ZAGREB, Nov 5 (Hina) - The Croatian National Bank (HNB) has no intention of forcing banks into making risky investments but it does not intend to enable them to make profit without risk, HNB Governor Zeljko Rohatinski told Hina last
Friday. Asked to comment on objections by some experts that commercial banks were granting less and less loans to domestic companies and citizens and investing money in foreign countries or government and HNB bonds, Rohatinski said this was a matter of business relations between the banks and their clients. As long as there is a lack of quality programmes, the banks will not be willing to grant loans because, from their point of view, they are acting rationally and avoiding high-risk investments, he said. On the other hand, the banks' improved liquidity has caused a decrease in interest rates and companies with better ratings can now be granted loans at
ZAGREB, Nov 5 (Hina) - The Croatian National Bank (HNB) has no
intention of forcing banks into making risky investments but it
does not intend to enable them to make profit without risk, HNB
Governor Zeljko Rohatinski told Hina last Friday.
Asked to comment on objections by some experts that commercial
banks were granting less and less loans to domestic companies and
citizens and investing money in foreign countries or government and
HNB bonds, Rohatinski said this was a matter of business relations
between the banks and their clients.
As long as there is a lack of quality programmes, the banks will not
be willing to grant loans because, from their point of view, they
are acting rationally and avoiding high-risk investments, he
said.
On the other hand, the banks' improved liquidity has caused a
decrease in interest rates and companies with better ratings can
now be granted loans at a 10% discount. This is why domestic loans
have become more favourable than the foreign ones, the HNB governor
said. The HNB uses different measures to stimulate commercial banks
to invest their money in the market more.
These measures include the reduction of the rate of required
reserves and interests paid to commercial banks for those reserves.
The HNB has also decreased interest rates on treasury bills.
This way the HNB is trying to reduce the possibility for commercial
banks to make profit by 'sterilising money', i.e. investing into
HNB treasury bills, Rohatinski said.
Accordingly, the interest rate on those bills has dropped below
seven percent whereas early this year it was above 11 percent. This,
in turn, has caused a fall in interest rates on Finance Ministry
treasury bills from 11 to seven percent.
Thanks to this, the banks have started investing more into
government bonds, which has enabled the state to seek more
favourable loans on the domestic rather than the foreign market,
Rohatinski explained.
This, in turn, has enabled the state to more use bonds in solving the
problem of inherited state debts. Recently, bonds were issued for
the payment of debts in the health system and it has been announced
that a similar measure will be used to solve the problem of payment
of citizens' insured savings in banks which have been declared
bankrupt by the end of this year.
Asked to comment on the objection that the kuna exchange rate is not
realistic, the HNB governor said that from the point of view of the
domestic foreign currency market the kuna exchange rate was
balanced. The kuna exchange rate is stable although the central
bank has not made any intervention in the market over the past five
or six months, except in one case, he added.
(hina) rml