Serbs pour savings into booming private banks

December 09, 1992|By Dusko Doder | Dusko Doder,Contributing Writer

BELGRADE -- Bank advertisements this week in Belgrade newspapers poignantly explained the surreal atmosphere created by the former Yugoslavia's civil war.

Belgrade, it seems, is El Dorado for anyone with money to invest. Private banks which have sprung up over the past two years are offering fantastic yields "without risk."

On local currency, they pay 75 percent on 30-day deposits, 100 percent a month for six-month deposits.

For customers with hard currency -- German marks, Swiss francs, U.S. dollars, Austrian shillings --30-day yields range between 11 and 12 percent. They go up to 15 percent a month for six-month deposits.

Lines snake outside the branches of the two most aggressive banks, Dafiment and Jugoskandic, which are now operating 18 hours a day.

Facing rampant inflation and unemployment because of economic sanctions, Serbs are pouring what savings they have into these banks. Average real incomes in Serbia have fallen nearly tenfold during the past two years. At the same time, prices have soared to levels higher than in Western Europe.

As a result, desperation is overcoming common sense. "There is no other way for me to get money," said a defiant customer with $2,000 invested and getting more than $200 return per month.

No officials were prepared to explain just how it is possible for their banks to pay such high interest on deposits. But observers say that bank profits are based on black market speculations: Banks are buying hard currency in the black market, then selling it to entrepreneurs at much higher rates.

Nor is it possible to determine whether these banks have any real assets. One of the private banks, Braca Karic, claims a total turnover last year of $4 billion, including operations of its branches in Japan, Cyprus, Canada, the United States and Russia.

But diplomats here say all Serbian banks make the Bank of Credit and Commerce International look as solid as Chase Manhattan; most private banks are founded on war plundering and are a conduit for gangland money.

Diplomats here say there are clear indications that they are also being used for laundering mobster funds from Western Europe.

Indeed, some underworld figures have also entered the bank business. Among them is Zeljko Raznjatovic, known as "Arkan," whose troops were involved in various ethnic cleansing operations in Croatia and Bosnia.

Ironically, United Nations sanctions have helped the situation. Encouraged by -- many say linked with -- the government of Serbian President Slobodan Milosevic, the private banks have been making fortunes by financing operations designed to circumvent the sanctions.

"They are going to crumble like houses of cards one of these days, and who is going to lose?" said one diplomat. "The people who are investing there."

The head of Dafiment Bank, Dafina Milanovic, is defiant. She claims to have 12 million depositors, an interesting figure since the rump Yugoslavia's total population is just over 10 million.

"I don't deal with guns, drugs, or gold," she says. "I have gold reserves to cover any kind of tax you want to impose on me. I am doing a great service to people here. Without me, many of them would starve."

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