At its meeting today, the CNB Council analyzed a quarterly report on economic and monetary developments, a report on international reserve management in 2004 and a report on the banking system condition in the last quarter of 2004. The Council also enacted several decisions requisite for launching open market operations, a new liquidity management instrument, designed to reduce money market fluctuations and stabilize interest rates. Finally, the Council enacted some decisions aimed at further liberalization of foreign financial relations.
It is expected that the CNB will launch open market operations as planned in early April. Three main operation types are envisaged: regular open market operations, fine tuning operations and structural operations. Intended to meet most financial sector liquidity needs, regular operations are to be conducted weekly, as reverse repo operations, through regular auctions, and collateralized by Ministry of Finance kuna treasury bills. Fine tuning operations will be conducted ad hoc, as needed to increase or withdraw liquidity and smooth unexpected interest rate market fluctuations, so that neither their frequency nor maturities are standardized. These operations are to be conducted via repo or reverse repo operations, direct purchases or sales of securities and foreign exchange and via foreign currency swaps, with a limited number of auction participants. Structural operations' features are in line with their purpose of making long-term liquidity adjustments.
Although open market operations will be used only to a limited degree in the early stage, mainly as repo operations to manage liquidity, the repo rate is expected to gradually become the benchmark money market rate. The ceiling in the interest rate range is to be maintained by the interest rate on Lombard loans, available for use at the end of each workday (and not, as previously, five days a month), with the collateral of treasury bills amounting to 90 percent of the nominal loan value and with an overnight maturity. The floor in the interest rate range is to be maintained by the interest rate charged on banks' deposits with the CNB.
For the purpose of increasing transaction flow during workdays, (once the Delivery Versus Payment and Real Time Gross Settlement systems have been put into operation) banks will also be able, as of July, to use intraday loans, posting the same collateral as for Lombard loans. These loans will be granted within the settlement limit and they will be interest-free. However, they will have to be repaid at a workday's end. A bank's failure to repay them will be automatically considered as an application for a Lombard loan up to the amount of the negative account balance, and will be treated as such.

The Decision on the Interest Rates and Remunerations of the Croatian National Bank, also enacted today, provides for the interest rate charged on Lombard loans to continue at 9.5% and sets the rate paid by the CNB on banks' deposits at 0.5% for the year. On the allocated component of kuna reserve requirements (70%), the CNB will pay remuneration to banks at an annual rate of 1.25%. No remuneration will be paid on the reserve requirement component held by banks in their accounts.
The CNB Council also enacted a decision providing residents with more flexible conditions and manners of investing into foreign securities and stakes in foreign investment funds. Amendments were also made to the regulations on the conditions of non-residents' investments into domestic securities and stakes in domestic investment funds and their issuing short term securities in the Republic of Croatia.

The CNB Council gave its approval to the proposals of competent supervisory boards for Krešimir Starčević to be appointed as member of the Hypo Alpe-Adria Bank d.d. Zagreb management board, for Branka Štinc to be appointed as member of the Slavonska banka d.d. Osijek management board and for Manda Ciprić, MSc, to be appointed as member of the Vaba d.d. Varaždin management board.