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Yugoslavia’s Largest Bank Reported on Brink of Collapse

March 31, 1993

BELGRADE, Yugoslavia (AP) _ Yugoslavia’s largest bank is fighting a run on deposits by limiting withdrawals, the bank’s chief accountant said today. News reports said the bank was appealing for government financial help.

The problems of Dafiment Banka come less than a month after its biggest rival, Jugoskandic bank, closed when its owner fled the country.

Opposition leaders have repeatedly warned of social unrest if both banks close. The astronomical interest rates paid by the banks on foreign currency deposits have become indispensable for many Yugoslavs as the economy reels under the cost of war and international sanctions imposed in May.

″Do you think I would be waiting here if my pension were not only 300,000 dinars a month″ - $10 at the black market rate, said Mila Milovanovic, a pensioner waiting outside a Dafiment branch today. ″If I lose the 80 German marks ($50) I get here every month, the only thing left for me is to starve.″

Yugoslavia faces the threat of even tougher sanctions if Bosnian Serbs continue to reject an international peace plan to end the year-long war in Bosnia-Herzegovina. Serbia, the bigger of Yugoslavia’s two remaining republics, is widely seen as instigator of the war.

Dafiment’s troubles likely will increase domestic pressure for a settlement in Bosnia.

Ljupka Dimitrovska, chief accountant for Dafiment, told The Associated Press that depositors were being limited to withdrawing 1,000 German marks ($617).

″We could function completely normally if it weren’t for this rush by depositors to get their money out,″ she said.

Rade Spasov, deputy director at Dafiment, was quoted by the newspaprer Borba as saying the bank would run out of money in 15 days if the withdrawals did not slow down.

Borba quoted the bank’s owner, Dafina Milanovic, as saying she expected the government to provide financial help by Monday.

On March 7, thousands of panicked depositors rushed to Jugoskandic branches after owner Jezdimir Vasiljevic fled to Israel, accusing Serbian officials of corruption and extortion. His bank has remained closed.

Two weeks ago, Dafiment was forced to open tellers’ windows at a Belgrade stadium to handle tens of thousands of frantic depositors seeking to withdraw their savings following Vasiljevic’s departure.

At one point, both Dafiment and Jugoskandic were paying 15 percent monthly interest on foreign currency accounts, which many Yugoslavs have because they or their relatives have worked abroad.

Average monthly earnings in Yugoslavia have plummeted to about $50, and annual inflation is believed to have soared to 25,000 percent.

Yugoslavia’s state-owned banks virtually stopped operating after the governments of Serbia and Montenegro seized their assets to finance the wars in Croatia and Bosnia.

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