Opinion of the European Central Bank of 15 June 2016 on amendments to the Law on Hrvatska Narodna Banka (CON/2016/33)
Date: 2016-06-15
Institutions: European Central Bank
Subjects: Croatia, activity report, appointment of staff, audit, central bank, institutional activity, national law

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 

Republic  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 and 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 Audit 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 ESCB’ 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 central 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 

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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). 

 
 
 
 
 
 
                                                 
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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 basis 4.  

2.1.2  The ECB understands that the audit performed by the State 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  for  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 to 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 
subject5. Hence, access by the State Audit Office to HNB’s confidential 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 

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3  

4  
5  

For the activities of the independent external auditors of the NCBs see Article 27.1 of the Statute of the ESCB. 
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. 
See the ECB’s Convergence Report, June 2014, p. 26. 
See the ECB’s Convergence Report, June 2014, p. 27. 

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Office  must  safeguard  the  confidentiality  of  information  and  documents  disclosed  by  HNB  to  the 
same extent as the professional secrecy provisions applied by HNB 6.  

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 
wording7 provides that semi-annual information 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, the 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 Article 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 capacity 

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  financial  statements  or  auditor’s 

report must not result in any direct or indirect instructions being given to HNB, its decision-making 

6  
7  
8  

'See the ECB’s Convergence Report, June 2016, Chapter 7.5.3'. 
See Article 2 of the draft law (which amends Article 62, paragraph 1 of Law on HNB). 
See the ECB’s Convergence Report, June 2014, p. 22. 

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bodies  or  its  members,  for  example  as  regards  amending  HNB’s  Annual  Report.  Moreover,  any 

right of the Parliament to approve, suspend, annul or defer HNB’s decisions would be contrary to 
HNB’s institutional independence under the Treaty and the Statute of the ESCB 9.  

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, the ECB understands, in accordance with the principles of the rule of law, legal safety, 

legal predictability and legal certainty 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 effect10. 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  from  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  
10  

See Paragraphs 3.5, 3.6 and 3.7 of the Opinion CON/2008/31. 
See Decision of the Constitutional Court of the Republic of Croatia U-III-930/2015, 31 March 2015. 

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