UPDATE 1 - Croatian C-Bank Cancels Marginal Reserve Requirement

The marginal reserve is a portion of funds borrowed abroad by commercial banks that banks have to deposit interest-free with the central bank. The central bank lifted the rate to 55% from 40% in 2005 to restrict foreign borrowing by local commercial banks and the growth in domestic lending associated with it.

At its meeting on October 10 the Croatian Central Bank decided to scrap the marginal reserve requirement, the bank said in a statement on its website.

"This is our contribution to boosting the liquidity of the system with the immediate effect of some 450 million euro," the central bank governor Zeljko Rohatinski said earlier on Friday at the opening of the 18th conference of the Zagreb Stock Exchange.

In September the central bank council decided that as of October 9 the cash that commercial banks have in their vaults will no longer be included in the calculation of the banks' mandatory reserves. The reserve requirement rate in Croatia stands at 17%.