The measures were prompted by indicators showing an increased growth of foreign borrowing in recent months, reads a statement issued by the HNB.
According to those data, in November alone the foreign debt rose by some 430 million euros to reach 24.6 billion euros at the end of the month, which is an increase of 11.3 percent in relation to the same period the year before.
By shifting to domestic borrowing, which was made possible also by the central bank's operations on the open market, foreign borrowing was cut by 6.1 percent, while direct borrowing by the business sector grew at a rate of 18.8 percent, and the banks' foreign debt rose by 24.9 percent.
Foreign borrowing made it possible for banks to increase domestic loans in October this year by 21.1 percent in relation to October 2004. Loans granted to the state rose by 38.8 percent, while loans granted to other sectors grew by 17.9 percent, including household loans, which rose by 23 percent. Such dynamics of borrowing encourages import and worsens the current account deficit, causes pressure on the appreciation of the exchange rate and increases the vulnerability of debtors in relation to possible changes of interest rates and the exchange rate.
The HNB thus decided that it was necessary to take measures to discourage new foreign borrowing and further growth of loans at such high rates.
The Council adopted changes to the decision on compulsory bank reserves, which bind banks to deposit 55 percent instead of the current 40 percent of their assets into the HNB account.
The amended decision will take effect on 11 January 2006.
It is expected that the increased rate of compulsory reserves will discourage banks from additional foreign borrowing. Nevertheless, banks are expected to be sufficiently solvent considering a decrease in the general rate of compulsory reserves from 18 percent to 17 percent. The reduced rate of compulsory reserves will take effect in January and it is expected to further decrease to 16 percent in the course of next year.
This will enable banks to increase loans by slightly over 10 percent, which is considered enough to keep up with the economic growth and normal market demand, the HNB Council said.