The Croatian National Bank Council today revoked the application of the Decision on the Marginal Reserve Requirement, thus placing back at banks' disposal an approximate EUR 355m and USD 129m in order to boost their foreign exchange liquidity and enable them to meet their commitments to clients without any difficulties.
Applied for the last four years, the Decision on the Marginal Reserve Requirement was aimed at curbing strong foreign borrowing by banks, obliging them to deposit part of the funds borrowed abroad (initially 24 percent and 15, 40 or 55 percent in the more recent period, depending on the financing source) in a special account with the Croatian National Bank. As a result, banks' interest in foreign borrowing waned and the amount of their external debt gradually decreased (gross external debt of banks dropped from EUR 10.2bn at the end of 2006 to EUR 7.8bn at the end of August this year), with the significant amounts of banks' additional foreign exchange reserves accumulated with the central bank serving as a source of required liquidity even under current unfavourable circumstances.
