The Croatian government on Thursday adopted amendments to the Croatian National Bank (HNB) Act, expanding the responsibilities of the central bank to cover the entire financial system.
Deputy Finance Minister Boris Lalovac said that the HNB had so far been responsible only for the banking sector, but because of the crisis in the EU its responsibilities would be broadened to coordinate and monitor the entire financial sector.
That does not mean that the HNB will assume the powers of the Financial Services Supervisory Agency (HANFA), but in case of a crisis in the non-banking sector, which includes insurance companies and other financial institutions and falls within HANFA's remit, the EU will coordinate all activities with the HNB, Lalovac explained.
The amendments should also ensure more flexible investment of international reserves, so that the HNB will be able to invest its reserves in all bonds on the secondary market. So far, the HNB has been able to invest its international reserves only in top-notch securities with an AAA rating, but not many of such securities are left on the market and today they mostly have a negative yield, Lalovac said.
That's why the HNB will be allowed to invest on the secondary market in all securities with an investment-grade rating, including Croatian bonds after Croatia regains the investment-grade rating. Lalovac believes that the investment-grade rating will be regained within the next year.
The HNB will not be allowed to directly finance the public sector, but will be able to invest in securities with an investment-grade rating affirmed by at least two internationally recognised rating agencies.
Finance Minister Slavko Linic, in the United States this week, sold government bonds for $1.5 billion at an interest rate of 5.625%, which was lower than last year and several previous years.
