The banking sector was crucial to Yugoslavia's efforts to constrain domestic demand, to shift resources toward exportproducing sectors, and to increase investment efficiency. Laws introduced in 1985 effectively created a new banking system and sought to bolster financial discipline, improve investment selection, and strengthen the commercial banks.
Almost all financial assets and savings in Yugoslavia were held in banks or kept in cash in the form of dinars or foreign currency. The financial institutions within Yugoslavia included the central banking system, which consisted of the National Bank of Yugoslavia and the national banks of the six republics and two autonomous provinces; the commercial banking system, including 166 basic banks and 9 associated banks; and other financial institutions such as internal banks and the Yugoslav Bank for International Economic Cooperation (YBIEC).
The central banking system was responsible for planning and implementing monetary policies. But in the 1970s, the federalized status of the National Bank limited its control over the commercial banks and made it relatively powerless to carry out national monetary policy. Because the credit policies of commercial banks were relatively unchecked and because they were organized on a republic basis, those banks were very powerful in maintaining the serious imbalance of investment and development among the regions of Yugoslavia. The reforms of January 1990, however, gave the National Bank more control over the operations and policies of commercial banks.
Day-to-day commercial banking activities were carried on by the self-managed business or basic banks. They were local or regional organizations that were nominally controlled by their founding local enterprises or communities of interest. In reality, because bank managers were politically appointed, they were heavily influenced by local party and government organizations. Two or more basic banks could form an associated bank through a self-management agreement. The major functions of associated banks were to pool resources and handle foreign exchange operations on behalf of their member basic banks.
Banks, enterprises, and other financial organizations were audited by the Social Accounting Service. All banks were required to be members of the Association of Yugoslav Banks (YBA). The function of the YBA was to initiate and organize cooperation among member banks through self-management agreements. A typical agreement of this type established uniform interest rates on deposits for all Yugoslav savings banks.
Internal banks were financial service organizations established through self-management agreements among basic organizations of associated labor. Not considered financial institutions per se and not subject to monetary regulation, internal banks were important as a cooperative source of funding to facilitate investment of their member basic organizations. Only member basic organizations and their workers were allowed to deposit in internal banks.
The Yugoslav Bank for International Economic Cooperation (YBIEC) was established in 1979 to provide financial support for foreign transactions. Owned by over 300 major capital goods and services exporters, YBIEC's main responsibility was to extend noncommercial export credit and insurance to exporters and joint ventures. In 1989 a new law transformed the organization into a joint stock company and expanded its ownership to include state and banking institutions. YBIEC received funding from its members, basic and associated banks, the National Bank of Yugoslavia, and foreign borrowing and issue of securities.
Data as of December 1990