At its meeting held on Wednesday, March 7 2001, the Council of the Croatian National Bank, chaired by Governor dr. Željko Rohatinski, examined recent economic and monetary developments, reviewed the report on international reserves management in the past year and made a number of decisions acting in accordance with its authorities.

The Council decided on reducing the Lombard rate from 12 to 9.5 percent on annual basis and the interest rate on obligatory reserve requirement from 4.5 to 3.7 percent, with the interest to be paid on all reserve requirement deposits, not only on those kept on a special account with the central bank. The decision was made considering the general trend of interest rate reductions in circumstances of high banking system liquidity that started characterizing the banking system last year and remained a feature of the system in the first two months of this year. Another reason for changes in interest rates on reserve requirements is CNB's commitment to ensure successful functioning of the National Clearing System (NCS) also in circumstances when banks will no longer have the possibility to use Lombard credit maximally to determine daily limits in the NCS, that is after the one-month introductory period.

Members of the CNB Council positively assessed the report on international reserves management in the past year during which international reserves increased by about USD 500 million, reaching USD 3.52 billion at the end of the year.

At the Wednesday meeting, members of the CNB Council received a report on the situation in Kaptol banka d.d. Zagreb and Hibis štedionica d.d. Zagreb. Central bank controllers that examined the operation of Kaptol banka in 1999 and 2000 found out that the bank was not operating in compliance with the Banking Law and other banking regulations. In addition, despite warnings and instructions of the Croatian National Bank, Kaptol banka did not adapt its operation to legal provisions and did not implement corrective measures prescribed by the central bank. Because of such inadequate and risky operation there lingers the danger that Kaptol banka will not be able to fulfill its financial obligations toward creditors and its obligations arising from operation with deposits. Further, having liquidity problems, Kaptol banka made use of the intervention credit in February. The credit was not paid back in the legally prescribed period. Taking into consideration the aforementioned, the Council concluded that legal preconditions for revoking Kaptol banka's operating license have been fulfilled and decided to revoke its license. Consequently, Kaptol banka has to initiate liquidation proceedings without delay. A bank in liquidation is obliged to complete ongoing transactions, convert its assets into liquid assets and fulfill its obligations towards creditors, including savers.

The same procedure is to be followed by Hibis stedionica d.d. Zagreb. The CNB Council revoked this savings banks' operating license due to its non-compliance with laws, regulations and corrective measures prescribed by the CNB.

At the Wednesday meeting, the CNB Council decided on a number of requests for acquiring more than 10 percent of voting shares in banks. Erste Bank der österreichischen Sparkassen AG Wien and Steiermärkische Bank und Sparkassen AG Graz were given approval for acquiring up to 50 percent of voting shares in Erste und Steiermärkische Bank dd. Zagreb. Mr. Siegfried Rudolf Einhellig, a shareholder of Prva obrtnicka stedionica d.d. Zagreb, was approved acquiring 26.97 percent of voting shares in that savings bank. This will enable Mr. Einhellig to increase its stake in the savings bank to 68.88 percent of its guarantee capital.