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Photograph: Freeimages.com/sanja gjenero

The Croatian National Bank (HNB) on Tuesday conducted the third of the four structural repo operations for this year, releasing a total of HRK 234.4 million to banks at a fixed repo rate of 1.40%, the central bank said.

The settlement date for this operation is 14 July 2016 and the repurchase date is 14 July 2020. The total amount of bids submitted for this operation was HRK 234.4 million, which shows that the HNB has accepted all the bids submitted.

"These operations are aimed at providing banks with longer-term sources of kuna liquidity at an interest rate competitive to interest rates on other banks’ kuna liquidity sources, with debt securities of issuers from Croatia to be accepted as collateral. This will enable banks to lend to the economy and households in the domestic currency at an increased pace and under more favourable conditions. While the total effect of the structural operations planned will depend on the degree of interest that banks show in this monetary policy mechanism, preliminary assessments are that it will approximately equal a one percentage point reduction in the reserve requirement rate," the HNB said.

The HNB released a total of HRK 711.5 million to banks through the first two structural repo operations. With the third operation this amount increased to HRK 945.9 million out of nearly HRK 3 billion planned for this year.

"By introducing structural repo operations, the HNB continues with the expansionary monetary policy it has been pursuing for years, which has helped mitigate the negative consequences of the economic crisis by boosting liquidity in the system and lowering the costs of financing for domestic sectors in Croatia. The HNB will continue to maintain the stability of the domestic currency, taking account of the important role of the EUR/HRK exchange rate in preserving the stability of prices and the banking system as a whole. In the unlikely event that depreciation pressures arise, the HNB will use the instruments available to it, including, if necessary, foreign exchange interventions and system liquidity management, to stabilise movements in the EUR/HRK exchange rate," the central bank said before the launch of these operations.

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