The museum quickly became influential throughout the Kingdom of Yugoslavia, which Banja Luka was part of until the Nazi occupation of World War II. The efforts of its first director, painter Spiro Bocaric, led to the 'Museum of Vrbaska Banovina', as it was then called, becoming an important cultural-historic institution, which held numerous exhibitions from all over the Kingdom of Yugoslavia. Its organization also began to take dynamic shape during this time, with a collection of prehistoric and historic coins and other forms of currency being installed, as well as a geological and paleontological exhibit. Added to these were also a tourist office, an archive and a museum library.
The museum also published its first guide in four languages in 1938 but three years later it was to face the most tragic part of its history, when the Nazis and their Croatian puppet government ruled the city. Bocaric was himself brutally murdered and many of the artifacts were stolen, with the Fascist governors determined to turn the museum into a place glorifying their own highly questionable heritage.

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