Fifteen years after the end of the process of rehabilitation of banks in Croatia, the controversy
— over how much the process has cost, what has been gained and would it have been better to
keep the banks in state hands, or sell them in a different way — is still going on.

Thus far, the fiscal costs of the disintegration of the former Yugoslavia (old foreign currency
savings, big bonds and regularization of the inherited debt with the Paris and London Clubs)
have been mixed with the fiscal costs of individual bank resolutions. The amounts of these
transactions, including the estimates of the interest payments, are:

• Big bonds and old foreign currency savings

       - KN 28.6 billion without the estimate of the annulment of the public debt through the
         purchase of public property

       - KN 20.7 billion with the estimate of the annulment of the public debt through the
         purchase of public property

• Regularization of relations with the Paris and London Clubs

        - KN 7.9 billion

• Individual bank rehabilitation (without the above mentioned regularization)

        - KN 12.9 billion

All the presented figures and their total are much lower than the estimates that have been
mentioned in public in Croatia — mostly without citation of credible sources — so far.

In addition, the sums presented above could not have been expected to be repaid through the
sale of the banks or covered by the revenue of the State Deposit Insurance and Bank
Rehabilitation Agency (DAB). The losses of the banks were already twice the size of their capital
as far back as 1989, due to the collapse of the socialist economy. After that, they increased
further and should be considered as fiscal costs of independence and heritage of the former
Yugoslavia, and of the maintenance of the functioning of the society and the economy in the
war. This expenditure could later be repaid only indirectly, rather than directly through the sale of
banks.

It is interesting to see that the total revenues of the DAB — although not yet fully evaluated —
are relatively high compared to the fiscal expenditure of individual bank bailouts. Sales and
other revenues associated with bank rehabilitation have brought the DAB the revenue of
approximately KN 7 billion, which does not include the estimated market value of the KN 3.9
billion in shares transferred to the coupon privatization portfolio, the fair market value of the
remaining portfolio, and broader benefits covered by the agreed recapitalization of banks to the
amount of KN 1.2 billion.

The complete picture of the direct fiscal costs and revenues from resolutions will be seen after
the evaluation of the remaining portfolio of the DAB at market prices, which is the next analytical
task. After that, an in-depth evaluation of the prices achieved in the sale should be done, as well
as a comprehensive social cost-benefit analysis, which will include a review and evaluation of
the social costs and benefits of the rehabilitation process.