Compared with most transition countries, Croatia is overbanked. With a population of 4.4 million it has 40 commercial banks compared with the 27 banks and foreign bank branches operating in the Czech Republic (population: 10 million) or with Hungary (population: about 10 million), which has 31 banks. In four years, however, the number of Croatian banks has fallen from 60 to 40 and it is widely expected that, through further consolidation, the number may drop to 30 in the next two years.
The banking system’s ownership structure has also changed dramatically. Before 1997, Croatian banking had been dominated by state-owned banks, which in 1996 controlled 78.4% of total banking assets. After the start of the privatisation process, by 1997 their share fell to 41.9%, while privately-owned domestic banks accounted for 54.1%.
