CNB Council adopts monetary projection for 2008

Published: 5/12/2007

At its today session, the Council of the Croatian National Bank adopted a monetary policy projection for the following year. The measures used by the central bank this year gave the desired results. They slowed down external debt growth, holding steady its share in gross domestic product, and slowed down considerably banks' lending based on foreign borrowing, while at the same time enabled high economic growth, which is estimated to stand at 5.9 percent. As a result, the CNB Council decided to pursue an equal monetary policy in the following year.
In this context, the Council of the Croatian National Bank has issued several decisions further restricting excessive growth of banks' credit activities and supported the proposed measures falling within the jurisdiction of the Governor. All these decisions are aimed at controlling external vulnerability of the national economy, and achieving further dynamic economic growth, while at the same time preserving macroeconomic stability in the country. As currently predicted, the growth of gross domestic product could reach around 5.1 percent next year, the exchange rate should remain stable and the rate of inflation is expected to exceed this year's average, currently estimated to stand at around 2.8 percent. While this year's price growth was boosted mainly by increased prices of agricultural and food products and oil, the next year's price growth is expected to be fuelled by the effects of price increases which took place towards the end of this year.
Under the amendments to the Decision on the interest rates and remunerations of the Croatian National Bank, the interest rate on the Lombard loan has been raised from 7.5 percent to 9 percent. As provided by the new Decision on the purchase of compulsory CNB bills, the balance as at 31 December 2007 has been set as the basis for the calculation of this obligation next year. Thus, each bank's monthly placements growth up to 1 percentage point on this initial balance, will be exempted from the compulsory CNB purchase, meaning that the permissible annual placements growth will remain 12 percent, as in this year. The obligation to purchase CNB bills in case of placements growth breaches will amount to 75 percent of the base (currently 50 percent) and the interest payable on subscribed CNB bills will amount to 0.25 percent annually (currently 0.75 percent).
The application of this Decision now extends to savings banks emerging following transformation from savings and loan co-operatives and the Decision provides application rules for newly-established banks, foreign bank branches and savings banks. The definition of the criteria for the application of the mentioned restrictions to such financial institutions was the main reason for the amendments to the Decision on the marginal reserve requirement and the Decision on the special reserve requirement on liabilities arising from issued securities.
The amendments to the Decision on the capital adequacy of banks provide for a more detailed definition of the obligations of banks in terms of their minimum capital adequacy ratios and the manner in which this ratio is determined in view of the banks' annual placements growth rate and the share of secondary sources, as well as for increased risk weights being assigned to placements with a currency risk exposure, extended to clients with no own foreign currency income.
At today's session several applications were approved for the acquisition of qualified holdings in several banks: Sandi Šola was granted approval for the acquisition of over 10 percent of shares in Karlovačka banka d.d. Karlovac, Boris Barač was granted approval for the acquisition of over 33 percent and Mirko Vuković for over 20 percent share in the share capital of Credo banka d.d. Split, and Banco Popolare Societa Cooperativa was granted approval for the acquisition of over 75 percent share in the share capital of Banco Popolare Croatia d.d.
Pursuant to CNB Council decision, Fran Renko, a management board member of Centar banka d.d. Zagreb, was granted approval for the appointment of the chairperson of that bank. Approvals for reappointments as management board members were granted to Branka Oštrić, Partner banka d.d. Zagreb, and Jasna Širola, Raiffeisenbank Austria d.d. Zagreb while Mario Žižek was granted approval for the appointment as management board member of Raiffeisenbank Austria d.d. Zagreb.