'The governor's decision has cancelled the obligation of banks to buy central bank liquidity bills, at a 0.25 percent interest, if their annual credit growth surpasses 12 percent,' the bank said on its website.
It said the readiness of banks -- 90 percent of which are foreign owned -- to extend loans to potentially riskier sectors has shrunk this year with the growing impact of the international financial crisis.
'Furthermore, increased financing of the budget deficit by local banks has this year left little room for credits to companies and citizens,' it said. 'It was therefore agreed that credit limits are no longer necessary'.
While the seven largest banks exceeded the limit in the first two years, banking sources say the banks were likely to stay below the ceiling in 2009 because of the slowing credit activity.
The central bank introduced the 12-percent annual limit in December 2006 in an effort to contain high growth of the European Union candidate's foreign debt by keeping a lid on credit growth.
The strong credit boom since 2000, which boosted household consumption and state investments, was one of the main culprits for Croatia's fast-growing external debt.
Foreign debt owed by the government, banks and companies amounts to some 90 percent of GDP or some 40 billion euros. However, public debt is still below 60 percent of GDP, as required by the Maastricht criteria for adopting the euro currency.
Croatia hopes to complete European Union membership talks next year and join the bloc in 2012. It could then adopt the euro in 2014 at the earliest.
(Reporting by Zoran Radosavljevic, Editing by Toby Chopra) Keywords: CROATIA CENTRALBANK/CREDIT (zoran.radosavljevic@thomsonreuters.com; +385 1 4899 971) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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