Banks' reserve requirement reduced from 17 to 14 percent

Published: 20/11/2008

The CNB Council decided to reduce the banks' reserve requirement rate from 17 to 14 percent in order to provide additional liquidity to the banking system of around HRK 8.4bn (5.9bn in kuna and 2.5bn in foreign exchange component of reserve requirement). The decision was adopted at the today's telephone session, so that it can be applied as early as in the forthcoming reserve requirement calculation period, i.e. on 10 December.
In this manner, in the conditions of operating difficulties of the financial market affected by the world crisis, liquidity is improved of both small and large banks, facilitating thus financing of the government needs on the domestic market, without squeezing out economic entities from the sources of crediting. The adopted decision is also a step towards achieving a gradual reduction of reserve requirement in the long run, in the process of alignment of monetary policy with the EU standards.
The Croatian National Bank expects that all the participants responsible for a rational use of the funds, released under that decision, will make sure, through their decisions and actions, that this additional liquidity is used for stabilisation of the situation in the financial market and the economy, which necessarily implies maintaining of the exchange rate stability and minimizing interest rate fluctuations on the money market.
In addition to the aforementioned assumptions, the central bank will have enough room for further maintenance of the required liquidity level and macroeconomic stability by its common monetary policy instruments (open market operation and foreign exchange market intervention, as appropriate).