Interest Swaps in Croatian Banking Possibilities of Application

The author analyzes interest rate trends in the Republic of Croatia within the period 1992-2003. What are the means of protecting against interest risks have also been subject to analysis, although in practice it very often comes down to setting variable interest rates that are fixed by certain banks’ decision-making. The author suggests that fixed interest rates should be applied combined with the variable ones with reference parameters. In addition he deals with main features of interest swaps and the need for their application in Croatian banking, so as to guarantee the parties of the contract: (1) protection against the interest risk, (2) decrease of financing expenses, (3) stable profit and other benefits. Croatian banks may use interest swaps in order to protect their business against interest risk or as intermediaries arrange this kind of business for their clients gaining an extra profit.