Banking & Finance in Croatia

I. LEGAL FRAMEWORK

1.1. Which main legislative and regulatory provisions govern the banking sector in your jurisdiction?

The banking sector in Croatia is governed by the provisions laid down in the Credit Institutions Act, the Act on Croatian National Bank, the Payment System Act, the Foreign Exchange Act, the Electronic Money Act, the Act on Deposit Insurance, the Credit Unions Act, the Act on Financial Conglomerates, the Act on the Resolution of Credit Institutions and Investment Firms, the Act on compulsory liquidation of credit institutions, the Consumer Credit Act, the Consumer Protection Act, the Act on Housing Savings and State Promotion of Housing Savings, the Act on the Comparability of Fees Related to Payment Accounts, the Payment Account Switching and Access to Basic Accounts, the Act on adoption of euro as the official currency, the Companies Act, the Capital Markets Act, the Act on Prevention of Money Laundering and Financing of Terrorism, the Act on the implementation of Regulation (EU) 2020/1503 on European crowdfunding service providers, the Act on the Implementation of Regulation (EU) 2017/2402 on establishing a general framework for securitization and establishing a specific framework for simple, transparent and standardized securitization, the Act on the implementation of Regulation (EU) 2019/2088 on disclosures related to sustainability in the financial services sector and Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investments.

In addition, it is governed by the provisions laid down in Regulation (EU) No 575/2013 on prudential requirements for credit institutions (as amended; CRR), Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, SSM Framework Regulation (EU) No 468/2014, Regulation (EU) No 537/2014 on specific requirements regarding statutory audit of public-interest entities (as amended), Regulation (EU) No 806/2014 of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund.

1.2. Which bodies are responsible for enforcing the applicable laws and regulations? What are their main competencies? Please refer to the resolution authority as well.

The following bodies are responsible for enforcing the applicable laws and regulations in the banking sector:

i. The European Central Bank (ECB) – ECB carries out its tasks within the Single Supervisory Mechanism (SSM) composed of the ECB and national competent authorities, and it is responsible for the effective and consistent functioning of the SSM. ECB is exclusively competent, for prudential supervisory purposes, to issue and withdraw authorizations to all supervised credit institutions upon receiving a draft decision proposal from Croatian National Bank.

ii. The Croatian National Bank (CNB) – with regards to its regulatory activity, CNB issues and withdraws certain authorizations and approvals, proposals for issuing approvals to ECB, and adopts other decisions in accordance with the laws governing the operation of credit institutions and the operation of credit unions, payment service providers, electronic money issuers and payment systems, payment operations, the issuance of electronic money as well as foreign exchange operations and the operation of authorized exchange offices. The CNB exercises supervision and oversight of credit institutions and the operation of credit unions, payment service providers, electronic money issuers and payment systems, payment operations, and the issuance of electronic money. The CNB performs the tasks of supervision and resolution of credit institutions within the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM).

With regards to resolution authorities for credit institutions, they are the following:

i. Single Resolution Board – the central resolution authority within the banking union. The Single Resolution Board is directly responsible for significant credit institutions (whose total value of its assets exceeds EUR 30 billion; the ratio of its total assets over the GDP of Croatia of establishment exceeds 20% unless the total value of its assets is below EUR 5 billion; which is considered an institution of significant relevance with regard to the domestic economy or which has established banking subsidiaries in more than one participating Member States (as defined by the Council Regulation (EU) No 1024/2013) and its cross-border assets or liabilities represent a significant part of its total assets or liabilities);

ii. Croatian National Bank – the national resolution authority. CNB is responsible for credit institutions that are not part of a group and groups in which at least one member is a credit institution, and for credit institutions that are not considered significant credit institutions;

• Croatian Deposit Insurance Agency manages the national resolution fund and is empowered to collect ex-ante and ex-post contributions paid to the Single Resolution Fund.
• The Ministry of Finance of the Republic of Croatia is the ministry competent for the exercise of the tasks under the Act on the Resolution of Credit Institutions and Investment Firms (e.g., decisions on the use of state instruments of financial stabilization, participation in the increase of the credit institution’s share capital in the name of Republic of Croatia, temporary state ownership, etc.).

1.3. What are the current priorities of regulators and how does the regulator engage with the banking sector?

Recent CNB’s priorities included various preparations and actions required to ensure an orderly process of adoption of the euro as the official currency in the Republic of Croatia and joining the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) in the full capacity.

The CNB conducts supervision of credit institutions as follows:

1) performs supervision by collecting and analyzing reports and information, continuously monitoring the operations of credit institutions and other persons who are subject to the provisions of the Credit Institutions Act, or other laws and regulations adopted on the basis of that or other laws or applicable regulations of the EU obliged to report to the CNB;

2) performs direct supervision over the operations of the credit institutions (including “dawn raids” after obtaining an appropriate warrant from the High Administrative Court of the Republic of Croatia);

3) imposes supervisory measures (including supervisory measures in the early intervention phase);

4) issues opinions, approvals, consents, and evaluations of credit institutions in accordance with Credit institutions, CRR, and other regulations of the EU governing the operations of credit institutions.

In general, the CNB shall, before passing a decision in accordance with this Credit Institutions Act or CRR, which could have a negative effect on the legal interests of the party, inform the party of all facts, circumstances, and legal issues that are important for making a decision and invite the party to express its opinion in writing, and CNB shall attach a draft of the decision stating the important facts, circumstances and legal issues on which the CNB bases its decision. If CNB deems it appropriate, it may give the parties the opportunity to comment on the facts, circumstances, and legal issues that are important for reaching a decision at an oral hearing.

II. AUTHORISATION

2.1. What licenses are required to provide banking services in your jurisdiction? What activities do they cover?

Banking services and financial services in the territory of the Republic of Croatia can be provided by:

1) a credit institution based in the Republic of Croatia that has received approval for the provision of banking services from the ECB (granted after CNB reviewed the application for approval and provided a draft decision proposal regarding approval to the ECB);

2) a credit institution from another EU member state which, establishes a branch office in the territory of the Republic of Croatia (local presence) or is authorized to directly provide banking and/or financial services in the territory of the Republic of Croatia (but only on a temporary basis) without the need for local presence (license passporting);

3) a branch office of a credit institution from a third country that has received approval from the CNB to provide banking and/or financial services in the territory of the Republic of Croatia (local presence).

Banking services are: the taking of deposits or other repayable funds from the public and the granting of credits for own account from these funds, and can be provided after meeting the above licensing requirements.

Core financial services are: 1) taking deposits or other repayable funds; 2) lending, including consumer credit, mortgage credit and, where permitted by a special law, financing of commercial transactions, including forfeiting; 3) factoring, 4) financial leasing; 5) issuance of guarantees or other commitments; 6) trading for own account or for the accounts of clients (in money market instruments, transferable securities, foreign exchange, including exchange transactions, financial futures and options, exchange and interest-rate instruments); 7) payment services; 8) credit reference services (e.g. collection, analysis and provision of information on the creditworthiness of legal and natural persons that conduct their business independently), 9) issuing and administering other means of payment, 10) safe custody services, 11) money broking, 12) participation in issues of financial instruments as well as the provision of services relating to issues of financial instruments, 13) portfolio management and advice, 14) safekeeping of financial instruments and services related to the safekeeping of financial instruments, 15) consulting legal entities regarding capital structure, business strategy and similar issues and providing services related to business mergers and the acquisition of shares and holdings in other companies, 16) issuance of electronic money, 17) investment and auxiliary services and activities.

2.2. What is the procedure for obtaining a banking license? How long does this typically take?

Credit institution established in the Republic of Croatia

A credit institution established in the Republic of Croatia must obtain approval for providing banking services before being able to register as a credit institution. The ECB and the CNB are involved in different stages of this licensing procedure in which the entry point for all applications is the CNB, irrespective of whether the significance criteria are met or not. The CNB and the ECB cooperate closely throughout the whole procedure, which, for all supervised credit institutions, ends with the ECB taking the decision on approval.

The licensing procedure starts with the applicant submitting to CNB the request for approval for providing banking and/or financial services with all of the required documentation prescribed in detail in CNB’s Decision on documentation accompanying the application for authorization of a credit institution and an application for authorization to provide financial services (e.g. program of activities, financial information, business plan, organizational structure and system of internal controls, drafts of internal acts, information on initial capital, information on the management and supervisory board, information about the founders).

The CNB informs the ECB of the receipt of the request and assesses whether all the conditions stipulated in Article 67 of the Act on Credit Institutions have been met for the issuance of the approval (e.g., appropriate initial capital, authorized representatives, ability to provide banking and/or financial services, risk management, possibility of supervision, etc.). If the CNB determines that the conditions for issuing the approval from the Act on Credit Institutions have not been met, it will reject the request and notify the ECB thereof.

If the CNB determines that the request meets the conditions for issuing the approval prescribed by Croatian law, it drafts a decision proposing that the ECB issues the approval to the applicant and delivers it to ECB (the CNB also delivers the aforementioned draft decision to the applicant). The CNB may propose that recommendations, conditions, and/or restrictions be attached to the decision on issuing approval.

The ECB assesses the request on the basis of the conditions for the issuance of approval prescribed by the applicable EU law. If ECB assesses that these conditions are not met, the ECB will give the applicant the opportunity to make a written statement about the facts and objections that are essential for the assessment.

The ECB decides on the draft decision on the issuance of approval that it received from the CNB within the term of ten business days (unless a decision was made to extend the final decision term for one more term of ten business days). The ECB can accept the draft decision of the CNB on the issuance of approval and thereby agree to the approval or object to the draft decision of the CNB on the issuance of approval.

The whole above licensing procedure usually takes around 12 months from submitting the complete application to CNB.

2.3. Can a foreign bank operate in your jurisdiction on the basis of its domestic license?

Credit institutions from EU member states

A credit institution from another EU member state may provide banking and/or financial services (that is already authorized to provide in its country), i.e., services subject to mutual recognition in the territory of the Republic of Croatia either (i) through a branch office (local presence) or (ii) directly without the need for local presence (license passporting) but only on a temporary basis.

It shall be deemed that a credit institution from another EU member state directly provides services subject to mutual recognition in the territory of the Republic of Croatia if it has not formed a branch office and (i) concludes contracts within the territory of the Republic of Croatia, the subject of which are lending services (territorial element); or (ii) offers, through its representatives, intermediaries or by some other means, such services within the territory of the Republic of Croatia to natural persons or corporate entities with domicile, normal place of residence or head office in the territory of the Republic of Croatia (initiative element). In the described case, when either the territorial or initiative element is present, the credit institution from another EU member state may start to perform lending services in the territory of Croatia only after the CNB has received an appropriate notification with a list of services subject to mutual recognition aimed to be provided from the regulator from the credit institution’s member state (license passporting). Services can be provided directly only temporarily. According to Croatian law, it shall be deemed that services are provided on a temporary basis if they are not provided regularly, frequently, or on an ongoing basis.

Banking and/or financial services subject to mutual recognition can be provided on a permanent basis and regularly if a credit institution from another member state establishes a branch office in the territory of the Republic of Croatia. Credit institution from another member may submit a request for the entry of its branch office in the court register and start providing services in the territory of the Republic of Croatia after the expiry of two months from the date on which the CNB received the appropriate notification from a competent authority from the credit institution’s home Member State.

Third-country credit institution

Under the Croatian Credit Institutions Act, a third-country credit institution may provide banking and/or financial services, within the territory of the Republic of Croatia only through a branch office (local presence) and provided that it is authorized to provide such services in its home country.

In order to establish a branch office in the Republic of Croatia, a credit institution from a third country must obtain approval from the CNB which will contain the list of banking and/or financial services the branch office of the third-country credit institution is approved to provide within the territory of the Republic of Croatia. Third-country credit institutions can establish only one branch office in the Republic of Croatia.

The process for obtaining approval from the CNB consists of submitting a request for approval together with the statutorily prescribed documentation and performance of required actions (e.g., providing various corporate information, information on the deposit insurance system to which the credit institution from a third country (the founder) belongs, obtaining approval from the third-country regulatory authority, audit reports from the last three years, filling a request to CNB for approval of persons authorized to represent the branch, etc.). In addition, the amount of minimum EUR 5 million must be deposited to the account opened with a credit institution in Croatia in order to obtain CNB’s approval, and which amount shall be transferred to a settlement account of the branch office opened with CNB after establishing a branch office.

2.4. What are the restrictions on ownership, including foreign ownership of banks?

Under the Companies Act, natural persons or legal entities that are convicted of the criminal offense of financing terrorism or the criminal offense of money laundering (for the duration of the legal consequences of the conviction), or that have been imposed an international measure restricting the disposal of property (for the duration of these measures) are not permitted to become founders/shareholders of the credit institutions.

The holder of a qualified share in a credit institution can only be a legal entity or natural person, and persons acting jointly, who received prior approval from ECB for the acquisition of a qualified share, and in the amount for which such approval was received.

2.5. What are the requirements for a proposed acquisition and acquirer of a qualified holding in a bank? Would the same requirements apply in the case of an increase of a qualifying holding?

A qualified share means a direct or indirect investment in a credit institution that makes up 10% or more of the capital or voting rights or that enables significant influence on the management of that credit institution.

The holder of a qualified share in a credit institution can only be a legal entity or natural person, and persons acting jointly, who received prior approval from ECB for the acquisition of a qualified share, and in the amount for which such consent was received. In order to acquire shares of a credit institution, a legal or natural person and persons acting jointly are required to submit a request for prior approval to the CNB (accompanied by required documentation prescribed in CNB’s Decision on prior approval for the acquisition of a qualified share in a credit institution), on the basis of which they individually or jointly, directly or indirectly, acquire a qualified share in the credit institution.

In order to (i) acquire shares of a credit institution that make up 10% of the capital or voting rights and (ii) for a further direct or indirect increase of the qualified share in an amount that is equal to or greater than 20%, 30%, or 50% of the share in the capital or voting rights in the credit institution, it is necessary to obtain the decision of the ECB giving prior approval for the acquisition of a qualified share.

The assessment of acquisitions and increases of qualifying holdings includes an analysis of and meeting of all of the requirements relating to (i) the good reputation of the proposed acquirer; (ii) the appropriate reputation, knowledge, skills, and experience of any member of the management body who will direct the business of the credit institution as a result of the proposed acquisition; (iii) the appropriate financial soundness of the proposed acquirer; (iv) the impact of the proposed acquisition on the target’s ability to maintain compliance with all prudential requirements, including any potential impact on the possibility of exercising effective supervision in future; and (v) whether the proposed acquisition involves money laundering or terrorist financing or could increase the risk thereof. CNB will check the criminal records of the acquirer of a qualified holding for various criminal offenses referred to in the Credit Institutions Act.

The same requirements would apply in the case of an increase of a qualifying holding as described above.

III. REGULATORY CAPITAL AND LIQUIDITY

3.1. How are banks typically funded in your jurisdiction?

The banks are typically funded through their users’ deposits. According to publicly available data, a bank’s funding is 70-75 % comprised of users’ deposits, 15 % of its own capital, and the rest consists of loans received and bonds issued.

3.2. What capital and own funds requirements apply to banks in your jurisdiction?

The initial capital for banks operating in the Republic of Croatia is at least EUR 5 million.

The adoption of the euro by Croatia on January 1, 2023, means that banks located in Croatia will be subject to minimum reserve requirements from that date in accordance with Regulation (EU) 2021/378.

In regard to the bank’s own funds, i.e., internal capital, a bank in the Republic of Croatia is obliged to ensure that at all times it has an amount of capital adequate to the types, scope, and complexity of the operations it performs and the risks it is exposed to or could be exposed to in the provision of these services. Therefore, the bank is obliged to establish and implement an appropriate, effective, and comprehensive strategy and procedures for continuous assessment and maintenance of the amount, type, and distribution of internal capital. The bank is obliged to regularly review the strategy and procedures in order to ensure that they are comprehensive and commensurate with the type, scope, and complexity of the work it performs.

• Capital requirements within the scope of implementation of macroprudential measures are divided into four groups of capital requirements, namely:
• Capital conservation buffer (CCoB),
• Countercyclical capital buffer (CCyB),
• Systemic risk buffer (SRB), and
• Systemically important institutions buffer (G-SII and O-SII).

3.3. Has your jurisdiction implemented the Basel III framework? Are there any major deviations?

With regards to implementing acts of the Basel III framework, Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (CRD IV) has been transposed into Croatian law (through Credit Institutions Act), and Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms (CRR) is in force in Croatia.

IV. REPORTING, ORGANISATIONAL REQUIREMENTS, INTERNAL GOVERNANCE, AND RISK MANAGEMENT

4.1. What key reporting and disclosure requirements apply to banks in your jurisdiction?

The key reporting and disclosure requirements pertain to the bank’s obligation to report to the CNB, namely the following:

• all facts entered in the court register, namely every submitted application for entry of data in the court register and every completed entry of data changes in the court register;
• convening and date of holding the shareholders meeting;
• the shareholders meeting held and all decisions made at that meeting;
• any planned change in the share capital of the bank of 10% or more;
• cessation of the provision of certain banking and/or financial services;
• learning that a natural or legal person has acquired a qualified share, i.e., that a qualified holder has sold or otherwise disposed of his shares so that his share has therefore increased above or decreased below the amount for which he had received prior consent;
• shareholders of the bank and persons related to them who have 3% or more of shares with the right to vote on the shareholders meeting of the bank;
• close connections between banks and other natural and legal persons;
• the composition of the group of related persons to whom the bank is exposed.

In addition, banks are also obliged to report to CNB information on Capital conservation buffer (CCoB), Countercyclical capital buffer (CCyB), Systemic risk buffer (SRB), and Systemically important institutions buffer (G-SII and O-SII).

An additional rule exists for a bank whose shares are listed for trading on a regulated market to notify the CNB at least once a year about shareholders who are holders of qualifying shares and the size of those shares.

Specific rules apply to the management of the bank to inform the CNB of the following without delay:

• if the liquidity or solvency of the bank is threatened;
• if there are circumstances for the termination of the validity of the license or the reasons for the termination of the license for the provision of a particular financial service and;
• if the financial condition of the bank changes so that the regulatory capital of the bank falls below the amount prescribed in Article 92 of the CRR, i.e., below the amount ordered by the CNB (the CNB may order the additional regulatory capital).

4.2. What are the organizational requirements for banks, including with respect to corporate governance?

Under the Credit Institutions Act, a bank is obliged, in proportion to the type, scope, and complexity of the work it performs and the risks inherent in the business model, to establish and implement an effective and reliable organizational system that includes:

• a clear organizational structure with well-defined, transparent, and consistent lines of authority and responsibility within the bank, established in such a way as to avoid conflicts of interest;
• effective management of all risks to which it is exposed or could be exposed in its operations;
• appropriate internal control systems that include appropriate administrative and accounting procedures;
• remuneration policies that are consistent with appropriate and effective risk management, that promote appropriate and effective risk management, and that are gender neutral and;
• recovery plan.

As for the suitability of the members of the management board of a bank, the member may be a person who, at any time, meets the following conditions:

• which has a good reputation, honesty, and conscientiousness,
• who has the appropriate professional knowledge, ability, and experience necessary for managing the affairs of a bank, and who, together with other members of the board, has the experience necessary for the independent management of the affairs of the bank, and especially for understanding the affairs and significant risks of the bank,
• who is capable of expressing an independent opinion, i.e. where there is no conflict of interest that cannot be managed in a way that ensures independence of opinion,
• that fulfills the requirements for a member of the management board according to the provisions of the Companies Act, and
• which can dedicate enough time to fulfill the obligations under its jurisdiction.

Obtaining prior approval of the CNB is required for the appointment of management board members of a bank. The supervisory board of the bank is required to submit the request for approval for the appointment of management board members for a mandate of up to five years.

4.3. What are the local rules for loans to the management body and their related parties?

According to the Companies Act, the company may grant loans to members of the management board, procurators, and members of their immediate families only based on the decision of the supervisory board. The decision may only refer to certain loan agreements or loan types, and the loan agreement must be concluded no later than three months from the date of the decision approving the loan. Interest and repayment of the loan must be specified in the decision. If a loan is granted contrary to the aforementioned, it must be returned immediately, regardless of the provisions of the contract, unless the supervisory board subsequently makes a decision approving the granting of the loan.

4.4. What are the main legal provisions governing risk management in the banking sector in your jurisdiction?

Under the Credit Institutions Act, the supervisory board of a bank appoints a risk committee. The members of the risk committee are appointed from among the members of the supervisory board of the bank. The committee must have at least three members, one of whom must be appointed as the chairman of the committee.

The following are the duties of the risk committee:

• to advise the supervisory board on the overall current and future risk-taking tendency and strategy and to assist in the supervision of the implementation of this strategy by senior management, while not calling into question the responsibility of the bank’s management and supervisory board in the overall risk management and supervision of the bank;
• review whether the bank’s business model and risk strategy were taken into account when pricing claims and liabilities to clients, and if that price does not reflect the risk assumed in relation to the business model and risk strategy, propose to the management of the bank a plan to eliminate deficiencies;
• with the aim of establishing and implementing appropriate receipts policies, to review whether risk, capital, liquidity, and the probability and expected period of profit realization were taken into account when determining the incentives provided by the receipts system.

The bank must use its risk management system to include credit risk, concentration risk, securitization risks, residual risk, market risks, operational risk, liquidity risk, interest rate risk in the book of positions that are not traded, the risk of excessive financial leverage and other risks to which it is exposed or could be exposed in its business (Significant Risks). For the management of all of the Significant Risks the bank is obliged to provide adequate resources, including the appropriate number of workers with the necessary expert knowledge and experience in risk management, and for asset valuation, the use of external credit ratings and internal models for these risks. The bank is also obliged to establish appropriate risk reporting lines to the management and the supervisory board that cover all Significant Risks and risk management policies and their changes.

For the sake of consistent application of risk management strategies and policies, the bank is obliged to determine and consistently apply appropriate administrative, accounting, and other procedures for an effective system of internal controls, and in particular:

• to calculate and review the number of capital requirements for these risks and
• to determine and monitor large exposures, changes in large exposures and to check compliance of large exposures with the bank’s policies in relation to that type of exposure.

The bank’s internal systems must be applied consistently, the bank must use a standardized methodology or a simplified standardized methodology for identifying, evaluating, managing, and mitigating risks resulting from possible changes in interest rates that affect the economic value of capital and net interest income from operations that are led in the book of non-traded positions. Standardized methodology or simplified standardized methodology pertains to the one prescribed by the European Commission in a Regulatory Technical Standard.

4.5. What are the legal requirements applicable to banks in combating money laundering and terrorist financing area?

Under the Act on Prevention of Money Laundering and Financing of Terrorism (AML Act) banks are required to implement measures, actions, and procedures for the prevention and detection of money laundering and terrorist financing in its entire business, i.e. before and/or during each transaction, as well as when entering into legal transactions in which property is acquired or used, and in other forms of disposing of funds, rights, and other property that can be used for money laundering and terrorist financing. The said obligation includes the following:

• creation of a risk assessment of money laundering and financing of terrorism;
• establishment of policies, controls, and procedures for effective reduction and effective management of the risks of money laundering and financing of terrorism;
• implementation of measures of in-depth analysis of the party in the manner and under the conditions determined by the AML Act;
• appointment of an authorized person and a deputy authorized person for the implementation of measures to prevent money laundering and financing of terrorism, taking into account the organizational structure, a sufficient number of deputies of the authorized person, and ensuring appropriate conditions for their work;
• enabling regular professional training and education of employees and ensuring regular internal audits of the system for preventing money laundering and terrorism financing;
• creating and regularly updating the list of indicators for identifying parties and suspicious transactions and funds for which there are reasons to suspect money laundering or terrorist financing;
• notification and delivery to the Office for the Prevention of Money Laundering (Office) of prescribed and requested data, information, and documentation on transactions, funds, and persons;
• storage and protection of data and keeping records of data prescribed by the AML Act;
• the obligation to establish an appropriate information system with regard to their organizational structure and exposure to the risk of money laundering and terrorist financing for the purpose of comprehensive risk assessment of parties, business relationships, and transactions, as well as constant monitoring of business relationships and with the purpose of timely and complete notification to the Office; and
• implementation of other obligations and measures prescribed by the AML Act and by-laws adopted on the basis of it.

4.6. Are there any legal provisions regulating banking secrecy in your jurisdiction?

Under the Credit Institutions Act, members of organizational bodies of a bank, shareholders, employees, and other persons who, due to the nature of the work they perform with or for a bank, have access to confidential data, must keep bank secrecy and may not disclose it to third parties, use it against the interests of the bank and its clients or enable third parties to take advantage of it. The obligation to keep bank secrecy exists even after the termination of employment, i.e. after the termination of the status of shareholder, as well as after the termination of the contractual relationship on the performance of work. Exceptions do exist in regard to, inter alia: a) providing certain information to the CNB, the Financial Inspectorate of the Republic of Croatia, or the competent authority for the purposes of supervision or control, and within the scope of their competence; b) with the prior express consent of the client; c) fulfilling the obligations prescribed under mandatory regulations.

V. TRENDS

5.1. What are the main trends in the banking sector in your jurisdiction?

The current main trends are the continuation of the slight increase in interest rates on loans and deposits, with the exception of the average interest rate on savings deposits of households, where the multi-year trend of gradual decrease continues. In March 2023, the last call for subsidized housing loans was announced.

5.2. What are the biggest challenges in the banking sector at the moment?

According to the vice governor of the CNB, big and complex challenges are related to digital transformation, increasing competition from technology companies, and climate change. The governor of the CNB also pointed out cyber security and automation of the banks as challenging ongoing events in the banking sector.

5.3. What’s new in fintech?

The most noticeable fintech trends in relation to the banking sector in Croatia are: a) embedded finance – the most prominent actor on the Croatian market being Leanpay, a service that offers installment payments after online purchases through the application without having to go through the bank system; b) open banking – banks allowing Fintech start-ups or applications with mandatory user consent to access bank account data, but not the functionality of the bank itself; c) Aircash: The first non-banking service with a Mastercard card; d) Crypto payments have emerged in one of the biggest grocery stores in Croatia, as well as in one of the biggest insurance companies.