No demand at Croatia’s central bank weekly repo auction

Croatia’s central bank, HNB did not allocate any funds at the regular weekly repo auction today, which is the forty-fifth straight week (since mid-December 2017) in which there was no demand for additional liquid funds on part of commercial banks. While some local sources have previously said that this was due to the high costs of this source of liquid funds, we also note that liquidity of late has been abundant even though lending on transaction-based terms has been growing steadily. As the tourist season, during which demand for local currency naturally increases (but not this year), has already ended, it is not surprising that banks do not ask for additional funds.

The weekly repo auctions were launched in September 2015 with the objective to inject short-term liquidity in the system following the requirements of the adopted CHF-loan conversion legislation. The interest of banks was high in the first months but then slowly faded out and in 2017 banks have been asking for funds only in the summer months, during the peak of the tourist season.

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