March 24 (SeeNews) - Croatia's central bank said it is cutting the mandatory reserves requirement to 9% from current 12% in order to provide the banking system with more liquidity amidst the ongoing coronavirus crisis.
"The rate of the mandatory reserves requirement has been lowered with the aim to release additional liquidity that would enable the banking system and subsequently the economy as a whole to overcome the current crisis situation more easily," the central bank, HNB, said in a statement on Monday.
The move will reduce the volume of total mandatory reserves by 10.45 billion kuna ($1.49 billion/1.37 billion euro), the central bank said, adding that it will return to local banks on March 27 the kuna-denominated part of the mandatory reserves surplus in the amount of 6.33 billion kuna.
At the same time, by lowering the mandatory reserves rate, HNB is bringing its system closer to the minimum reserves system of the European Central Bank, to which it is gong to switch to once the euro is adopted, it said.
The Croatian authorities sent in July 2019 a letter of intent to join the European Exchange Rate Mechanism II (ERM II), the training grounds for adopting the euro. The whole process of joining the euro area is expected to take at least four years to complete, including the two-year mandatory stay in ERM II.
Zagreb is targeting ERM II entry in mid-2020. However, the ongoing coronavirus crisis might result in some delays of the previously presented plans.
The number of people infected by the virus in Croatia rose to more than 300 as of Monday evening, with public life and transport in the country being almost locked down in an attempt to limit the spread of the disease.
(1 euro = 7.60725 kuna)