At its meeting held on Wednesday, June 7 2000, the Council of the Croatian National Bank, chaired by Governor dr. Marko Škreb, reviewed recent economic and monetary developments, agreed with the submitted nominations for managers of a number of Croatian banks and made several other decisions, acting in accordance with its authority. In addition, the CNB Council was briefed on recent developments in Istarska banka and prospects for its recapitalization by a strategic partner in near future.
Central bank analysts estimated that a recent rise in prices of oil products will induce a one-off increase in total prices not higher than 2 percentage points. However, CNB Council members noted with concern that Croatia is leaving the low inflation zone, also in comparison with other transition economies. The danger of waking inflationary expectations and their passing through on further movements in prices should not be underestimated. The Council emphasized central bank's determination to react decisively - by restricting monetary policy - to indicators of a more considerable increase in prices. Accordingly, respective central bank departments were entrusted with the analysis of effects that the implementation of available monetary policy instruments would have under current circumstances, so that, if necessary, only those instruments could be used that would effect the stabilization of prices without undesirable consequences.
Caution is necessary in this context especially due to currently very high liquidity of the banking system. However, the excess liquidity is not spilling over into increased bank lending to the enterprise sector, but into central bank bills and Treasury notes. Interest rates on these securities are falling. Interest rates on bank lending to good borrowers have decreased to one-digit figures which means that, considering the current inflation rate, they have reached the level of real interest rates in some of the most developed countries. In addition, high liquidity of the banking system has enhanced a considerable reduction of interest rates on the Zagreb Money Market, so that interest rates on loans to better banks have become even negative in real terms.
Another indicator capturing attention is a significant rise in foreign currency savings, which also in April continued to characterize monetary developments. In the first four months of the year, foreign currency savings increased by 2.9 billion kuna. Even if exchange rate differentials, accrued interest and frozen foreign currency deposits are deducted from the aforementioned amount, the real increase in foreign currency savings still amounts to more than 1.5 billion kuna, pointing undoubtedly at revived confidence in the domestic banking system and emphasizing the positive impact, which the exit of problem banks from the banking system had on the financial system as a whole. The largest part of the increase was recorded in the biggest banks. At the Wednesday meeting, the CNB Council agreed the nominations of Mr. Ante Todoric for chairman and Mr. Zeljko Jakus for member of the management board of Kreditna banka d.d. Zagreb, as well as the nominations of Ms. Davorka Jakir for chairwoman and Ms. Vesna Andrijasevic and Ms. Vlasta Panjkovic for members of the management board of Sisacka banka d.d. Sisak. Further, the Council approved the nominations of Mr. Stjepan Poljak for member of the management board of Karlovacka banka d.d. Karlovac and Mr. Roberto Drandic for member of the management board of PBZ-Laguna banka d.d. Porec, as well as the nominations of Mr. Gabrijel Sentic for chairman of the management board of Brodsko-posavska banka d.d. Slavonski brod and Mr. Josip Slade for chairman of the management board of Hrvatska poštanska banka d.d. Zagreb.