Authorisation of credit institutions

Published: 31/1/2015 Modified: 25/7/2017
A credit institution may not start operating before it has obtained authorisation from the Croatian National Bank. The authorisation must contain authorisation to provide banking services but may also contain authorisation to provide core and additional financial services. Described in the text below is the authorisation of a credit institution, the application and documents to be enclosed with the application for authorisation, the decision-taking procedure and the reasons for refusing the application and for the annulment and revocation of the decision on the authorisation.

The characteristic which sets credit institutions apart from other companies is taking of deposits or other repayable funds from the public which in the Republic of Croatia may be taken only by:

  1. credit institutions with head offices in the Republic of Croatia authorised by the Croatian National Bank to provide banking services;
  2. credit institutions of EU Member States that have established branches within the territory of the Republic of Croatia or have been authorised to provide banking services directly within the territory of the Republic of Croatia; and
  3. branches of third-country credit institutions authorised by the Croatian National Bank to provide banking services within the territory of the Republic of Croatia.

In accordance with Article 60 of the Credit Institutions Act, a credit institution will receive authorisation from the Croatian National Bank to operate as a bank, a savings bank or a housing savings bank. The authorisation will include authorisation to provide banking services (the taking of deposits or other repayable funds from the public and the granting of credits for own account from these funds) and may also include authorisation to provide core and additional financial services. Where a credit institution intends to provide financial services which are not covered by authorisation, prior to the entry of such services into the register of companies it has to obtain an authorisation from the Croatian National Bank to provide such services.

Article 8 of the Credit Institutions Act defines core and additional financial services which may be provided by credit institutions subject to authorisation of the Croatian National Bank to provide such services. It should be noted that the said provision and the provisions on the obligation to obtain an authorisation from the Croatian National Bank for the provision of financial services, apply only to credit institutions and not to undertakings which are not credit institutions and which intend to provide services listed in Article 8 of the Credit Institutions Act.

Core financial services are as follows:

  1. taking of deposits or other repayable funds;
  2. lending, including consumer credit, mortgage credit and, where permitted by a special law, financing of commercial transactions, including export financing based on the purchase at a discount without recourse of non-current, non-matured receivables collateralised with a financial instrument (forfeiting);
  3. repurchase of receivables with or without recourse (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 currency exchange transactions;
    • financial futures and options;
    • exchange and interest-rate instruments;
  7. money transmission services in accordance with special laws;
  8. credit reference services, such as 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, if the provision of such services is not considered the provision of services within the meaning of item (7) of this paragraph and in accordance with the Payment System Act;
  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 in accordance with the law governing the Capital Market Act;
  13. portfolio management and advice;
  14. safekeeping of financial instruments and services related to the safekeeping of financial instruments in accordance with the Capital Market Act;
  15. advice to legal persons on capital structure, business strategy and related issues as well as the provision of services relating to mergers and the acquisition of shares and holdings in other companies;
  16. issuance of electronic money; and
  17. investment and ancillary services and activities prescribed by the Capital Market Act and not included in services referred to in items (1) to (16).

Additional financial services are as follows:

  1. activities related to the sale of insurance policies in accordance with the law governing insurance;
  2. payment systems management services in accordance with the provisions of a special law;
  3. other services which a credit institution may provide in accordance with the provisions of a special law;
  4. trading in gold;
  5. the services of data submission in accordance with the regulations governing the capital market; and
  6. other services or activities that are, in terms of the manner of the provision and risk to which a credit institution is exposed, similar to core financial services.

Application for authorisation of credit institutions

The application for authorisation of credit institutions is to be submitted on a form Application for authorisation of credit institutions together with the documents and information specified in the Decision on the documentation to be enclosed with the application for the authorisation of a credit institution and the application for the authorisation to provide financial services.

The application for authorisation of credit institutions is to be submitted together with the application/applications for prior approval for the acquisition of a qualified holding, prior approval to perform the function of the chairperson, a member of the management board and members of the supervisory board and application for authorisation to provide financial services. Decisions on all the listed applications are taken at the same time.

Deciding on the application

In the processing of applications for authorisation and other applications submitted together with this application, the Croatian National Bank may require from the applicant to submit other documentation and information necessary for decision-taking. If the Croatian National Bank has requested additional documentation, the date of its delivery will be considered the date of receipt of a valid application.

The Croatian National Bank is obligated to issue a decision on the application for authorisation within six months from the date of receipt of a valid application, i.e. within maximum 12 months from the date on which the application was submitted.

When deciding on the application for authorisation of a new credit institution, the Croatian National Bank assesses whether it can be expected, based on the documents and information and other available information submitted, that the credit institution will operate in accordance with regulations and in a stable and safe manner over a long-term. The Croatian National Bank will grant the authorisation if the following conditions are met:

  1. if for a holder of a qualifying holding or, in case no legal or natural person acquires a qualifying holding, for the 20 largest acquirers of holdings in a credit institution no reason referred to in Article 29 of the Credit Institutions Act exists;
  2. if the exercise of supervision of the credit institution's operation pursuant to the provisions of the Credit Institutions Act is not made difficult or prevented by close links between the credit institution and other legal or natural persons;
  3. if the exercise of supervision of the credit institution's operation pursuant to the provisions of the Credit Institutions Act is not made difficult or prevented by close links between the credit institution and other legal or natural persons with head offices or domicile or normal place of residence in a third country whose regulations prevent the exercise of supervision or where there are other reasons preventing the exercise of supervision;
  4. if the persons recommended for the chairperson or members of the management board meet the criteria referred to in Article 38 or Article 40 of this Act or if the persons recommended for supervisory board members meet the criteria referred to in Article 45 of the Credit Institutions Act;
  5. if the initial capital of the credit institution complies with Article 19 of the Credit Institutions Act and if it is evident that the credit institution is organised in accordance with this Act or if the conditions for the operation of credit institutions laid down in this Act, regulations adopted under the Credit Institutions Act or the regulations of the European Union governing the operation of credit institutions are met;
  6. if it is evident that the credit institution will have physical presence in the Republic of Croatia or that its business will be directed from the territory of the Republic of Croatia (shell bank);
  7. if the provisions of the credit institution's Articles of Association are not contrary to the Credit Institutions Act, regulations adopted under that Act or the regulations of the European Union governing the operation of credit institutions;
  8. if it is evident from the documentation and from other available information that the credit institution meets the personnel, organisational and technical requirements for the provision of banking and/or financial services in the manner and scope envisaged in its business plan; or
  9. if it is evident from the application and the accompanying documentation that the credit institution meets other requirements for the provision of the banking and/or financial services covered by the application for authorisation.

Reasons for revocation of authorisation

In accordance with Article 69, paragraph (1) of the Credit Institutions Act, the Croatian National Bank will revoke a decision on authorisation in the following cases:

  1. where a credit institution does not commence its activities within 12 months of the issue of authorisation;
  2. where a credit institution submits a written notification to the Croatian National Bank stating that it no longer intends to provide the banking and/or financial services for which authorisation has been granted; or
  3. where a credit institution ceases to provide banking services for more than six months.

The Croatian National Bank may revoke a decision on authorisation:

  1. where a credit institution no longer meets the prudential requirements set out in Parts Three, Four and Six of Regulation (EU) No 575/2013 or the own funds requirements imposed by a decision of the Croatian National Bank under Articles 224 and 228 of the Credit Institutions Act, or the specific liquidity requirements under Articles 224 and 225 of the Credit Institutions Act;
  2. where a credit institution can no longer be relied on to fulfil its obligations towards its creditors, and, in particular, no longer provides security for the assets entrusted to it by its depositors;
  3. where a credit institution fails to meet internal capital requirements and other operating conditions in accordance with regulations on risk management;
  4. where a credit institution repeatedly fails to meet reporting requirements of the Croatian National Bank in a timely and accurate manner within a three year period;
  5. where a credit institution prevents supervision of its operation in any manner whatsoever;
  6. where a credit institution fails to implement supervisory measures imposed by a decision of the Croatian National Bank;
  7. where there are reasons for revocation of approval to acquire a qualifying holding referred to in Article 32 of the Credit Institutions Act;
  8. where a credit institution fails to meet the requirements relating to deposit insurance laid down in the law governing deposit insurance;
  9. where a credit institution fails to meet the technical, organisational, personnel and other requirements for the provision of banking services;
  10. where the credit institution failed to act in accordance with Article 151, paragraph (2), item (5) and paragraph (3), item (2) of the Credit Institutions Act; 
  11. where a credit institution fails to establish governance arrangements as provided under Article 101 of the Credit Institutions Act and subordinate legislation adopted under that Act;
  12. where a credit institution fails to report to the Croatian National Bank the data on satisfying the requirements regarding its capital ratios in accordance with Article 92 of Regulation (EU) No 575/2013 or where the reported data are inaccurate or incomplete which is in breach of Article 99, paragraph (1) of that Regulation;
  13. where a credit institution fails to report to the Croatian National Bank the data in accordance with Article 101 of Regulation (EU) No 575/2013 or where the reported data are inaccurate or incomplete;
  14. where a credit institution fails to report information or provides incomplete or inaccurate information about large exposures to the Croatian National Bank in breach of Article 394, paragraph (1) of Regulation (EU) No 575/2013;
  15. where a credit institution fails to report information or provides incomplete or inaccurate information on liquidity to the Croatian National Bank in breach of Article 415, paragraphs (1) and (2) of Regulation (EU) No 575/2013;
  16. where a credit institution fails to report information or provides incomplete or inaccurate information on the leverage ratio to the Croatian National Bank in breach of Article 430, paragraph (1) of Regulation (EU) No 575/2013;
  17. where a credit institution repeatedly or persistently fails to meet liquid assets requirements in breach of Article 412 of Regulation (EU) No 575/2013;
  18. where a credit institution breaches the provisions on exposure limits set out in Article 395 of Regulation (EU) No 575/2013;
  19. where a credit institution is exposed to the credit risk of a securitisation position without satisfying the conditions set out in Article 405 of Regulation (EU) No 575/2013; 
  20. where a credit institution fails to disclose information or provides incomplete or inaccurate information in breach of Article 431, paragraphs (1), (2) and (3) or Article 451, paragraph (1) of Regulation (EU) No 575/2013;
  21. where a credit institution makes payments to holders of instruments included in the calculation of own funds of the institution in breach of Article 140 of the Credit Institutions Act, or in cases where, in accordance with Articles 28, 51 or 63 of Regulation (EU) No 575/2013 no such payment is allowed;
  22. where a credit institution is found liable by a judgement with final force and effect for a material breach of the act governing the prevention of money laundering and terrorist financing;
  23. where a credit institution no longer meets the conditions under which authorisation was granted; or 
  24. where a credit institution obtained authorisation on the basis of false or inaccurate documentation or false presentation of data relevant to its operation.

The Croatian National Bank is obligated to publish a decision to annul or revoke authorisation of a bank, a savings bank or a housing savings bank in the Official Gazette and deliver it to the competent commercial court and the State Agency for Deposit Insurance and Bank Resolution and issue a press release thereon.