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Close Cooperation and Direct Supervision of European Central Bank over Croatian Banks

Close Cooperation and Direct Supervision of European Central Bank over Croatian Banks

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Now the necessary supervisory and legislative prerequisites have been fulfilled, the European Central Bank Governing Council has adopted a decision to establish close cooperation with the Croatian National Bank. As a result, Croatia has joined the Single Supervisory Mechanism and the Single Resolution Mechanism, whose members include all the Euro-area states that already enjoy close cooperation with the European Central Bank. This means, among other things, that from 1 October 2020, the European Central Bank will directly supervise many important Republic of Croatia institutions.

Prior to commencing this direct supervision, the European Central Bank assessed all the significant credit institutions in Croatia and, based on prescribed criteria, decided to supervise the following directly: (i) Zagrebačka banka d.d., (ii) Privredna banka Zagreb d.d., (iii) Erste & Steiermarkische Bank d.d., (iv) PBZ stambena stedionica d.d., (v) Raiffeisenbank Austria d.d., (vi) Raiffeisen stambena stedionica d.d., (vii) Sberbank d.d., and (viii) Addiko Bank d.d. Less significant institutions will continue to be supervised by the Croatian National Bank; however, the European Central Bank may decide to supervise any further institution directly to ensure high supervisory standards are consistently applied.

Powers vested in the European Central Bank

What does direct supervision entail and precisely which tasks are conferred on the European Central Bank? The European Central Bank is authorized to review directly supervised institutions’ own funds requirements, securitisation, large exposure limits, liquidity, and leverage, as well as to report and disclose information to the public on those matters. The European Central Bank is also authorized to ensure that directly supervised entities comply with EU law and carry out supervisory reviews and stress tests, and publish the findings when necessary. On the basis of the supervisory reviews, the European Central Bank is authorized to impose on credit institutions specific additional own funds requirements, specific publication requirements, specific liquidity requirements and other measures. To summarize, this means that from 1 October 2020, and for the exclusive purpose of carrying out the tasks, the European Central Bank will be the competent authority for the directly supervised credit institutions in Croatia, and have all the powers and obligations set out in the Council Regulation (EU) No 1024/2013 of 15 October 2013, including all the powers and obligations the Croatian National Bank has under the relevant EU law.

Common Procedures

It is important to emphasise that, apart from the above mentioned powers and obligations, the European Central Bank is now also in charge of the procedures for granting and withdrawing authorisation for a business to act as a credit institution in Croatia and deciding on the acquisition and disposal of qualifying holdings in Croatian credit institutions.

For a licensing procedure, applications must still be submitted to the Croatian National Bank; however, if the application complies with the statutory requirements, the Croatian National Bank will forward it to the European Central Bank with a proposed decision on which the European Central Bank has the final say. If, however, the application does not comply with the statutory requirements, the Croatian National Bank must dismiss it. In addition to granting authorisation, under certain conditions stipulated by EU law, the European Central Bank is authorized to withdraw existing authorizations, based either on the Croatian National Bank’s proposal or its own initiative.

A similar procedure is envisaged for acquiring and disposing of qualifying holdings in credit institutions; however, the Croatian National Bank is not authorised to dismiss the application in this procedure, even if it finds it unsatisfactory. That is, the Croatian National Bank is always required to forward the application to the European Central Bank along with its proposed decision so that the European Central Bank can take the final decision.

In addition to the concurrent inclusion of the Croatian Kuna in the Exchange Rate Mechanism II, joining the Single Supervisory Mechanism and Single Resolution Mechanism has brought Croatia one step closer to entering the Eurozone.

By Jelena Nushol Fijacko, Partner and Relja Rajkovic, Attorney at Law, Bardek, Lisac, Musec, Skoko in cooperation with CMS

Croatian Knowledge Partner

Čipčić-Bragadin Mesić & Associates is one of the leading law firms in Croatia that serve companies, credit & financial institutions and public entities. We have been recommended and recognized as the legal experts and service leaders by many leading international legal guides for more than 15 consecutive years. With roots dating from 1928. we now probably have more tradition, experience and market presence than almost any other law firm in Croatia. We work closely with the leading international law firms and consultants so we’re able to manage complex, cross-border projects and deals seamlessly and successfully. Around 85% of our clients are international enterprises doing business in Croatia. List of our clients include some of the world-renowned companies such as Amazon Europe Core, China Machinery Engineering Corporation, Tate & Lyle, Nafta a.s., Unilever Croatia, Unilever Hungary, Lenovo, Innoenergy CE, Flixmobility, Flixbus CEE South, Okoenergie Group, CTC Holding, Bunge Limited, Chipita, Rolls-Royce, Canvas Holidays, Vacalianselect, Redgate Software, Red gate Investment, Yahoo!, Aston Martin Lagonda, Domino Printing UK, Domino Printing Sciences, Goldman Sachs, Deutsche Bank, Barclays Bank, HSBC, State Street Bank, Citigroup Global Markets, Credit Suisse, Bank of America Merill Lynch, Standard Chartered, Och-Ziff Capital Management, Amundi Asset Management, Altima International, Red Arc Global Investments, SMBC Nikko Capital Partners, Royal Bank of Scotland, Morgan Stanley International, J.P. Morgan group, Allianz Global Investors, Schroders, Macquarie Bank, Digital Finance International, Winton Capital Management, Citibank, Invesco Asset Management Österreich, Croatian Pension Investment Company, Unicredit Bank AG etc. We enjoy learning about our clients’ businesses and want to understand them completely so we can provide the best possible and complete service.

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