EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 15 June 2016  
on amendments to the Law on Hrvatska Narodna Banka  
(CON/2016/ 33) 
 
Introduction and legal basis  
On 24 May 2016 the European Central Bank (ECB) received a request from the Ministry of Finance of the 
Republ ic of Croatia for an opinion on draft amendments to the Law on Hrvatska Narodna Banka 
(hereinafter the ‘draft law’).  
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union an d the third indent of Article 2(1) of Council Decision 98/415/EC
1, as 
the draft law relates to Hrvatska Narodna Banka (HNB). In accordance with the first sentence of 
Article  17.5 of the Rules of Procedure of the European Central Bank, the Governing Council  has adopted 
this opinion.  
 
1.  Purpose of the draft law  
 The draft law proposes to amend the Law on Hrvatska Narodna Banka (1) to enable the State 
Audit Office to perform an annual audit of HNB’s prepared financial statements and overall operations of HNB ; (2) to require HNB to submit its Annual Report on its work and operations to the 
Croatian Parliament as well as the semi -annual information on financial standing, the accomplished 
level of price stability and the implementation of monetary policy, where they will be discussed and 
voted on at the Parliament’s plenary session; and (3) to reduce the permissible number of 6- year 
terms of office of the Governor and other members of HNB’s Council to a maximum of two terms.  
 
2. Specific observations  
2.1  State A udit Office’s audit of HNB  
2.1.1  The principle of institutional independence referred to in Article 130 of the Treaty and Article 7 of 
the Statute of the European System of Central Banks and of the European Central Bank 
(hereinafter the ‘Statute of the ES CB’ or the ‘Statute’) refers to the fact that the exercise of central 
bank powers and the performance of the tasks and duties conferred on central banks must not be 
subject to external instructions or government influence. In particular, where a national c entral bank 
(NCB)'s operations are subject to the control of a state audit office or similar body charged with 
controlling the use of public finances, the scope of the control (i) should be clearly defined by the 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the Eur opean Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
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2 legal framework, (ii) should be without prejudice to the activities of the NCB’s independent external 
auditors to examine all books and accounts of the NCB2, and further, in line with the principle of 
institutional independence, (iii) should comply with the prohibition on giving instructions to an NCB 
and its decision- making bodies and (iv) should not interfere with the NCB’s ESCB -related tasks3. 
The state audit should be done on a non- political, independent and purely professional basis4.  
2.1.2  The ECB understands that the audit performed by the S tate Audit Office is generally governed by 
the provisions of the current Law on the State Audit Office. Its provisions stipulate that an audit  includes a procedure for examining the auditee’s financial transactions in terms of the legal use of 
funds and f or assessing the effectiveness and efficiency of the auditee’s operations and how 
effectively the auditee’s general objectives were met or how effectively the objectives of the 
auditee’s individual financial transactions, programmes and projects were met. Furthermore, the 
auditee must comply with audit findings and notify the State Audit Office of the actions taken in response to the audit findings. It follows that the State Audit Office would be empowered to assess 
whether HNB meets its general objectives,  including its primary objective of maintaining price 
stability. These provisions of the current Law on the State Audit Office in conjunction with the 
relevant provisions of the draft law are not in line with the principle of central bank independence 
referred to in Article 130 of the Treaty and Article 7 of the Statute of the ESCB. There are no 
provisions to establish a framework for the public audit of HNB that respects HNB’s independence under the Treaty and the Statute of the ESCB, and prohibits external instructions and interference 
with HNB’s ESCB -related tasks or with the activities of HNB’s independent external auditors. 
Therefore the draft law would need to be adapted to comply with the requirements referred to in 
paragraph 2.1.1.  
2.1.3  According t o the current Law on the State Audit Office, the legal representative of the audited entity 
is obliged, for the purposes of the audit, to provide the certified state auditor with all documentation classified as a business secret or any other type of secret . Under Article 37 of the Statute of the 
ESCB members of the governing bodies and the staff of NCBs are required, even after their duties have ceased, not to disclose information of the kind covered by the obligation of professional secrecy. The primacy of  Union law and the rules adopted thereunder means that national laws on 
access by third parties (such as the State Audit Office) to documents may not lead to infringements 
of the ESCB’s confidentiality regime. The access of a state audit office or similar body to an NCB’s 
information and documents must be limited and must be without prejudice to the ESCB’s 
confidentiality regime to which the members of NCBs’ decision- making bodies and staff are 
subject
5. Hence, access by the State Audit Office to HNB’s conf idential information must be limited 
to that which is strictly necessary for the performance of the state auditor’s statutory tasks. Such 
access must also be without prejudice both to HNB’s independence and to the ESCB confidentiality 
regime, to which the members of HNB’s decision- making bodies and staff are subject. In addition, 
the relevant legal provisions in the draft law should be amended to stipulate that the State Audit 
                                                 
2  For the activities of the independent external auditors of the NCBs see Article 27.1 of the Statute of the ESCB.  
3  See the ECB’s Convergence Report, June 2014, p. 26 and Opinions CON/2011/9 and CON/2011/53. All ECB 
Opinions and Convergence Reports are published on the ECB website at www.ecb.europa.eu.  
4  See the ECB’s Convergence Report, June 2014, p. 26.  
5  See the ECB’s Convergence Report, June 2014, p. 27.  
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3 Office must safeguard the confidentiality of information and documents disclosed by HNB to the 
same extent as the professional secrecy provisions applied by HNB6.  
2.2  Croatian Parliament’s vote on HNB’s Annual Report  
2.2.1  On the basis of the explanatory memorandum to the draft law, the ECB understands that the reference in the draft  law to HNB’s obligation to ‘submit the Annual Report’, implies that the 
Croatian Parliament would discuss and vote upon the Annual Report. Although the explanatory 
memorandum states that the draft law clearly defines that HNB's Annual Reports are discussed 
and voted upon at a plenary session of the Croatian Parliament, it is not clear from the draft law 
what type of decision the Croatian Parliament would adopt on the Annual Report and what the consequences or implications of the Croatian Parliament’s vote on the Annual Report might be. 
Furthermore, in addition to the HNB’s obligation to ‘submit the Annual Report’ to the Croatian 
Parliament and its implied authority to discuss and vote upon the Annual Report , the proposed 
wording
7 provides that semi -annual i nformation on financial standing, on the level of price stability 
achieved and on the implementation of monetary policy should be submitted to the Croatian 
Parliament. Although the explanatory memorandum to the draft law does not expressly mention this, th e proposed wording in the draft law implies  that the semi -annual information shall  be subject 
to discussion and voting by the Parliament in the same manner as the HNB's Annual Report.  
2.2.2  In line with the principle of institutional independence under Art icle 130 of the Treaty and Article 7 
of the Statute of the ESCB the NCBs and the members of their decision- making bodies are 
prohibited from seeking or taking instructions from Union institutions, bodies or agencies, from any government of a Member State or from any other body. In addition, the governments of the Member States are prohibited from seeking to influence the members of the NCBs’ decision-
making bodies whose decisions may affect the fulfilment of the NCBs’ ESCB -related tasks. If 
national legislation mirrors Article 130 of the Treaty and Article 7 of the Statute, it should reflect 
both prohibitions and not narrow the scope of their application.    
2.2.3  Furthermore, the rights of third parties to approve, suspend, annul or defer an NCB’s decisions are incompatible with the Treaty and the Statute as far as ESCB -related tasks are concerned
8. 
Therefore, the Croatian Parliament’s competence to vote on and adopt a decision on HNB’s Annual 
Report on its activities, semi -annual information, annual financial statements and auditor’s report 
could affect the institutional independence of HNB, as it goes beyond the transparency and 
accountability obligation of a central bank towards the national Parliament. The ECB notes that, in 
general, dialogue between NCBs and third parties is welcome and compatible with central bank 
independence, provided that (1) this does not result in interference with the independence of the members of the NCB’s decision- making bodies; (2) the special status of Governors in their capaci ty 
as members of the ECB’s General Council is fully respected; and (3) confidentiality requirements resulting from the Statute of the ESCB are observed. A decision of the Croatian Parliament as regards HNB’s Annual Report, semi -annual information, annual f inancial statements or auditor’s 
report must not result in any direct or indirect instructions being given to HNB, its decision- making 
                                                 
6  'See the ECB’s Convergence Report, June 2016, Chapter 7.5.3' . 
7  See Article 2 of the draft law (which amends Article 62, paragraph 1 of Law on HNB).  
8  See the ECB’s Convergence Report, June 2014, p. 22.  
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4 bodies or its members, for example as regards amending HNB’s Annual Report. Moreover, any 
right of the Parliament to appr ove, suspend, annul or defer HNB’s decisions would be contrary to 
HNB’s institutional independence under the Treaty and the Statute of the ESCB9.  
2.3  Reduction of the number of terms of office of HNB’s Governor and the other members of HNB’s Council  
2.3.1 In view of the principle of central bank independence laid down in Article 130 of the Treaty and 
Article 7 of the Statute of the ESCB, Governors and other members of NCBs’ decision- making 
bodies involved in the performance of ESCB -related tasks may not be dismissed for reasons other 
than those mentioned in Article 14.2 of the Statute. Therefore, the current members of HNB’s Council should be allowed to complete their current terms of office, irrespective of how many terms 
of office have already been served in the past, and the draft law should be adapted to explicitly 
guarantee the completion of their current terms.  
2.3.2  Moreover, t he ECB understands, in accordance with the principles of the rule of law, legal safety, 
legal predictability and legal certai nty under the Croatian Constitution, that the requirement that the 
members of the HNB Council may be appointed for a maximum of two terms of office does not apply in respect of terms which were served before the date the draft law comes into effect
10. This 
implies that the current and past members of the HNB Council  would be able to serve two terms in 
the future,  and that terms served in the past are not included and do not count towards the 
calculation of the limitation of two terms.  The ECB welcomes this f rom the perspective of legal 
certainty . 
 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 15 June 2016.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
9  See Paragraphs 3.5, 3.6 and 3.7 of the Opinion CON/2008/31.  
10  See Decision of the Constitutional Court of the Republic of Croatia U -III-930/2015, 31 March 2015.