Credit growth limit removed

Published: 26/11/2009

Pursuant to a decision of the Governor of the Croatian National Bank, the CNB removed the obligation of banks to subscribe CNB bills at 0.25% interest in case of credit growth which exceeds 12% annually. Around HRK 137m, set aside by a total of only seven banks pursuant to this obligation, will be paid out to the banks immediately following the entry into force of this decision (eight days from the date of its publication in the Official Gazette), while interest accrued will be paid out to the banks no later than within the following eight days.
The central bank used this obligation in the past three years, during which time it underwent some implementing adjustments, to slow down fast credit growth which was at times even several times faster than GDP growth, with a view to ensuring macroeconomic and financial stability in the country. However, faced with the global financial crisis and its effects, the banks became increasingly less inclined to lend to potentially more risky sectors. Increased financing of the state budget by domestic banks this year also pushed the corporate and the household sectors, to which this restriction applied, away from credit sources. This led to an increase in bank lending to the government of 35.7% in the first ten months of this year and a fall in corporate and household lending of 0.4% and 3.6%, respectively, compared to the end of the previous year.
Based on available indicators on a considerable slowdown in bank placements growth and the fact that banks now exercise greater caution as regards credit and associated risks, it has been estimated that further formal restriction of credit growth is no longer necessary.