 - The Republic of Croatia has made an agreement within the framework of the Bank for International Settlements in Basel and the IMF impossible.

No negotiations on the issue were conducted within the framework of the IMF, nor are such negotiations planned. The negotiations in Basel indeed started a few years ago, led by the former Swiss central bank Governor. However, after it has been established that the standpoints and interests of Slovenia (and its Ljubljanska banka) on one side, and Croatia, Bosnia and Herzegovina and Macedonia (and their citizens that deposited their savings with branch offices of Ljubljanska banka) on the other side, are completely opposite and irreconcilable, the negotiations ended without any results.

Position 10 - The Republic of Croatia, especially the Croatian National Bank and its Governor, act in an «anti-European» and discriminating way, violating the European acquis on free capital movement.

To accuse the state with 92 percent of its banking system in foreign ownership of restricting free movement of capital is absurd indeed. Denying the central bank of any country the right to assess whether the bank seeking to enter its banking system would contribute to its credibility and stability, while taking into account that bank's stance on legal and contractual obligations, cannot be based on any part of «European acquis».

The observance of European standards and (non)discriminatory behaviour can well be illustrated by the already mentioned fact that under its 1994 Constitutional Act, the Slovene state forbade legal protection and foreclosure for the benefit of non-Slovene depositors of Ljubljanska banka (it would be interesting to hear which part of the «European acquis» provided basis for such a provision?!). The Croatian state has in none of its acts forbidden Ljubljanska banka to collect its claims from Croatian legal or natural persons in court.

Insinuations that the Governor of the Croatian National Bank is closing the doors of the European Union to Croatia by demanding that Croatian depositors finally be given the possibility to access their money, as well as references to the dismissal of the Italian Governor (on account of his acting in favour of a bank connected with him via personal relations and abundant gifts to his family), represent a level of public communication that we do not want to descend to. This is certainly not the way to a resolution acceptable to both sides, which would be in the interest both of those directly involved and in the interest of good overall cooperation of Slovenia and Croatia as neighbouring countries.