At its meeting held on Wednesday the Council of the Croatian National Bank, chaired by Governor dr. Zeljko Rohatinski, reviewed recent monetary and economic developments and made several decisions acting in accordance with its authority.

Industrial production in October was 1.1 percent lower than in the same month last year. October is, thus, the second month in a row with industrial production registering lower levels than those recorded last year, after it had been growing (year on year) for three consecutive months. This change in industrial production developments is not, however, a consequence of a fall of output in manufacturing industry, but of a decrease in energy product supply. Industrial production developments indicate that the achieved economic growth still is not sufficiently robust and that structural reforms will have to be implemented more intensively if the growth is to be stronger.

Moderate depreciation of kuna against euro which began in mid-October continued in November - the average kuna exchange rate against euro decreased by 0.4 percent in nominal terms in comparison with October (the average kuna exchange rate against US dollar decreased by 0.5 percent). Total exports for the first then months of this year increased by 2.31 percent and total imports by 1.65 percent compared with the same period last year. As a result of these developments, trade deficit for the first ten months 2000 increased 0.82 percent compared with the same 1999 period. Current account deficit for the first two quarters of 2000 is 37.7 percent lower than in the same period last year.

After a significant period of stagnation, bank lending to real sector began showing signs of moderate revival. The revival is, however, still disproportional with the high liquidity of the banking system, which was additionally increased due to effects of the recent reduction and unification of reserve requirements. This fact points to the reduced potential of monetary policy measures in that area and to the necessity of a more intensive engagement of other economic policies in that respect. Quite opposite, kuna and foreign currency deposits in Croatian banks recorded strong growth. It is especially important that, after frequent public discussions about devaluation of kuna, the structure of savings did not change in favor of foreign currency deposits, as it was the case in January. Growing trend of registered unemployment, which increased by 2.7 percent in October) is still a cause of concern.

At the Wednesday meeting, the CNB Council decided on a number of requests for acquiring more than 10 percent of voting shares in banks. Dalmatinska banka d.d. Zadar was given approval for acquiring up to 100 percent of voting shares in Istarska banka d.d. Pula. Privredna banka Zagreb d.d. was approved acquiring an additional 24.96 percent of voting shares (26.97 percent of equity capital) in Riadria banka d.d. Rijeka. This will enable Privredna banka Zagreb to become the only owner of Riadria banka, since it already holds 75.04 percent of voting shares (73.03 percent of equity capital) in that bank.

Further, the CNB Council agreed with the amalgamation of Stedionica Zlatica d.d. Zagreb with Varazdinska štedionica Kovanica d.d. Varazdin. After the amalgamation, which will be undertaken for the purpose of adjusting the capital level of these two savings institutions with the requirements of the Banking Law, the equity capital of Varazdinska štedionica Kovanica will amount to 17 million kuna.

In addition, on the basis of findings presented by CNB's banking supervisors, the CNB Council decided to revoke the operating license from Alpe Jadran banka d.d. Split and Stedionica Gros banak d.o.o. Split. The review of their financial statements and direct control of their operations showed that these financial institutions encountered serious difficulties in operation, did not operate in compliance with regulations and had not completely followed-up on the measures prescribed by the central bank for the purpose of correcting the irregularities and improving the operation. Also, it was estimated that their further operation could lead to additional financial damage, which had to be prevented. Alpe Jadran banka and Stedionica Gros banak have to stop performing operations for which the license was once given and decide on initiating liquidation proceedings without delay.

At the Wednesday meeting the CNB Council approved the nominations of Mr. Ivo Sinko for chairman and Mr. Zeljko Kardum and Ms. Anka Bandalovic for members of the management board of Jadranska banka d.d. Sibenik, Mr. Goran Ramesa for chairman of the management board of Kvarner banka d.d. Rijeka and Mr. Vinko Matijevic for chairman of the management board of Pozeska banka d.d. Pozega.