No one wants to criticize the Central Bank here. On the contrary, the existing exchange rate is probably the best CNB can offer as far as kuna value is concerned. We do not have a market-oriented exchange rate to equate supply and demand. The biggest problem is that it is not post festum indicator, but a starting point in determining the exchange rates of many Croatian banks. The premise is that banks freely determine exchange rates, and the CNB only registers their decisions.
Reality is a different story.
Out of 50 banks which send reports to the CNB, only 10 independently create their own exchange rates. The rest simply copy the CNB average rate and applying their own buy and sell margins. The banks use forex lists in retail situations - in wholesale situations, the lists only serve as indicators which the banks deviate from as required. If all banks in Croatia set their own exchange rates without CNB interference, the DEM exchange rate could fluctuate freely. This partly explains why the kuna has had a slight downward tendency during the past year, free from the fluctuations expected of a free market currency.