102 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 44 | 2026 nance, in 1991, the Croatian government established the Croatian National Bank (HNB), which remains active today. The HNB introduced the kuna in 1994 as the national currency, solidifying the new state’s monetary system. Privatization of socially owned banks began in the early 1990s, but the process was uneven and often politicized (Filipović et al., 2022). Many institutions were sold to politically connected owners who lacked experience in banking and finance, and supervisory frameworks were still underdeveloped. Lenient licensing policies also allowed entry to an excessive number of small, undercapitalized private banks, most lacking effective leadership and risk-assessment frameworks (Filipović et al., 2022). Between 1998 and 2000, a quarter of the nation’s banks failed, forcing the government and the HNB to close failing banks and recapitalize others. These reforms marked a turning point for Croatia as it tightened supervision, adopted international accounting standards, and expanded access to strategic foreign investors. Foreign ownership was viewed as a credibility-enhancing method of importing capital, technology, and leadership. The future consequences of the loss of sovereignty it entailed were not clearly foreseen. Privatization and foreign ownership By the early 2000s, foreign banks (mostly Austrian, Italian, and German) had acquired controlling stakes in Croatia’s largest institutions, including Zagrebačka banka (UniCredit), Privredna banka Zagreb (Intesa Sanpaolo), and Erste Bank Croatia (Erste Group). Strategic decisions began to shift to external parent institutions and regional credit policies, which concentrated lending in low-risk, urban areas such as consumer lending and mortgages. Because lending decisions were now controlled by standardized approval processes and strict collateral requirements designed to protect portfolios internationally, credit allocation toward riskier or more information-intensive segments of the economy became unfavorable. This accelerated growth in Zagreb and touristic centers, while excluding rural, small enterprise finance. The HNB strengthened supervision to align with Basel capital adequacy standards, and by 2005, foreign-owned banks held over 90% of total assets (International Monetary Fund, 2008). The 2008 global financial crisis exposed the vulnerabilities of this expansion, as nonperforming loans (NPLs) surged, credit and private investment declined, and already cautious banks tightened their standards even further. These tight standards tend to work well for households, larger corporations, and borrowers with strong collateral, such as real estate, but they disadvantage SMEs and startups that have less predictable cash flows and assets that are harder to pledge as collateral. This asymmetry would become a defining feature of Croatia’s post-crisis financial landscape. However, foreign ownership is not the only mechanism responsible for this inefficiency; the next sections illustrate how EU regulatory integration and an inherited risk-averse culture operate alongside it, with a lack of nonbank alternatives compounding all three. EU integration: Financial stability and constraints The banking crisis magnified the limitations of a system heavily reliant on foreign capital and focused on retail lending. Domestic capital markets were shallow, with limited bond issuance and venture capital activity. These weaknesses continued through the 2010s, shaping Croatia’s financial system as it approached EU membership. Accession and euro adoption were major milestones in national financial integration as they brought Croatia within the European financial and regulatory framework, increasing credibility and currency strength. Ultimately, compared to other Balkan states, the banking system today is stable and well capitalized. Yet banking remains highly concentrated, with the top five banks (all foreign owned) holding 82.4% of total assets as of 2024 (Helgi Library, 2026). Foreign leadership has strengthened efficiency and stability. Effective regulations and disciplined borrowers have reinforced this stability, leaving Croatian banking highly liquid, well capitalized, and resilient to risk. Croatian banks hold capital equal to 21.1% of their risk-weighted assets, which is well above the EU average of 16.1% (European Central Bank, 2026), meaning they have an exceptionally large safety buffer against credit losses, interest rate fluctuations, and economic downturns. Additionally, Croatia’s NPL ratio of just 3.1%, down from 15.0% in 2016, shows a significant improvement in asset quality and debt repayment over the past decade (S&P Global, 2025). This combination of high capitalization, low NPLs, and strong liquidity would normally be associated with a high availability of credit, as a banking system with large capital buffers and limited past lending losses should be able to loosen credit requirements, absorb small losses, and support broad firm sizes and regions. But Croatia exhibits a persistently high share of financially constrained firms relative to the EU average (Fi-compass,
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