Inflation remains low

Published: 22/12/2004

At its Wednesday session, the CNB Council analysed recent economic and monetary developments and the banking system condition in the third quarter of 2004, adopted the monetary policy projection and the CNB financial plan for 2005, revoked the operating licence of Primus banka d.d. Zagreb and enacted several other decisions within its field of competence.

According to available indicators, the consumer price inflation rate will stand at about 2.3 percent this year. Estimates are that it will remain below 2.5 percent also in 2005, despite the growing oil prices and some other factors which might drive up the total price level. Macroeconomic stability will be further maintained primarily through the exchange rate stability, increasing market competition, especially in the trade and financial sectors, and modest wage growth. Exchange rate fluctuations have been kept within an acceptable range. In response to mounting appreciation pressures in early December, the central bank purchased EUR 99.5m, smoothing the exchange rate and starting a depreciation trend which is still underway.

The CNB Council decided on revoking the operating licence of Primus banka d.d. Zagreb. At mid-September, the bank had total assets of HRK 230.7m (0.11 percent of total banking system assets), HRK 180.2m of savings deposits (HRK 156.4m insured), seven branch offices and fifty one employees. The difficulties and irregularities which arose already at the time the bank operated as Prva obrtnička štedionica prompted its merger with Hypobanka d.d. Zagreb, and the bank operated under its present name for the last two years. The central bank repeatedly required the bank's management and supervisory boards to eliminate the established irregularities, setting clearly defined time-limits. However, these requests were not complied with. Primus banka failed to allocate reserve requirements, maintain the prescribed coverage of foreign exchange liabilities by foreign exchange claims, increase the regulatory capital to the stipulated level and reduce majority shareholder exposure. In addition, the bank submitted inaccurate financial statements to the CNB, while generating an average monthly operating loss of HRK 1m. In view of these facts, the CNB Council revoked the bank's operating licence. In line with legal provisions, the State Agency for Deposit Insurance and Bank Rehabilitation will appoint a liquidation trustee to conduct the settlement of the bank's liabilities towards its creditors, in keeping with the bank's asset liquidation schedule.

The amendments made to the Decision on the Conditions for Issuing Approvals for Opening Foreign Exchange Accounts Abroad provide for a more detailed elaboration of the provisions enabling residents (legal and physical persons) to be granted a CNB approval for opening accounts and maintaining funds in accounts abroad.

The CNB Council approved the proposals of the HVB Splitska banka supervisory board to appoint Vedrana Carević as management board member and of the Jadranska banka d.d. Šibenik supervisory board to appoint Marija Trlaja and Mate Šarić as management board members.