Croatian Banks Act as Cash Warehouses, And They're Earning Handsomely
May the 15th, 2023 - Croatian banks have been acting as real cash warehouses ever since the country's accession to the Eurozone back in January this year, and they're earning a pretty penny for that ''work''.
As Poslovni Dnevnik writes, it is only logical that the net interest income of Croatian banks grew because they increased their own interest on loans issued to their clients. Interest on savings however doesn't follow that trend, those figures are still barely above zero, meaning that both margins and earnings are increasing, writes Rijeka-based portal Novi list.
In addition to these usual reasons for bank profit growth, which therefore derive from "core" operations, Croatian banks have had one additional source of income since the New Year, more specifically since the Republic of Croatia officially entered the Eurozone, which wasn't there before, and the same of course concerns the European Central Bank's key rates.
More specifically, we are talking about increasingly high interest rates on deposits held by commercial banks within the central bank, and in Croatia's case this regards the Croatian National Bank. Namely, until the country entered the Eurozone, the rate for depositing liquidity surpluses with the CNB was a firm zero. With this year's entry into the Eurozone, all of the key rates of the "new monetary centre", the ECB in the German city of Frankfurt, began being applied to the domestic market as well.
It's important to explain that the ECB is constantly raising its key rates, which is why interest rates on loans are also always rising. This is what the banks are talking about when they discuss the "deposit facility rate" increasing and this also represents one of the ECB's three key rates, which specifically refers to those funds that commercial banks keep hold of with central banks.
At the time of Croatia's entry into the Eurozone back on January the 1st, 2023, this ECB rate stood at two percent. Immediately following accession, Croatian banks began to receive returns on the money they kept with the CNB.
Surplus liquidity that Croatian banks have kept in their accounts with the Croatian National Bank in the period since the beginning of the year currently amounts to around 14.4 billion euros on average.
In the aforementioned period, the European Central Bank continued the cycle of raising its interest rates that began back in July 2022, and interest rates on overnight bank deposits with the central bank rose from 2 percent at the beginning of the year to 3.25 percent in May. Accordingly, banks operating in Croatia were paid out a massive 85.6 million euros in interest in the first quarter of this year, according to the CNB.
For more, check out our dedicated news section.
European Central Bank to Start Directly Supervising Eight Banks in Croatia
ZAGREB, September 12, 2020 - Following the establishment of close cooperation with the Croatian National Bank (HNB), the European Central Bank will take direct supervision of eight banks in Croatia, the HNB said in a statement on Friday.
"The European Central Bank (ECB), after establishing close cooperation with Българска народна банка (Bulgarian National Bank) and Hrvatska narodna banka (Croatian National Bank) and assessing the significance of the countries’ banks, announced today that it will start directly supervising five banks in Bulgaria and eight banks in Croatia," the HNB quoted the ECB as saying in a press release.
In Croatia the ECB will be supervising the three largest banks - Zagrebacka Banka, Privredna Banka Zagreb and Erste & Steiermaerkische Bank and it will also supervise PBZ Stambena Stedionica, Raiffeisen Bank and Raiffeisen Stambena Stedionica, Sberbank and Addiko Bank.
The ECB's supervision of Addiko Bank's Croatian subsidiary is part of its plan to soon start directly supervising that Austrian banking group.
"The ECB will also directly supervise two new institutions, DSK Bank AD in Bulgaria as of 1 October and Addiko Bank AG group in Austria as of 7 October. The supervision of Addiko Bank AG group will include supervision of its subsidiaries Addiko Bank d.d. in Slovenia and Addiko Bank d.d. in Croatia," the ECB said.
The ECB in July established close cooperation with the HNB and the Bulgarian National Bank, and now it will take direct supervision of five banks in Bulgaria and eight in Croatia, countries that have both applied to join the euro zone.
In particular, the ECB will be responsible for directly supervising four Bulgarian and seven Croatian subsidiaries of existing significant banking groups headquartered in Belgium, Greece, Italy and Austria. This ensures that the ECB fulfils the regulatory requirements that it must directly supervise, at an individual level, all banks belonging to significant groups, and at least the three most significant banks in each country.
The ECB will also be responsible for the oversight of the less significant institutions and in charge of the common procedures for all supervised entities in the two countries.
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