The Croatian Banking System
This paper provides an analysis of the stability of the Croatian banking sector. After the banking crisis of 1998, the Croatian banking system underwent a deep transformation process; foreign investors gained a dominating market share of more than 90% of total assets, with Austrian banks holding 43% thereof. Compared to other Central and Eastern European countries (CEECs), the degree of banking intermediation is relatively high in Croatia. In recent years, lending to the private sector and in particular to households has risen whereas lending to the general government has declined. Foreign currencies continue to play an important role in the Croatian banking sector, in particular on the liabilities side of banks balance sheets. While maintaining a large negative net foreign currency position on their balance sheets (with an increasing portion of net liabilities to nonresidents), Croatian banks overall net foreign currency position seems to be marginally positive. Still, foreign currency(-indexed) lending represents a credit risk as it entails an indirect exchange rate risk. Asset quality, by contrast, has improved significantly over the past five years, the capital adequacy ratio is on a relatively high — albeit declining — level, and real return on equity (ROE) is now as high as the profitability levels observed in other CEECs.
Banking Sector Problems: Causes, resolutions and consequences
Until the mid 1980s, commercial banking was the main lever of soft budgetary constraint. Commercial banks were under the control of their founding enterprises and their basic function was to approve the cheapest possible credit to their founders. The process of reforming commercial banking began during the last ten to twelve years. Since then, new laws and other regulations have been passed that are suitable for a market economy. In late 1991, a so-called linear rehabilitation of the banks began in which the majority of bad credits by banks were written off. The linear rehabilitation of the banks did not contain measures that would lead to changes in bank operations. Banks continued to approve credit to “their” enterprises. Therefore, in 1996 the government was forced to rehabilitate three large banks. These rehabilitations were conducted in a serious manner and were based on the transfer of bad bank credits to a special agency, recapitalization, replacing shareholders and replacing bank management. After these rehabilitations, there was a large drop in the interest rate. In 1998, there was a new bank crisis that chiefly affected new banks, which had highly aggressive interest rate policies. The fundamental cause of the new bank crisis was the inappropriate credit policies of these banks, exacerbated by various external shocks. The central bank began to intervene very quickly but only after the bank crisis occurred. Although many banks failed, it is not possible to speak about the end of the banking crisis. There are still many internal weaknesses in bank operations entwined with currency and credit risks, bank investment in enterprise shares, the maturity-gapping of assets and liabilities and the discrepancy between the information about banks and the possibilities for complying with regulations. These internal bank weaknesses open the possibility for similar banking problems in the future, which should be eliminated on time. The fiscal expenditures incurred to date for the rehabilitation of banks can be estimated in the amount of 31 percent of GDP, placing Croatian among the countries with the highest expenditures for bank rehabilitation.
Strategy and Manipulation in Medieval Elections
There are many goals in developing electoral protocols, including a desire for a system which is transparent, in that it is clear what the rule or procedure to follow is; nonmanipulable, in that it is not in a person’s best interest to misrepresent their preferences; honest, in the sense that it elects the ‘right’ candidate; and not open to strategizing, i.e., bribery or collusion. However, these desiderata are in tension with each other: Often, transparent electoral procedures are the least strategy resistant, and many honest procedures encourage manipulation. Thus a balance between these different goals must be sought. In modern times, since the seminal result on vote manipulation, the Gibbard-Satterthwaite Theorem [5, 6], much attention has been devoted to developing voting rules where manipulation is never in the best interest of the voters [4] or which are computationally too complex for the average bounded agent to be able to manipulate [1]. This focus on computational aspects of electoral methods is one of the hallmarks of modern studies on voting. But pursuit of these goals is not restricted to modern times: Those participating in elections in the Middle Ages also sought transparency, non-manipulability, honesty, and strategyproofness in so far as these properties can be consistently expressed in a single procedure. However, given the lack of computational sophistication in the Middle Ages, alternate approaches were needed in order to promote honesty, discourage strategizing, etc. These approaches can be classified as either external (constraints introduced outside of the electoral procedure, such as incentives for coming to consensus quickly) or internal (constraints introduced within the electoral procedure, such as voting rules which cannot be manipulated without adverse effects, or which are too difficult for the average bounded agent to manipulate). Surveying examples of both approaches in the context of medieval ecclesiastical and secular elections provides an interesting comparison to modern electoral procedures. Elections in the Middle Ages were used for the same reasons that they are today: To select suitable candidate(s) for a particular office, duty, or obligation. However, it is important to note that the term electio was used in the Middle Ages in a broader sense than our modern ‘election’. Its primary sense was ‘selection’ or ‘choice’, and only secondarily ‘election’ in the modern sense. Thus, many records which purportedly discuss elections are not discussing elections of the type which interests us. We can identify four categories of medieval electoral processes: (1) Election by an external authority having no direct interest in the election; (2) Indirect election, where electors name other electors who then select or elect the officials; (3) Election by lot; and (4) Election by ballot. Elections of the first and third types are generally computationally uninteresting; the first type corresponds to dictatorial voting rules, and the third type collapses to probability theory. In general, interesting voting methods are found only in the fourth type, election by ballot, though they can also occur in indirect election.