Accounting Acrobatics

Before closely examining an extremely difficult situation of commercial banking let's check out still unconfirmed rumors that in January the banks had to go through the same thing all banks have to go before ``collectivization.'' These rumors have it that the banks have been hastily spending all convertible means which had been stowed away in expectation of forced hard currency loans to the central bank. There is a rumor that the bank managers ``had gone skiing'' leaving their associates buying electronic equipment for the hard currency they had, stocking up imported goods and making long-term investments with their hard currency on foreign accounts. Dragoslav Avramovic, the program's author, was careless enough to openly declare he counted on hard currency reserves in commercial banks for support to his anti-inflation program and optimistically assessed their volume between 2 and 4 billion German Marks. Jovan Rankovic's recent assessment was much more moderate. He believes that the entire hard currency capital taken out of the country and camouflaged on the accounts from which payments cannot be effected amounts to 1.5 billion Marks (of which only some 50 per cent belong to the banks). It is very difficult to predict what the central bank will manage to get hold of after the ``slaughter'' in January.

It follows, according to the analysis by Stanko Radmilovic, that ``the banks are the most serious patient in the Yugoslav economy.'' The report of November 16, 1993, says that cash assets and hard currency deposits in the National Bank of Yugoslavia accounted for 43 per cent of the active capital in the Yugoslav banks, while hard currency credits and investments in securities took up 55 per cent of the entire active capital (only 1.4 per cent of the capital was in Dinars). Hard currency savings deposits are represented by 42.6 per cent in the passive balances, and hard currency credits 48.3 per cent of all funds (which means that only 0.6 per cent was in Dinars). The credits of the central bank, even besides a crazy primary issue, account for only 0.3 per cent of the passive balance.

Since the data on the losses the banks incurred in 1993 are not available the last year's result after first half of the year when hyperinflation had still not got out of hand should be illustrative. 31 banks had positive income-based balances amounting to 40,000 billion, and 29 banks sustained losses of 130,000 Dinars which were valid then. According to rough assessments, which are considered to be optimistic, Yugoslav banks have lost from 2 to 3 billion U.S. Dollars.

This text does not represent an attempt at tackling all accounting stunts which blur the picture about emptiness of Yugoslav banks. It should be noted in passing that the income relies with 9.6 per cent on the positive exchange rate differences, which is a fictitious asset. Is it necessary to add anything to the assessments that the capital in the banks accounts for 1 per cent of the entire ``potential''?

It is still early to evaluate the position of the banks when it comes to the implementation of ``the monetary reconstruction,'' but there is an impression that the business banks are asked to do more than they can.