The CNB today for the first time published the national reference rate (NRR) for the average funding expenses of the Croatian banking sector. The CNB computes and publishes the NRR ‒ which serves primarily as an index to determine the variable part of the variable interest rate on consumer credit ‒ in accordance with the published methodology.
Having assumed the task of computing and regularly publishing the NRR from the Croatian Banking Association (CBA) early this year, as required to comply with EU regulations, the CNB started to compute and publish it based on data for the first quarter of 2020.
The NRR is a rate representing the average funding expenses of the Croatian banking sector in relation to the period under review (3, 6 or 12 months), the scope of funds (1 – for deposits of natural persons, 2 – for deposits of natural persons and legal persons from the non-financial sector, 3 – for all banks’ funding) and the relevant currency (HRK, EUR, USD, CHF). The name of each NRR clearly indicates the duration of the period to which the original data based on which it is computed refer (3M, 6M or 12M), the scope of funds (1, 2 or 3) and the currency of funds (HRK, EUR, USD, CHF) — a total of 24 indices. Kuna funds indexed to a foreign currency are included in the currency to which they are indexed – instead of in kuna funds. For instance, the six-month NRR published by the CNB, computed on the basis of data on the deposits of natural persons in euro and those in kuna indexed to euro is indicated as "6M NRR1 EUR".
The Consumer Credit Act and the Act on Consumer Housing Loans require credit institutions to determine a parameter for loans with a variable interest rate and observe it when deciding on its correction. This parameter must be clearly defined and known to consumers.
Credit institutions may agree upon one of the parameters prescribed by these acts, including the reference interest rates (EURIBOR, LIBOR), the NRR, yields on Ministry of Finance treasury bills and average interest rates on household deposits in the relevant currency. The NRR is among the most used interest rate parameters in Croatia. At the end of 2019, the share of kuna and euro household loans linked to the NRR in total household loans with a variable interest rate was 67%.
A presentation on the function and importance of the NRR given by CNB Vicegovernor Roman Šubić is available on the CNB YouTube channel.
Historical data on the NRR up to the fourth quarter of 2019 will remain posted on the CBA website at https://www.hub.hr/sites/default/files/inline-files/NRS-2019-4q-objava.pdf.