Reserve requirements

Published: 8/2/2016 Modified: 11/8/2022
Reserve requirements enable the control over money supply and, as a result, help ensure monetary stability and banking system liquidity as well as the smooth functioning of the payment system.

Reserve requirements refer to the obligation of credit institutions to deposit a certain percentage of received funds (received sight and time deposits, received loans, etc.) in accounts held with the Croatian National Bank. The aforementioned funds in the form of reserves are either allocated to special accounts with the central bank or are maintained by the average daily balance in the credit institution's settlement account within a certain period.

Reserve requirements enable central banks to control money supply and thus ensure monetary stability and the liquidity of individual banks and the banking system as a whole as well as the smooth functioning of the payment system. By increasing the reserve requirement rate, the central bank sterilises liquidity, i.e. withdraws money from circulation, while by lowering the reserve requirement rate, it provides reserve money, i.e. increases the liquidity of the banking system.

The reserve requirement calculation base consists of:

  • a kuna component, which comprises sources of funds in kuna, notably received deposits and loans in kuna (with or without a currency clause), issued debt securities in kuna, hybrid and subordinated instruments in kuna (with or without a currency clause) and other financial liabilities in kuna
  • a foreign exchange component, comprising foreign exchange funding sources, notably received foreign currency deposits and loans, liabilities in foreign currency arising from issued securities (other than the bank's equity securities), hybrid and subordinated instruments in foreign currency and other financial liabilities in foreign currency

The calculation base is the average balance of the aforementioned sources of funds in the calculation period lasting from the first to the last day of the calendar month. (see Reserve requirements schedule)

  • The reserve requirement rate is 5%
  • The kuna and the foreign exchange component of the base are calculated separately and consist of the average daily balances of kuna and foreign exchange sources of funds in a calculation period
  • Of the calculated foreign exchange component of reserve requirements, 75% is included in the calculated kuna component of reserve requirements and is executed in kuna
  • The percentage for allocating the kuna component of reserve requirements is 70%, while for the foreign exchange component it amounts to 0%
  • The remaining part of reserve requirements is maintained by average daily balances of liquid claims
  • The maintenance period begins on the second Wednesday of a month and lasts to the day preceding the second Wednesday of the following month
  • The CNB pays no remuneration on the allocated reserve requirements