Not all of them disappeared though, for example, Charlemagne capital bought four regional banks and consolidated them into a single bank. Cleaning up the market, by removing inefficient banks, laid foundations for a healthier banking system, resistant to macroeconomic disturbances and improved risk management. Moreover, these two crises made us attentive to emerging risks, such as rapid credit growth or lax risk management practices and generated political support required to provide us with the toolkit needed to prevent future disruptions in the financial sector with large spillovers to the real economy and potentially huge costs to the budget. Since then, we continued cleaning up the system with no threat to either the financial stability or the budget. Navigating the Boom and the Bust The resumption of growth and resolution of weak banks eventually stabilized the banking system, setting the stage for the period of rapid international integration and financial deepening of the 2000's. After the first clean-up at the turn of the century, the number of banks has fallen to slightly above 40, and consolidated institutions started to compete strongly. In their pursuit of higher market shares, banks turned to foreign sources of financing, facilitated by extremely favourable financing conditions and high liquidity at the global level. At the surface, the financial sector supported the story of economic growth and convergence. However, experiences from the 1990s provided an optics needed to spot risks emerging underneath.
We need to try and think "out of the box" and seek new and creative solutions to old problems – fighting old battles might not bring victories. In order to move from the situation in which we say that many of these things are necessary, but unrealistic – we need political support. That is what we also learned from experience. And political support usually comes after a good crisis. With that happy note I would like to thank you for the attention, excuse myself if I was too long, and leave you to the rest of the dinner. References: Jankov, Lj. (2000), Banking Sector Problems: Causes, Solutions and Consequences, S – 1, Croatian National Bank, Zagreb. CNB (2008), Annual Report. CNB (2022), Financial Stability No. 23. Vedran Šošić, Maja Bukovšak, Lana Ivičić (2022), Prevencija sistemskih kriza i očuvanje financijske stabilnosti, u Stojanović A. (ur.) Suvremene financijske usluge: razvojni pravci i strateška pitanja, str. 500-574, Ekonomski fakultet Zagreb. Vujčić, B., Dumičić, M. (2016), Managing Systemic Risks in the Croatian Economy, BIS Paper No. 86l, September. © CROATIAN NATIONAL BANK