EN ECB -PUBLIC  
 
 OPINION OF THE EUROPEAN CENTRAL BANK  
of 18 March  2020  
on Hrvatska narodna banka  
(CON/20 20/8) 
 
Introduction and legal basis  
On 29 January 2020 the European Central Bank (ECB) received from Hrvatska narodna banka (HNB) 
two requests for opinion  on two draft laws, being (i)  a draft Law amending  the Law on HNB  (hereinafter 
the ‘draft law on HNB ’) and (ii) a draft law amending the Law on credit institutions (hereinafter the ‘draft 
law on credit institutions’ ) (together  referred to hereinafter as the ‘draft law s’)1. 
The ECB’s competence to deliver this  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the second,  third and sixth indents of Article 2(1) of Council 
Decision  98/415/EC2, as the provisions of the draft laws addressed by this opinion3 relate to  means of 
payment, to HNB  and to rules applicable to financial institutions insofar as they materially influence the 
stability of financial institutions and markets . 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 s 
1.1 HNB’s i nstitutional and personal independence and international cooperation  
 The draft law on HNB clarifies  that the institutions and bod ies of the European Union (EU) and the 
government s, agencies,  offices and other bodies of the EU Member States  may not influence the 
members of  HNB’s decision -making bodies . The draft law also specifies  that the competence of the 
HNB Council to decide on HNB’s membership in international institutions and organisations shall 
be without prejudice to the powers of the ECB ref erred to in Article 6.1  of the Statute of the 
European System of Central Banks (ESCB) and of the ECB (the ‘Statute’)4. 
                                                 
1  HNB’s authority to consult the ECB is based on Article 39(1) of the Law on HNB, whereby HNB may require the 
Government of the Republic of Croatia to propose the enactment of laws concerning HNB to the Croatian 
Parliament. The Ministry of Finance is the proponent of the draft laws, which were approved by the Croatian 
Government on 23 January 2020 and were delivered on the same day to the Croatian Parliament for the next steps 
in the legislative process.  
2  Council Decision 98/415/EC of 29 June 1998 on the c onsultation of the European Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
3  This opinion addresses those provisions of the draft laws that concern the institutional independence of HNB, the 
personal independence of its decision- making bodies , HNB’s international cooperation, HNB’s possible application of 
negative interest rates, the Republic of Croatia’s foreign reserves, HNB’s financial statements, general reserves, 
revaluation accounts, provisions for financial risks and profit and loss, HNB’s planning for the euro cash changeover, 
HNB’s anti -counterfeiting tasks, security checks of HNB employees and HNB’s calculation of the national reference 
rate of the average cost of financing the Croatian banking sector. The remaining provisions of the draft laws are 
addressed in a separate opinion.  
4 See Articles 20 and 28 of the draft law on HNB (amending Articles 71 and 104 of the Law on HNB).  
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2 1.2 Possibility for HNB to apply negative interest rates  
 The draft law on HNB provides that the interest rate for the funds that HNB has received as 
deposit s may be negative5. 
1.3 Foreign reserves  of Republic of Croatia  
The draft law on HNB streamlines the existing provision s of the Law on HNB regarding the foreign 
reserves  of the Republic of Croatia, providing that the  foreign reserves comprise all types  of foreign 
exchange assets and precious metals, includ ing securities and all other assets in the convertible 
currency of a non- resident debtor or in unit s of account, in whatever form held, and that in order to 
manage the foreign reserves, HNB may buy and sell spot and forward or otherwise acquire these 
types of assets . Existing requirements relating to investment ratings by credit rating agencies are 
removed6. 
1.4 Preparation of HNB f inancial statements  in accordance with ECB Guideline (EU) 2016/2249  
 The draft l aw on HNB requires  HNB to prepare financial statements in accordance with ECB 
Guideline (EU) 2016/22497 (hereinafter the ‘ ECB Accounting Guideline’ ). Provided there is no 
contrary decision of the HNB Council, HNB shall,  when report ing on transactions that are not 
regulated by the ECB Accounting Guideline , apply valuation principles in accordance with 
International Financial Reporting Standards (IFRS) accepted by the EU, which are significant for 
the operations and reports of HNB.  HNB’s  financial statements are to be prepared according to 
these requirements for the financial year 20218. 
1.5 HNB’s g eneral reserves, revaluation accounts and provisions for financial risks  
Under the existing provisions of the Law on HNB , HNB’s reserves comprise general reserves to 
cover general operational risks, the amount of which shall not be limited, and specific reserves to 
cover identified losses established pursuant to a decision of the HNB Council9. The draft law on 
HNB instead pr ovides that HNB shall establish general reserves to cover general business risks, 
where the lower bound of general reserves shall be determined by a decision of the HNB Council. 
HNB shall establish revaluation accounts for the purpose of revaluation of ass ets and liabilities in 
accordance with the ECB Accounting Guideline.  HNB shall also  establish revaluation accounts 
whose establishment is not regulated by the ECB Accounting Guideline , in accordance with 
applicable IFRS  established by the European Commission.  Revaluation accounts are to be 
established from the part of general reserves as at 1 January 2021 related to unrealised gains on 
the revaluation of assets and liabilities in the previous years, in the amount to be d etermined by the 
HNB Council10. HNB may also establish provisions for financial risks in accordance with a decision 
                                                 
5 See Article 7 of the draft law on HNB (introducing Article 13(2) of the Law on HNB).  
6  See Article 8 of the draft law on HNB (amending Article 18(2) -(3) of the Law on HNB).  
7  Guideline (EU) 2016/2249 of the European Central Bank of 3 November 2016 on the legal framework for accounting 
and financial reporting in the European System of Central Banks (ECB/2016/34) (OJ L 347, 20.12.2016, p.  37). 
8  See Articles 16 (amending Article 60 of the Law on HNB) and 35(3) of the draft law on HNB; see also Explanation 
accompanying the draft law on HNB, Article 16, p. 30.  
9  See Article 55 of the Law on HNB.  
10  See Article 35 of the draft law on HNB.  
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3 of the HNB Council. The provisions for risks are to be established from the part of general reserves 
as at 1 January 2021 in the amount to be determined by the HNB Council11. 
1.6 Profit and loss of HNB  
The draft law on HNB provides that the profit ( or loss) of HNB shall be calculated for each financial 
year as the difference between HNB's total income and total expenditures12. As noted in the 
explanatory memorandum accompanying the draft law on HNB, in accordance with the ECB 
Accounting Guideline, unrealised gains on exchange rate differences and changes in market prices 
are not recognised in the profit and loss account, i.e.,  they are not included in the calculation of the 
financial result . Therefore, the draft law shortens and simplifies the definition13. HNB profit reported 
in the financial year shall be allocated to general reserves and to the State budget in accordance 
with a decision of the HNB Council.  As a general rule, the profit of HNB shall be allocated so that 
20% of the profit is allocated to general reserves and 80% constitutes revenue to the S tate budget. 
However, i f the amount of general reserves on the last day of the financial year is lower than the 
lower bound of general reserves  determined by the HNB Council , the HNB Council shall allocate  
the required amount of profit to general reserves until their lower bound is reached. As far as 
coverage of loss is concerned,  the loss of HNB shall firstly be covered from general reserves. If 
HNB's loss is higher than the general reserves, the exc ess shall be covered from the profit of the 
following years14. By contrast, under the existing Law on HNB, any shortfall between income and 
expenditures that cannot be covered from general reserves shall be covered from the State 
budget15. 
1.7 HNB’s p lanning for euro cash changeover  
 The draft law on HNB provides that the location, structure and operations of HNB's treasury are of 
material importance for the financial, economic and security interests of the Republic of Croatia and 
its defence16. As noted in the explanatory memorandum accompanying the draft law, HNB requires 
new larger capacities for cash storage at a new location due to the fact that the current capacities 
of HNB, because of their spatial and security conditions, fail to meet the requirements for the 
conversion of the k una into euro. This  provision therefore serves as a basis for the adoption of 
subordinate legislation by HNB in order to more precisely define security , defence and other 
measures aimed at preventing situations that could prove to be damaging to economic and 
financial national interests, especially where the supply of information in procurement procedures 
could damage security interests17. 
                                                 
11  See Articles 12 and 13 (amending Article 55 and introducing Articles 55a and 55b of the Law on HNB ) and 
Article  35(1) -(2) of the draft law on HNB.  
12  See Article 14 of the draft law on HNB (amending Article 56 of the Law on HNB).  
13  See Explanation accompanying the draft law on HNB, Article 14, p. 29. Under the existing provisions of the Law on 
HNB the surplus of income over expenditure or shortfall between income and expenditures  of HNB shall be 
calculated for each financial year as the sum of net operating income (realised income) and net profit (or loss) from 
the value adjustment of balance sheet items to changes in the exchange rate or market prices (unrealised income), 
decreas ed by general administrative expenses and depreciation, as well as assets allocated to specific reserves. 
See Article 56 of the Law on HNB.  
14  See Article 15 of the draft law on HNB (amending Article 57 of the Law on HNB).  
15  See Article 57(5) of the l aw on HNB.  
16  See Article 3 of the draft law on HNB (introducing Article 2(10) of the Law on HNB).  
17  See Explanation accompanying the draft law on HNB, Article 3, p. 26.  
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4 1.8 HNB’s tasks concerning protection of kuna, euro and foreign banknotes and coins against 
counterfeiting  
 The draft law on HNB provides that  HNB  shall have  competence  for the technical analysis of 
suspect samples of kuna and foreign banknotes and coins (including lipa coins) and combating the 
counterfeiting of these banknotes and coins18. HNB  shall also be the competent national authority  
for the protection of the euro against counterfeiting as provided for in Council Regulation (EC) 
No 1338/2001 and Council Regulation (EC) No 1339/200119. While performing activities related to 
the protection of euro banknotes and coins against counterfeiti ng, the HNB shall act entirely in 
accordance with EU rules. HNB shall have  competence  for the technical analysis of suspect 
samples of euro and banknotes and coins and for combating the counterfeiting of these banknotes 
and coins . To this effect, HNB shall cooperate with the competent national authorities and 
institutions in Croatia and abroad and adopt implementing acts providing for the direct application 
of EU rules that  are fully in line with EU regulations20. 
1.9 Security checks of specified HNB employees  
 The draft law on HNB requires HNB to identify the employment positions with HNB that, due to 
their high degree of sensitivity, need to be subject to a basic security check of all applicants , with 
the basic security check to  be carried out by the competent securit y and intelligence agency at 
HNB’s  request21. 
1.10 HNB’s new task concerning calculation of national reference rate of average cost of financing the 
Croatian banking sector  
 The draft l aw on credit institutions provides that the national reference rate of the average cost of 
financing the Croatian ba nking sector (NRR) shall be calculated  by HNB  and published on its 
website. HNB shall calculate the NRR based on data available to HNB, collected from credit 
institutions for regulatory purposes. HNB shall pu blicly disclose the methodology for the calculation 
of the NRR and the NRR release calendar  on its website22. As noted in the explanatory 
memorandum accompanying the draft law on credit institutions , the NRR is the only index  
calculated and published with the explicit aim of serving as an index  to determine the variable 
portion of the variable interest rate on consumer loans. The NRRs (24 different indices) are 
currently not calculated by HNB as the holder of the aforementioned data, but are calculated and 
published as implicit weighted interest rates by the Croatian Banking Association based on the data 
on the cost of financing of credit institutions in Croatia published by HNB23. 
 
                                                 
18  See Article 22 (amending Article 76) and Article 23 (introducing Article 77b) of the draft law on HNB .  
19  Council Regulation (EC) No 1338/2001 of 28 June 2001 laying down measures necessary for the protection of the 
euro against counterfeiting (OJ L 181, 4.7.2001, p. 6); Council Regulation (EC) No 1339/2001 of 28 June 2001 
extending the effects of Regulation (EC) No 1338/2001 laying down measures necessary for the protection of the 
euro against counterfeiting to those Member States which have not adopted the euro as their single currency (OJ L 
181, 4.7.2001, p. 11).  
20  See Article 23 of the draft law on HNB (introducing Articles 76a and 76b of the Law on HNB).  
21  See Article 11 of the d raft law on HNB introducing Article 52(5) of the Law on HNB.  
22  See Article 59 of the draft law on credit institutions (amending Article 306 of the Law on cr edit institutions).  
23  See Explanation accompanying the draft law on credit institutions, Article 59, p. 55.  
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5 2. Observations  
2.1 HNB’s institutional and personal independence  
2.2 The ECB welcomes the clarification that the Croatian Government  may not influence the members 
of the HNB’s decision- making bodies. This amendment of  the Law on HNB makes this provision 
fully consistent with Article 130 of the Treaty , in line with suggestions previously made by the 
ECB24.  
2.3 Foreign reserves of Republic of Croatia  
The ECB notes that the new provisions regarding the Republic of Croatia’s foreign reserves closely 
correspond to the wording of the second indent of Article 23 of the Statute.  
2.4 Preparation of HNB financial statements in accordance with ECB Guideline (EU) 2016/2249  
The ECB welcomes the amendment proposed by the draft law on HNB whereby  HNB will prepare 
its financial statements in accordance with the ECB Accounting Guideli ne. Although the ECB 
Accounting Guideline does not lay down binding rules for the national reports and financial 
accounts  of any national central bank (NCB) , in order to achieve consistency and comparability 
between Eurosystem  and national regimes , the ECB  recommends that NCBs should, to the extent 
possible, follow the rules set out in this Guideline for their national reports and financial accounts25. 
2.5 HNB’s general reserves, revaluation accounts and provisions for financial risks  
Under the principle of financial independence provided for  in Article 130 of the Treaty, an NCB, in 
the performance of its tas ks, may independently assess financial  risks involved in its operations, 
and has the power to take decisions  on any necessary precautions. Consequently NCBs should be 
given the ability to safeguard the real value of their capital and assets by being free to 
independently create adequate financial buffers26. The ECB therefore welcomes the provisions of 
the draft law on HNB concerning HNB’s general reserves, revaluation accounts and provisions for 
financial risks, which will contribute to the financial independence of HNB . 
2.6 Profit and loss of HNB  
With regard to profit allocation, an NCB’s statute may prescribe how its profits are to be allocated27, 
and the ECB welcomes the clarifications introduced in this respect . Furthermore, profits may be 
distributed to the State budget only after any accumulated losses from previous years have been 
covered28. The ECB therefore welcomes the fact that the draft law on HNB provides for this 
contingency . However, the draft law on HNB eliminates  the existing provision whereby  any shortfall 
between income and expenditures that cannot be cov ered from general reserves shall  be covered 
from the State budget . Notwithstanding HNB’s current financi al position, the ECB cautions against  
any situation in which  an NCB’s  net equity  is below the level of its statutory capital ( or is even 
                                                 
24  See ECB Convergence Report 2018, p. 177- 178; ECB Convergence Report 2016, p. 169- 170; see ECB 
Convergence Report 2014, p. 239- 240. 
25  See Article 2(2) of the ECB Accounting Guideline and paragraph 4 of Opinion CON/2005/61. All ECB Opinions are 
published on the ECB 's website at www.ecb.europa.eu . 
26  See paragraph 3.1.9 of Opinion CON/2018/23 and paragraph 3.1 of Opinion CON/2013/96.  
27  See ECB Convergence Report 2016, p. 27.  
28  See ECB Convergence Report 2018, p. 27; paragraph 4.3 of Opinion CON/2009/85 and paragraph 3.2.5 of Opinion 
CON/2017/17.  
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6 negative) for a prolonged period of time, including where losses beyond the level of capital and the 
reserves are carried over. Any such situation may not only negatively impact the NCB’s ability to 
perform its ESCB -related tasks , but also its national tas ks. Therefore, the event of an NCB’s  net 
equity  becoming less than its statutory capital ( or even negative)  would require the respective 
Member State to provide the NCB with an appropriate amount of capital at least up to the level of 
the statutory capital  within a reasonable period of time so as to comply with the principle of financial 
independence29. Against this backdrop, the ECB considers the existing mechanism whereby losses 
that cannot be covered from general reserves are automatically covered from the State budget to 
be a useful mechanism that serves to strengthen HNB’s financial independence . The ECB  regrets 
the fact that this mechanism is not maintained in the current draft law on HNB . 
2.7 HNB’s tasks concerning protection of kuna, euro and foreign banknotes and coins against 
counterfeiting  
Under the existing Croatian legal framework , HNB is responsible for the handling of suspect kuna 
and foreign banknotes and coins  (including lipa coins) , as well as protecting euro banknotes and 
coins against counterfeiting and distribution30. Consequently, the draft law on HNB does not confer 
genuinely new tasks on HNB in this respect, and the issue of assessing whether the conferral of 
new t asks on an  NCB complies with the prohibition of monetary financing does not arise in the 
case at hand. The ECB welcomes the fact that HNB will act entirely in accordance with EU rules 
while performing activities related to the protection of euro banknotes and coins against 
counterfeiting  and distribution.  
2.8 HNB’s new task concerning calculation of national reference rate of average cost of financing the 
Croatian banking sector  
The draft law on credit institutions  confer s on HNB the new task of calculating and publishing the 
NRR on its website. The ECB understands that the NRR is one of the most important reference 
interest rates in Croatia and has thus far been calculated and published by the Croatian Banking 
Association. The ECB understands that as at September 2019 a 29% share of loans with a variable 
interest rate referenced the NRR ; this share amount ed to HRK 46  billion of credit institutions’ 
loans31. The ECB understands that due to the importance of the NRR for the domestic financial 
market, and in order to ensure the continuity and independ ence of the NRR’s calculation and 
publication, the NRR and related calculation methodology will be published by HNB on its website 
for the first time in May 2020, and will continue to be published on a quarterly basis . 
2.8.1  Where a new task is conferred on an  ESCB central bank , that task  must be assessed against the 
prohibition on monetary financing under Article 123 of the Treaty. For the purposes of that 
prohibition, Article 1(1)(b)(ii) of Council Regulation (EC) No 3603/9332 defines ‘other type of credit 
facility’ as, inter alia, ‘any financing of the public sector’s obligations vis -à-vis third parties’.  
                                                 
29  See ECB Convergence Report 2018, p. 25- 26. 
30  See Article 76 of the Law on HNB.  
31   See HNB press release ‘The Croatian National Bank to take over the calculation and publication of the national 
reference rate (NRR)’, 13.1.2020, available at www.hnb.hr.  
32  Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the 
prohibitions referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1).  
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7 2.8.2  Ensuring that Member States implement a sound budgetary policy is one of the key objectives of 
the monetary financing prohi bition, which may not be circumvented33. In view of this, the task of 
financing measures, which are normally the responsibility of the Member States and funded from 
their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To decide what 
constitutes financing of the public sector’s obligations vis -à-vis third parties, which can be 
understood as provi ding central bank financing outside the scope of central bank tasks, it is 
necessary to carry out a case- by-case assessment of whether the task to be undertaken by an 
NCB is a central bank task or a government task, i.e. a task within the responsibility of the Member 
State. In other words, adequate safeguards must be in place to ensure strict compliance with  the 
prohibition of  monetary financ ing and the maint enance of  sound budgetary policy by each  Member 
State.  
2.8.3  As part of its discretion in the exercise of its duty, on the basis of Article 271(d) of the Treaty and 
Article 35.6 of the Statute, and in order to ensure that NCBs honour the obligat ions laid down by 
the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for 
determining what may be seen as falling within the scope of a public sector’s obligation within the 
meaning of Article 1(1)(b)(ii) of Regul ation (EC) No 3603/93 or, in other words, what constitutes a 
government task as follows:  
First, central bank tasks are in particular those tasks that are related to the tasks that have been 
conferred upon the ECB and the NCBs by the Treaty and the Statute.  These tasks are mainly 
defined in Article 127(2), (5) and (6) and Article 128(1) of the Treaty, as well as Article 22 and 
Article 25.1 of the Statute.  
Second, as Article 14.4 of the Statute allows NCBs to perform ‘other functions’, new tasks  – i.e. 
tasks that are not related to tasks that have been conferred upon the ECB and the NCBs  – are not 
precluded per se. However, new tasks that are undertaken by an NCB and that  are atypical of NCB 
tasks or are clearly discharged on behalf of, and in the exclusive interest of the government or of 
other public sector entities, should be considered government tasks.  
Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly 
on behalf of, and in the exclusive interest of the go vernment or other public sector entities, is the 
impact of the task on the institutional, financial and personal independence of that NCB.  
In particular, the following aspects should be taken into account:  
(a) whether the performance of the new task creates conflicts of interest with existing central 
bank tasks that are not adequately addressed, and does not necessarily complement those 
existing central bank tasks. If a conflict of interest arises between existi ng and new tasks, 
sufficient safeguards to mitigate that conflict should be in place. The complementarity 
between a new task and the existing central bank tasks should not be interpreted broadly, so 
as to lead to the creation of an indefinite chain of anci llary tasks. Such complementarity 
should also be examined in relation to the financing of those tasks;  
                                                 
33  Article 123 of the Treaty also serves the objective of maintaining price stability and reinforces central bank 
independence.  
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8 (b) whether without new financial resources the performance of the new task is disproportionate 
to the NCB’s financial or organisational capacity, and may ha ve a negative impact on its  
capacity to perform properly existing central bank tasks;  
(c) whether the performance of the new task fits into the institutional set -up of the NCB in the 
light of central bank independence and accountability considerations;  
(d) whether  the performance of the new task harbours substantial financial risks;  
(e) whether the performance of the new task exposes the members of the NCB decision- making 
bodies to political risks that  are disproportionate and may also have an impact on their 
personal independence and, in particular, on the guarantee of term of office set out in 
Article  14.2 of the Statute.  
2.8.4  On the basis of the c riteria set out in paragraph 2. 8.3, the following paragraphs assess whether 
HNB’s new task is in line with the monetary financi ng prohibition.  
New tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the 
Statute  
Calculation and publication of interest rate benchmarks is not among the central banking tasks 
listed in Article 127(2) or (5) of the Treaty or  otherwise conferred upon the NCBs by the Statute. 
However, interest rate benchmarks are important for the functioning of financial markets. Financial 
markets rely on such benchmarks as a reference in financial contracts, in this case in mortgage  
and consumer loans. The absence of robust and reliable benchmarks might therefore trigger 
financial market disruptions with a possible adverse impact on HNB’s ability to contribute to the 
stability of the financial system34. 
Tasks that are atypical of NCB tasks 
Central banks have a particular interest in interest rate benchmarks , which are linked to financial 
stability . The ECB itself and the Eurosystem NCBs have tasks and responsibilities with respect to 
their contribution to the euro short -term rate deter mination process , albeit in the context of inter -
bank rather than consumer lending35. HNB’s new task of calculating and publishing the NRR on its 
website is not, therefore, atypical for an NCB of the ESCB.  
Impact of th e tasks on the independence of H NB 
The ECB notes that the common framework to ensure the accuracy and integrity of indices used as 
benchmarks in financial instruments and financial contracts under Regulation (EU) 2016/1011 of 
the European Parliament and of the Council does not  apply to central banks, as central banks 
already meet principles, standards and procedures aimed at  ensur ing they exercise their activities 
with integrity and in an independent manner36. Accordingly, HNB would have full discretion to 
develop the methodolog y for determining the NRR so as to ensure its accuracy, integrity and 
                                                 
34  See recital 1 of Guideline (EU) 2019/1265 of the European Central Bank of 10 July 2019 on the euro short -term rate 
(€STR) (ECB/2019/19) (OJ L 199, 26.7.2019, p. 8) , and paragraphs 2 and 3.2.4 of Opinion CON/2014/2.  
35  See Guideline (EU) 2019/1265 of the European Central Bank of 10 July 2019 on the euro short -term rate (€STR) 
(ECB/2019/19) (OJ L 199, 26.7.2019, p. 8) . 
36  See Recital 14 and Article 2(2)(a) of Regulation (EU) 2016/1011 of the European Parliament and of the Council of 
8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the 
performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) 
No 596/2014 (OJ L 171, 29.6.20 16, p. 1).  
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9 reliability. When central banks provide benchmarks, it is their responsibility to establish appropriate 
internal procedures in order to ensure the accuracy, integrity, reliability and independence of those 
benchmarks, taking into account international best practice where relevant and appropriate37. The 
degree to which internal procedures of a central bank should meet best practice standards will 
depend on its assessment of the risks to whi ch the benchmark is exposed, e.g. from manipulation 
risk. 
Extent to which the performance of the new task creates conflicts of interest with existing central 
bank tasks  
The performance of HNB’s new task complements its existing tasks, as  central banks have an  
interest in interest rate benchmarks  for consumer loans due to their  links to financial stability . 
HNB’s new task also complements its existing activities related to the provision of  data collected 
from credit institutions for regulatory purposes for the calculation of the NRR . As regards conflicts 
of interest that may arise with respect to the involvement of HNB staff and members of HNB ’s 
decision -making  bodies in the production of the NRR, HNB m ight wish to consider publishing its 
arrangements for managing conflicts of interest on its website, in connection with the publication of 
the methodology for calculating the NRR . In the interests of accountability, HNB may also consider 
having the control procedures for the NRR audited for their compliance with relevant international 
best practices38. 
Extent to which the performance of the new task places a disproportionate burden on HNB’s 
financial or organisational capacity  
The principle of financial independence requires that Member States may not put their NCBs in a 
position where they have insufficient resources to carry out both their ESCB -related tasks and their 
national task s, from an operational and financial perspective. Furthermore, when allocating specific 
new tasks to NCBs, each NCB concerned should have sufficient financial and human resources at 
its disposal to ensure that the tasks can be carried out without impacting on the NCB’s financial or 
operational capacity to perform its ESCB tasks. In order to ensure that HNB’s capacity to perform 
its ESCB -related tasks is not impacted, HNB must, therefore, be in a position to avail itself of the 
necessary resources, including personnel, to carry out its new task of calculating and publishing 
the NRR on its website.  
Extent to which performance of the new task fits into HNB’s institutional set-up, in the light of the 
principles of central bank independence and accountability  
The performance of the new task  fits smoothly into HNB’s institutional set -up, given the links with 
financial stability. The new task does not therefore raise accountability or personal and institutional 
independence concerns.  
Extent to which the performance of tasks harbours substantial financial risks  
The draft law on credit institutions  does not directly address HNB’s potential liability in the event of 
any l egal proceedings for damages in relation to the exercise of its powers under the draft law  or 
                                                 
37  See paragraph 3.4 of Opinion CON/2019/18, and Board of the International Organization of Securities Commissions 
(OICU- IOSCO), Principles for Financial Benchmarks (July 2013), available at www.iosco.org.  
38  See OICU -IOSCO Principles for Financial Benchmarks (July 2013), p. 27.  
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10 the failure to exercise these powers. In the absence of any provision in the draft law excluding 
HNB’s liability, HNB would ultimately be liable for damages in ac cordance with the general liability 
regime under Croatian law. Therefore, the new task conferred on HNB under the draft law would 
entail additional financial risks.  
Extent to which the performance of the new task exposes members of H NB’s decision- making 
bodies to disproportionate political risks and has an impact on their personal independence  
The performance of the new task does not appear to expose the members of H NB’s decision -
making bodies to any disproportionate political risk or to have an impact on their personal 
independence.  
Conclusion regarding the compatibility of the draft law with the prohibition on monetary financing  
HNB’s new task of calculating and publishing the NRR on its website complements  HNB’s financial 
stability role, as well as  HNB’s existing provision of data for calculating the NRR . This task is not  
atypical for NCBs in the ESCB ; the ECB itself and the Eurosystem NCBs have tasks and 
responsibilities in contributing  to the euro short -term rate determination process , albeit in th e 
context of inter -bank rather than consumer lending. When central banks calculate and publish 
interest rate benchmarks, it is their responsibility to establish appropriate internal procedures in 
order to ensure the accuracy, integrity, reliability and independence of those benchmarks, taking 
into account international best practice where relevant and appropriate.  In addition, they should 
avail themselves of the necessary resources, including personnel, to carry out this new task.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 18 March 2020.  
 
[signed]  
 
The President of the ECB  
Christine LAGARDE