In order to ensure that the new Law on the Croatian National Bank corresponds with the modern European central bank regulation and to facilitate the adjustment Croatian financial regulation to European regulation in the process of gradual integration of Croatia into European Union, the forthcoming amendments to the Constitution of the Republic of Croatia should include a different definition of the primary objective and tasks of the Croatian central bank, concluded the Joint Committee of the Croatian National bank and the Ministry of Finance at its meeting held on Tuesday, October 10 2000.
The current Article 53 of the Constitution of the Republic of Croatia sets forth, namely, that the Croatian National Bank "is responsible for the stability of domestic currency and general liquidity of payments in the country and abroad, within the scope of its rights and duties ". Contrariwise, the primary objective of the European Central Bank and, accordingly, of all national central banks that have entered the European System of Central Banks, is "the maintenance of price stability". The Joint Committee concluded that the "achievement and maintenance of price stability" should be laid down as the primary objective of the Croatian National Bank as well, both in the Law on the Croatian National Bank and in the Constitution of the Republic of Croatia.
Naturally, the introduction of the aforementioned amendment does not diminish the importance of stability of the national currency. On the contrary, stable exchange rate of the national currency, especially in a small and open economy with a high level of currency substitution, is closely related to the stability of prices in the country, as well as to the successful integration of the national economy in international trade of goods, services and capital.
The Joint Committee suggested that current provisions assigning the central bank with the responsibility for "general liquidity of payments in the country and abroad" should be replaced with more precise provisions defining the "achievement and maintenance of liquidity and solvency of the banking system as a whole" as CNB's objective. The maintenance of liquidity and solvency of the banking system as a whole implies the commitment of the central bank to maintenance of general liquidity on financial markets, not to direct and/or selective maintenance of liquidity and solvency of individual economic subjects. Current definition of central bank's objective is a remnant of the past, thus incompatible with the adjustment of the Croatian central bank regulation to corresponding European Union regulations.