CNB Council:

Reserve requirement reduced

Published: 7/11/2001

At its Wednesday meeting, the Council of the Croatian National Bank, chaired by the Governor, Dr Željko Rohatinski, decided to reduce the reserve requirement rate from 22% to 19% and increase the reserve requirement percentage accrued on foreign currency calculation base and allocated in kuna from 20 percent to 25 percent. Owing to these changes both the kuna and foreign currency components of reserve requirements will be lowered by about HRK 420 million, and HRK 2.6 billion respectively. The decisions will be implemented as of December 10, 2001, when this month's reserve requirements will be calculated. This will continue the process of reserve requirement unification.

The CNB Council also decided to reduce the annual Lombard rate from 10.5 percent to 10 percent since the market relations, which were the reason for its September increase, have stabilized in the meantime. The rate charged by the central bank on the insufficiently allocated or maintained amount of the reserve requirement was reduced from 18 percent to 15 percent. This is expected to support the continuance of a steady downward trend in interest rates.

These decisions were adopted after reviewing recent economic and monetary developments. Available indicators show satisfactory macroeconomic stability. This year's rate of inflation will probably be lower than the previously expected 4.5 percent mostly owing to the stability of the domestic currency and the central bank measures taken for the purpose of its preservation. The amount of foreign currency purchased from individuals again largely exceeded the amount sold and foreign currency deposits continued growing. The Croatian National Bank purchased a total of about EUR 85 million in mid-October and early November.

The nominal consolidated central government deficit reached HRK 5.1 billion in the first nine months of 2001; it was 2.3 percent lower than in the same period last year.

The semi-annual financial statement and report of the Institute for Payment Transactions were approved at the Wednesday meeting. Another four banks were given approval for keeping legal persons' accounts and conducting payment transactions across these accounts: Dresdner Bank Croatia d.d. Zagreb, Erste&Steiermärkische Bank d.d. Zagreb, Istarska kreditna banka d.d. Umag and Slatinska banka d.d. Slatina. In addition, the CNB Council approved the nomination of Ms Lidija Hočurščak for chairwoman of the management board of Varaždinska štedionica Kovanica d.d. Varaždin.