Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu (Dec 2005)
Croatian bank investments in securities
Abstract
In this paper the author presents the basic characteristics of debt securities and shares and analyses the amount, structure and characteristics of the securities portfolio in Croatian banks in period from 1993 to 2004. The analysis shows that in the entire analyzed period Republic of Croatia together with state funds and other public institutions was the main issuer of securities that banks have in their portfolios. The securities issued by banks and companies represent only a marginal part of banks’ portfolios but it is also true that banks have strongly supported the privatization process of state owned companies by providing credit for purchasing of shares and later on swapping their credit claims for shares. In this way banks acquired a significant portfolio of shares that they later sold on the open market. Data about the significant reduction of securities portfolio in the banking assets structure, from 46.1% in 1993 to only 10.6% in 2004, is indicative of a low level of trading in securities. This means that in the following years, central and local government should secure the necessary funds more by issuing securities than by credit, especially not by taking credit from abroad. Furthermore, in order to spread business with securities, banks should also substitute a portion of their credit portfolio with short and long term securities. In this way, the investors would be able to use the benefits of investing in securities instead of investing their funds in bank deposits as they have done until now.
