MONETARY POLICY INSTRUMENTS

IN THE REPUBLIC OF CROATIA

Monetary policy

Central bank’s objectives and tasks• STABILITY OF PRICES – the main objective• SUPPORTING THE ECONOMIC POLICY OF THE EU, WITHOUT

PREJUDICE TO ITS PRIMARY OBJECTIVE

The Croatian National Bank has the following tasks:• to define and implement the monetary and foreign exchange policies;• to hold and manage the foreign reserves of the Republic of Croatia;• to issue banknotes and coins;• to exercise supervision and oversight of credit institutions ….;• …• to regulate and improve the payment system;• to perform operations on behalf of the Republic of Croatia, as provided by law;• to contribute to the stability of the financial system as a whole; and• to perform other activities, as provided by law.

Monetary policy instruments and measures of the CNB

1. OPEN MARKET OPERATIONS

2. STANDING FACILITIES

3. RESERVE REQUIREMENT

4. FOREIGN CURRENCY AUCTIONS

5. MINIMUM REQUIRED AMOUNT OF FOREIGN CURRENCY CLAIMS

1. OPEN MARKET OPERATIONS

OPEN MARKET OPERATIONS

1. Regular operations

2. Fine tuning operations

3. Structural operations

1.1. Regular operations

•reverse repo operations – practically they work like collateral loans that the central bank approve to banks

•used to increase the system's liquidity

•it can be conducted every week (on Wednesdays), with a maturity of up to one week

•conducted at standard offer auctions

•acceptable collateral: MoF treasury bills with an original maturity of up to one year

No. R-37-2009

Repurchase date21 October 2009

Total amount of bids submitted

4,705.70

Fixed repo rate 6.00%

Total amount of bids accepted

470.57

Total amount of bids rejected

4,235.13

The percentage of allotment

10.00%

REVERSE REPO AUCTION held on 14 October 2009 (in million HRK)

The Croatian National Bank accountRESERVEMONEY /

PRIMARYMONEY/

MONETARYBASE /

M0

1.2. Fine tuning operations

•repo/reverse repo operations, direct purchase/sale of securities

•used to increase or decrease the system's liquidity•frequency and maturity not standardised •acceptable collateral: MoF treasury bills with an

original maturity of up to one year

1.3. Structural operations •direct purchase/sale of securities and repo/reverse

repo operations•used to increase or decrease the system's liquidity •maturity not standardised •acceptable collateral: government securities.

1.1. Regular operations

reverse repo operations – practically they work like collateral loans that the central bank approve to banks

2. STANDING FACILITIES

STANDING FACILITIES

1. Deposit facility

2. Lombard loan

3. Intraday loan

2.1. Deposit facility

• banks may deposit surplus funds with the CNB at the end of the day • maturity: overnight • interest rate: 0.00%

2.2. Lombard loan• granted on the basis of a bank's application at the end of a working day • may be used on a daily basis • maturity: overnight • collateralised• interest rate: 2,5%

2.3. Intraday loan • granted by setting a limit in a bank's settlement account during the day • may be used on a daily basis • maturity: the end of the day when it was used • collateralised

• interest-free

The Croatian National Bank accountRESERVEMONEY /

PRIMARYMONEY/

MONETARYBASE /

M0

3. RESERVE REQUIREMENT

• reserve requirement rate: 12,0% 

• calculation base consists of: • a kuna component, which includes kuna sources of funds,

i.e. received kuna deposits and loans (with or without a currency clause), issued debt securities denominated in kuna …

• a foreign exchange component, which includes foreign exchange sources of funds, i.e. received foreign exchange deposits and loans, obligations arising from the issued securities in foreign currency (excluding banks' equity securities) …

• kuna and foreign exchange components of the calculation base are calculated separately, representing the average daily balance of the kuna and foreign exchange sources of funds in a single calculation period

• 75% of the calculated foreign exchange reserve requirement is included in the calculated kuna reserve requirement and allocated in kuna

• calculation period lasts from the first to the last day of a calendar month

• maintenance period lasts from the second Wednesday of a month to the day preceding the second Wednesday of the following month

• percentage for allocating the kuna component of reserve requirements

amounts to 70%

• remaining portion of reserve requirements may be maintained by the average daily balances in the accounts of liquid claims

• currency of the foreign exchange component of reserve requirements: EUR, USD

• remuneration rate (rate at which the remuneration is paid) on the allocated kuna component of reserve requirements: 0.75%

• the CNB shall not pay remuneration on the allocated foreign exchange component of reserve requirements.

Credit institutions are institutions authorised by the Croatian National Bank under the Credit Institutions Act. Credit institutions are banks, savings banks and housing savings banks.

4. FOREIGN CURRENCY AUCTIONS

• based on a discretionary decision of the CNB

• held to protect stability of the domestic currency and maintain liquidity of payments in the country and abroad

• may be two-sided (the CNB buys and sells foreign currency) or one-sided (the CNB buys or sells foreign

currency)

The Croatian National Bank accountRESERVEMONEY /

PRIMARYMONEY/

MONETARYBASE /

M0

5. MINIMUM REQUIRED AMOUNT OF FOREIGN CURRENCY CLAIMS

• minimum amount of foreign exchange claims of one particular bank: 17% of its foreign exchange liabilities

• daily obligation to maintain the prescribed percentage

Euroisation of deposits

Euroisation of loans

Monetary aggregates in Croatia• Reserve money (M0) consists of currency outside credit

institutions, cash in credit institutions’ vaults, credit institutions’ deposits with the CNB and deposits of other financial institutions with the CNB.

• Money (M1) comprises currency outside credit institutions, deposits with the CNB by other financial institutions as well as demand deposits with credit institutions.

• Broadest money (M4) comprises money (M1), savings and time deposits, foreign currency deposits as well as bonds and money market instruments and money market funds’ shares/ units.