How does the CNB compute the NRR

Published: 29/5/2020

The reporting population for the purposes of the NRR computation is comprised of banks and savings banks (hereinafter referred to as ‘banks’). Housing savings banks and branches of credit institutions from EU member states are not included in the computation of funding expenses of credit institutions for the purpose of the NRR computation. In addition, only the data of banks operating over the entire quarter are included in the computation of monthly aggregates of the main funding and of quarterly aggregates of interest expenses on the main funding, i.e. the data of banks that ceased or began to operate in the observed quarter (due to bankruptcy, liquidation, merger, acquisition, etc.) are excluded from the computation.

The CNB first computes the quarterly indicators of interest expenses of the Croatian banking sector for the main funding over the preceding quarter and the indicators of the position of such funding at the end of each month of the quarter to which these interest expenses refer. Indicators are computed for three scopes (Natural persons, Natural persons and non-financial sectors, All legal and natural persons) and four currencies (HRK, EUR, CHF, and USD). Indicators for a particular foreign currency also include banks’ kuna funding indexed to that currency, while indicators for kuna only refer to kuna funding not indexed to a foreign currency.

The computation is performed based on the data that are available at the moment of computation and have passed all logical checks prescribed for input data by the CNB. If some data fail to pass all logical checks at the moment of computation, expert judgement is used before the NRR computation to decide whether such data may nevertheless be used in the computation or whether it is better to replace them with the relevant data from the preceding quarter. The CNB conducts several iterations of input data checks.

The NRR is computed according to the following generic formula:


Where the following applies:

N – Number of months for which the NRR is computed (3, 6 or 12)

S – Scope of funding and expenses (1, 2 or 3)

C – Currency of funding and expenses (HRK, EUR, USD or CHF)

Average funding position – regular arithmetic mean of relevant data (last N months)

Total expenses – regular sum of relevant data (last N/3 quarters)

Number of days (N) – actual number of days in last N months