At the Regional Conference on Recovery and Resolution Planning, held on 15 November this year in Tirana and organised by the central bank of Albania with the support of the World Bank (FinSAC), Vicegovernor of the Croatian National Bank Roman Šubić presented the resolution framework for credit institutions in Croatia, as well as the experiences of the CNB in resolution planning.
Speaking of institutions competent for resolution proceedings in Croatia, Vicegovernor Šubić explained that the Croatian National Bank was responsible for activities related to the resolution of credit institutions before resolution proceedings are opened, i.e. for resolution planning. Even in the conditions of unquestionable stability of the banking system, the CNB conducts resolution planning processes for all credit institutions within its area of competence. In doing so, the CNB primarily strives to minimise, in line with resolution objectives, all potentially negative effects on the financial stability and real economy that could occur in case of difficulties in the operation of particular credit institutions.
The Croatian Financial Services Supervisory Agency has authority over investment firms prior to the opening of resolution proceedings, while the State Agency for Deposit Insurance and Bank Resolution is responsible for the implementation of resolution proceedings in all institutions after the proceedings begin, as well as for managing the Resolution Fund.
Šubić emphasised that it was important for the CNB's supervision function, competent for the recovery planning of credit institutions, to be separated from the CNB's organisational unit responsible for the assessment of the resolvability of these institutions. The exchange of information between these organisational units is defined by internal procedures harmonised with national legislation and the relevant guidelines issued by the European Banking Authority (EBA).
Croatia's legal framework relating to the resolution of credit institutions and investment firms points to the need for interinstitutional cooperation and coordination, Šubić stressed. The cooperation is defined by the Act on the Resolution of Credit Institutions and Investment Firms and agreements on interinstitutional cooperation and exchange of information, while high-level coordination is achieved through the Financial Stability Council.
According to applicable regulations, in contrast to bankruptcy, resolution is only possible for institutions where there is public interest. In Croatia, public interest is primarily determined through the presence of critical functions and the effect on financial stability. The Croatian National Bank developed the methodology for the assessment of critical functions, the summary of which is publicly available.