EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 8 July 2019  
on national legislation to be adopted for the purpose of establishing close cooperation between 
the European Central Bank  and Hrvatska narodna banka  
(CON/20 19/25) 
 
Introduction and legal basis  
On 27 May 2019 the European Central Bank (ECB) received a req uest from Hrvatska narodna banka  
(HNB), on behalf of the Croatian Minister for Finance, for an opinion on a draft law on amendments to the 
Law on c redit institutions (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 and the third and sixth indents of Article 2(1) of Council Decision 
98/415/EC1, as the draft law relates to HNB  and rules  applicable to financial institutions insofar as they 
materially influence the stability of financial institutions  and markets , and the ECB’s tasks concerning the 
prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty . 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  
1.1 Introduction  
 The draft law was  prepared in the broader context of the request fil ed on 27 May 2019 by the 
Republic of Croatia to establish close cooperation between the ECB and HNB, in line with the 
existing procedures established under Article 7 of Council Regulation (EU) No 1024/2013  
(hereinafter the ‘SSM Regulation’)2 and under Deci sion ECB/2014/5 of the European Central 
Bank3. The draft law ensures  the implementation of the SSM Regulation and Regulation (EU) No 
468/2014 of the European Central Bank (hereinafter the ‘SSM Framework Regulation’)4. In this 
respect, the draft law introduces changes to the Law on Credit institutions5 to comply with the 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42) . 
2  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank  
concerning policies relating to the prudential supervision of credit institutions ( OJ L 287, 29.10.2013, p. 63).  
3  Decision ECB/2014/5 of the European Central Bank of 31 January 2014 on the close cooperation with the national  
competent authorities of participating Member States whose currency is not the euro (OJ L 198, 5.7.2014, p. 7).  
4   Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for 
cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent 
authorities and with national designat ed authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 
14.5.2014, p. 1).  
5         Zakon o kreditnim institucijama (Narodne novine no 159/13, 19/15, 102/15 and 15/18).    
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2 prerequisites for the establishment of close cooperation between the ECB and the national 
competent authority (NCA) of a Member State whose currency is not the euro, in order to allow the  
ECB to carry out its tasks concerning the prudential supervision of credit institutions established in 
that Member State. The draft law focuses on two main issues: ( a) ensuring that the NCA  will abide 
by any guidelines or requests  issued by the ECB ; and ( b) ensuring that all credit institutions 
established in Croatia will provide all information that the ECB may require for the purpose of 
carrying out a comprehensive assessment of those credit institutions.  
1.2 Role of the ECB and HNB  once close cooperation is es tablished  
1.2.1  For the purposes of close cooperation, t he draft law inclu des definitions set out in the SSM 
Framework Regulation, in particular definitions for : (a) an NCA  in close cooperation;  (b) a 
supervised entity and significant supervised entity ; (c) a supervised group and significant 
supervised group;  and ( d) a less significant supervised entity and less significant supervised group.  
The draft law also includes a definition for legal acts of the ECB.  
1.2.2  Further more, the draft law puts an obligation on  HNB to  abide by any guidelines or requests issued 
by the ECB, and to adopt any measure in relation to credit institutions requested by the ECB. The 
draft law further provides  that legal acts adopted by the ECB pursuant to the SSM Regulation shall 
be directly app licable in the Republic of Croatia. Additionally, t he draft law specifies that whenever 
the ECB exercises  its supervisory powers  and performs its supervisory tasks referred to in Articles 
4 and 5 of the SSM Regulation, in performing its supervisory tasks and exercising its supervisory 
powers or the powers of the designated authority, HNB shall adopt decisions in accordance with 
the instructions, requests or guidelines issued by the ECB. The draft law  further specifies the 
following . Whenever the ECB exercis es its supervisory powers and performs its supervisory tasks 
as referred to in Article 4(1) and (2) of the SSM Regulation in relation to significant supervised 
entities or significant supervised groups, in performing its supervisory tasks and exercising it s 
supervisory powers, HNB shall adopt decisions only upon the request of and in accordance with 
the ECB's specific instructions, guidelines, requests and measures . In addition,  whenever the ECB 
exercises its supervisory powers and performs its supervisory tasks referred to in Article 4(1) (a) 
and (c) of the SSM Regulation in relation to less significant supervised entities or less significant 
supervised groups, in performing its supervisory tasks and exercising its supervisory powers, HNB 
shall adopt decisio ns only upon the request of and in accordance with the ECB's specific 
instructions, guidelines, requests and measures . Finally,  whenever the ECB exercises its 
supervisory powers and performs its supervisory tasks referred to in Article 4(1) (b), (d) to (g), and 
(i) of the SSM Regulation  in relation to less significant supervised entities or less significant 
supervised groups, in performing its supervisory tasks and exercising its supervisory powers, HNB 
shall adopt decisions upon the request of and in accordance with the ECB’s instructions, 
guidelines, requests and measures.  
1.2.3  The draft law also refers to the exercise of macroprudential tasks under Article 5 of the SSM 
Regulation and specifies that whenever the ECB exercises its supervisory powers and performs  its 
supervisory tasks referred to in that Article, in exercising its powers as macroprudential authority, 
HNB shall adopt decisions in accordance with the instructions, requests or guidelines issued by the 
ECB. A dditionally , where HNB acts as designated a uthority for the purposes of Article 458(1) of 
ECB -PUBLIC  
3 Regulation (EU) No 575/2013 of the European Parliament and of the Council6 or adopts any other 
measures aimed at addressing systemic or other macroprudential risks, whenever the ECB 
exercises its supervisory p owers and performs its  supervisory  tasks referred to in Article 5 of the 
SSM Regulation , in accordance with Article 7 of the SSM Regulation, HNB shall act in accordance 
with the instructions issued by the ECB.  
1.2.4  The draft law further specifies a termination procedure in the event that termination is ini tiated 
under  Article 7(8) of the SSM Regulation, whereby a Member State whose currency is not the euro 
disagrees with a decision of the ECB and may request the ECB to terminate the close cooperation 
with immedi ate effect. The draft law provides that in the event  of termination of close cooperation, 
the legal acts of the ECB adopted pursuant to the SSM Regulation shall cease to be appli cable  in 
the Republic of Croatia.  
1.3 Provision of information for the purpose of conducting a comprehensive assessment of credit 
institutions established in the Republic of Croatia  
 With regard to the comprehensive assessment of the credit institutions est ablished in the Republic 
of Croatia to be carried out by the ECB pursuant to Arti cle 7(2)(b) of the SSM Regulation, the draft 
law provides that the ECB or any person empowered by the ECB shall be directly provided with all 
necessary information, and that  such provision of information shall not be considered a disclosure 
of a business or banking secret. A dditionally , for the purposes of the comprehensive assessment, 
the ECB or any person empowered by the ECB may : (a) request credit institutions to submit 
documentation; ( b) carry out a review of books and documentation of credit instituti ons, including 
obtaining copies of such documentation; ( c) request written and oral explanations from credit 
institutions and from their employees; and ( d) for the purpose of collecting information, interview 
any person it considers as having relevant information, provided such person provides their explicit 
consent.  
1.4 Termination of close cooperation  
 The draft law provides that the close cooperation provisions of the Law on credit institutions will 
cease to apply  either : (a) from the date of termination of close cooperation pursuant to Article 7 of 
the SSM Regulation,  or (b) from the date on which the derogation pursuant to Article 139 of the 
Treaty is abrogated in respect of th e Republic of Croatia in accordance with Article 140(2) of the 
Treaty . 
 
2. General o bservations  
2.1 The ECB welcomes the draft law as part of the process leading to the establishment of close 
cooperation between the ECB and HNB pursuant to Article 7 of the SSM Regulation. The ECB 
notes that the request for and adoption of this opinion are nec essary on the basis of Article 2 and 
Article 3(2)(b) of Decision ECB/2014/5.  
                                                 
6     Regulation (EU) No 575/2013 of the European Parliament and of the C ouncil of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 
27.6.2013, p. 1).  
ECB -PUBLIC  
4 2.2 It is important to emphasi se that, pursuant to Article 7(2) of the SSM Regulation and Article 3(2) (b) 
of Decision ECB/2014/5, the scope of this opinion pertains to the national legislation to be adopted 
by the Republic of Croatia to ensure that legal acts adopted by the ECB pursuant to the SSM 
Regulation are binding and enforceable in the Republic of C roatia and to ensure that HNB is 
obliged to adopt any measure requested by the EC B in relation to the supervised entities in 
accordance with Article 7(4) of the SSM Regulation.  
2.3 The ECB notes that  this opinion is without prejudice to the assessment to be conducted by the 
ECB in accordance with Article 4 of Decision ECB/2014/5, which wil l include a broader assessment 
of the relevant national legislation, also taking into account the practical implementation of such 
legislation .  
 
3. Observations regarding close cooperatio n between ECB and H NB 
3.1 Establishment and termination of close cooperation  
3.1.1  The ECB welcomes the introduction of new provisions into the Law on credit institutions aimed at 
addressing in a cohesive manner several aspects related to the establishment and operation of 
close cooperation with the ECB. The ECB understands that the ne w provisions will be read in 
accordance with the other provisions of the Law on credit institutions, so that the exercise of 
prudential supervision over credit institutions established in the Republic of Croatia will take place 
under the framework provided for in the SSM Regulation.  
3.1.2  The ECB also welcomes that the application of the new provisions of the Law on credit institutions  
will be linked to the duration of the close cooperation between the ECB and H NB, starting from the 
date on which close cooperati on will begin as indicated in the ECB decision establishing close 
cooperation, until termination of close cooperation either under Article 7 of the SSM Regulation or 
from the date on which the derogation pursuant to Article 139 of the Treaty is abrogated i n respect 
of the Republic of Croatia  in accordance with Article 140(2) of the Treaty. This approach will 
facilitate the transition from one system to the other and will ensure clarity w ith respect to the 
applicable legal framework before, during and after close cooperation.    
3.1.3  With respect to the request to terminate close cooperation, the ECB understands that the draft law7 
regulates the coordination between the HNB and the Government of  the Republic of Croatia, and 
does not affect the application of Articl e 7(6), (7) and (8) of the SSM Regulation.  In this respect, it is 
noted that the draft law8 mirrors the scope of Article 7(7) of the SSM Regulation, which 
nevertheless remains the relevant applicable legal basis regulating the reasoned disagreement 
procedure.  
3.2 Role of the ECB and HNB once close cooperation is established  
3.2.1  In order to ensure that supervised entities and groups established in a Member State in close 
cooperation will be in a position comparable to supervised entities and groups established in euro 
area Member States, Article 7 of the SSM Regulation states  as a precondition for the establishment 
of close cooperation that the requesting Member State ensures that its NCA abides by any 
                                                 
7  Article 3 of the draft law (introducing Articles 11a(9), (10) and (13) of the Law on credit institutions ). 
8  Article 3 of the draft law (introduci ng Article 11a(12) of the Law on credit institutions ). 
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5 guidelines or requests issued by the ECB and that it adopts the r elevant national legislation to 
ensure that its NCA will be obliged to adopt any measure in relation to credit institutions requested 
by the ECB. This requirement is further specified under Article 3(2)(a) of Decision ECB/2014/5, 
which provides that the re levant national legislation has to ensure that acts adopted by the ECB 
under the SSM Regulation are binding and enforceable9. 
3.2.2  Against this background, the ECB welcomes the provisions of the draft law that ensure that H NB 
will abide by any guidelines or requests issued by the ECB, and will adopt any measure in relation 
to credit institutions requested by the ECB , including adopting decisions in accordance with the 
instructions, req uests or guidelines issued by the ECB. In particular, the ECB understands that  the 
provisions of the draft law aim to ensure compliance with the abovementioned requirements and 
that the ECB is able to exercise its supervisory powers and perform its supervisory tasks under the 
framework of close cooperation.  In this respect, the ECB highlights the importance of having in 
place a legal framework providing HNB with all necessary powers to comply with all instructions 
which the ECB may adopt under the SSM Regulation.  
3.2.3  Lastly , the ECB welcomes the clarification in the draft law on the exer cise of its supervisory powers 
and the performance of its supervisory tasks in respect of significant and less significant credit 
institutions, in particular that HNB will act only upon the ECB’s request for the supervision of 
significant credit institutio ns and in the context of common procedures . 
3.3 Applicability of ECB legal acts  
3.3.1  The ECB notes that the draft law10 provides that ECB legal acts adopted pursuant to the SSM 
Regu lation will be binding and enforceable in the Republic of Croatia. The ECB therefore 
understands that such cross -reference will be sufficient to ensure applicability of ECB legal acts 
and that no additional primary or secondary provision  will need to be adopted for each individual 
legal act.  
3.3.2  The ECB also notes that the definition of “legal  acts of the ECB ” included in  the draft law11 refers to 
“regulations, decisions, recommendations and opinions that European Central Bank adopts in 
accordance with Article 34 of the Statute of the European System of Central Banks and of the 
European Central Bank ”. This definition would exclude from the scope of application of the draft 
law12 other legal acts which the ECB could adopt under the SSM Regulation, most importantly 
guidelin es. For this reason, the ECB is of the view that, for the purpose of the draft law13, it would  
be more opportune to either : (a) use in the definition the same wording as Article 3(2)(a) of the 
ECB decision establishing  close cooperation, which refers to “legal acts adopted by the ECB 
pursuant to Regulation  (EU) No 1024/2013” , in whi ch case the reference to  Regulation (EU) No  
1024/2013 in Article 3 of the draft law , introducing Article 1 1a(2)  of the Law on credit institutions , 
should be omitted;  or (b ) delete the definition of "legal acts  of the ECB " in Article 2 of the draft law , 
introducing item (103) in Article 3 of the Law on credit institutions , since the legal acts that the ECB 
                                                 
9         See paragraph 3.2.1 of Opinion CON/2018 /49. 
10  Article 3 of the draft law (introducing Article 11a(2) of the Law on credit instituti ons). 
11  Article 2 of the draft law (introducing item (103) in Article 3 of the Law on credit institutions) . 
12  See new Article 11a(2)  of the Law on credit institutions.  
13  In particular for the purpose of new Article 11a(2)  of the Law on credit institutions . 
ECB -PUBLIC  
6 may adopt pursuant to the SSM Regulation are already referred to in Article 3,  introducing Article 
11a(2)  of the Law on credit institutions .  
3.4 Provision of  information for the purpose of a conducting comprehensive assessment of credit 
institutions established in the Republic of Croatia  
3.4.1  The ECB understands that the draft law aims to ensure compliance with the undertaking of the 
Republic of Croatia to provide the ECB with all information on credit institutions established in 
Croatia that the ECB may require for the purpose of carrying out a comprehensive assessment of 
those credit institutions, in line with Article 7(2)(b) of the SSM Regulation. In particular, it is 
understood that HNB, as the consulting authority , is fulfilling this undertaking by imposing 
obligations directly upon credit institutions.  
3.4.2  Nonetheless, it is stressed that this approach should not be read as affecting the position of the 
ECB in rela tion to Croatian credit institutions or as conferring powers on the ECB which may go 
beyond what is provided for under the SSM Regulation. It is emphasi sed that even after the 
establishment of close cooperation, HNB will remain the authority responsible for adopting 
decisions addressed to Croatian credit institutions. It is understood that this will also be the case for 
the purpose of the assessments necessary to establish close cooperation, in line with the Treaty 
and the SSM Regulation . 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt  am Main, 8  July 2019 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI