Throughout 2007, the Croatian National Bank (CNB) continued implementing its restrictive monetary policy by restricting the growth of placements to 12 percent.
However, the rate was modified several times this year because placement growth remained high. Since these measures resulted in only a mild slowdown of the growth rate in June, CNB has tightened its restraints on lending growth by restricting the growth of placements to 0.5 percent on monthly basis and separating the calculation base for purchasing compulsory CNB bills into two base components.
This move is part of the central bank’s efforts to curb foreign borrowing by Croatian commercial banks that triggers growth in the country’s large foreign debt. Over the past few months the implementation has yielded the expected results by slowing down the growth of banks’ lending.
However, in an attempt to go around this restrictive measure, some banks have turned to their existing or newly established companies, using them to increase placements by granting consumer or other loans via the transfer of receivables or some other legal transaction on the basis of which legal persons owned by these banks became creditors.
As of 1 October 2007 such forms of lending by legal persons with head offices in Croatia, controlled by a bank or an owner of a qualifying holding, who is a financial institution, shall be included in the calculation of the permissible growth rate of 0.5 percent per month. The starting calculation base for these categories of placements shall be the balance as at 30 September 2007.