Serbian banks face closure

Yugoslav economy is still far from recovery

Four of Serbia's biggest banks are teetering on the brink of closure as part of a World Bank plan to restructure the country's moribund financial architecture.

No-one seriously doubts that the banks are doomed.

But given the huge numbers of Serbs reliant on the banks for employment, savings or pensions, the axe has yet to fall while the Serbian government, the federal authorities and trade unions argue about the terms.

The final day of 2001 saw Serbia's finance minister, Bozidar Djelic, hold three hours of talks with the unions, which are demanding that the decision on the fate of Investbanka, Beobanka, Jugobanka and Beogradska Banka be postponed.

Union leaders have demanded more from the government than offers already made of assistance both to workers who will lose their jobs and to bank customers whose wages and pensions are paid through the banks.

In effect, they want the government to find a way to keep the banks on their feet in some form.

Part of the plan

The long-awaited closure of the banks, which together employ more than 9,000 people, is part of a World Bank recovery plan for Yugoslavia's financial sector.

The country's financial and banking sectors are still bowed under a mountain of bad loans dating back to the communist years, not to mention deep mistrust among the population.

Since closure is a prerequisite of Serbia continuing to receive assistance from the World Bank, Mr Djelic refused to go beyond the guarantees to workers and savers.

He promised that citizens who received their pensions and wages through the banks would for the moment get their money with the help of the state budget - although there is no guarantee how long that guarantee would last.

Serbia has already allocated 1.138bn dinars ($17.12m, £11.87) towards ensuring that cash withdrawals continue without interruption.

That sum looks set to hit 1.5bn dinars by the end of next week.

Even so, Mr Djelic has maintained that the final decision on closure is not his to make, but the responsibility of the federal government.

Next steps

The talks with the trade unions are to continue on 11 January and a draft on a strategy for the banking sector is expected to be drawnup by the end of next month.

At present, the Serbian government would like to see new financial institutions take over the bad loans owed by dozens of corporations, and to restructure the companies rather than close them.

The problems of Yugoslavia's financial sector are similar to the ones of many post-Communist countries, notably Russia and Ukraine, where the governments failed to restructure the banking systems.