ABSTRACT: In 1965, the Socialist Federal Republic of Yugoslavia began implementing the most comprehensive economic reform to date, which should have resulted in a more pronounced adherence to the principles of a liberal economy, as well as the country's greater involvement in the international market. This set of measures was intended to modernise the economic system, enhance productivity, address structural imbalances, facilitate the introduction of advanced technologies into the production process, promote more efficient integration within the industrial sector, strengthen export competitiveness, and ultimately improve the balance of payments. The reform had a relevant political component as well, which, for the most part, focused on the attempt to change the mentality of the economic actors and the administration, meaning their pronounced distance from the methodology of central planning and managing economic processes. Based on relevant historiographical literature and articles from the newspaper Borba, this paper analyses the position of the banking system within the context of the described reform processes, with particular emphasis on its fundamental characteristics, modes of operation, and the role it played in the implementation of investment projects.

KEYWORDS: Socialist Federal Republic of Yugoslavia, economic reform, banking system, 1965–1966.

SUMMARY: The Yugoslav banking system in 1965 played a significant role in the implementation of the most comprehensive economic reform undertaken up to that point., which was initiated with the goal of the country’s greater involvement in the international exchange of goods and services, and a more pronounced adherence to the principles of the liberal economic order. Therefore, the banking system was primarily concentrated on maintaining the stability of the dinar, not only from the aspect of the implementation of the measures of the monetary and credit policy, but also its efficient compatibility with the income policy, the investments, the balance of payments, and tax measures. The synchronisation of the aforementioned segments of this economic policy had the end goal of stabilising the Yugoslav population’s purchasing power as well as the exchange rate of the foreign currencies. The bank operations at the time of the reform were marked with a restrictive credit policy, whose realisation had a goal of slowing down the growth in the volume of loans based on the printing of money, which was larger than the actual production. The purpose was to reduce production within its realistic limits, which, in turn, had to secure the contraction of personal, investment, federal and republic budget consumption. An important aspect of this restrictive Yugoslav credit policy, which lasted from 1965. to 1966., was to encourage the population to save money. In this period, the amounts of savings deposits had first equalized with those of consumer credits, and later even began to exceed them. This trend was linked with the rise in the interest rates on the savings deposits, and, more broadly, with the problems with which Yugoslavia struggled at the moment the reform was started, that is, with the decline in employment and industrial production.