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/2019/25)
Date: 2019-07-08
Institutions: European Central Bank
Subjects: Croatia, EU banking union, European Central Bank, banking supervision, central bank, credit institution, financial stability, national law

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/2019/25) 

Introduction and legal basis 

On  27  May  2019  the  European  Central  Bank  (ECB)  received  a  request  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 credit 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  filed  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  Decision  ECB/2014/5  of  the  European  Central 
Bank 3. 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  institutions 5  to  comply  with  the 

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2  

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). 
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). 
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  designated  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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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 established 

1.2.1  For  the  purposes  of  close  cooperation,  the  draft  law  includes  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  Furthermore, 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 applicable in the Republic of Croatia. Additionally, the 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 exercises 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  its 

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  decisions  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.  Additionally,  where  HNB  acts  as  designated  authority  for  the  purposes  of  Article  458(1)  of 

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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  powers 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  initiated 

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 immediate 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 applicable 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 established in the Republic 

of Croatia to be carried out by the ECB pursuant to Article 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. Additionally, 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  institutions, 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 the Republic of Croatia  in  accordance  with  Article  140(2) of the 

Treaty. 

2. 

General observations 

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 necessary 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  Council  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). 

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2.2 

It is important to emphasise 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  Croatia  and  to  ensure  that  HNB  is 

obliged  to  adopt  any  measure  requested  by  the  ECB  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 will include a broader assessment 

of  the  relevant  national  legislation,  also  taking  into  account  the  practical  implementation  of  such 

legislation.  

3. 

Observations regarding close cooperation between ECB and HNB 

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  new  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 HNB, starting from the 

date  on  which  close  cooperation  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 in 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  with  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 Article 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  
8  

Article 3 of the draft law (introducing Articles 11a(9), (10) and (13) of the Law on credit institutions). 

Article 3 of the draft law (introducing Article 11a(12) of the Law on credit institutions). 

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guidelines  or  requests  issued  by  the  ECB  and  that  it  adopts  the  relevant  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  relevant  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 HNB 

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, requests 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 exercise 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 institutions 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 

Regulation  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 
guidelines. 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  which  case  the  reference  to  Regulation  (EU)  No 

1024/2013 in Article 3 of the draft law,  introducing Article 11a(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  
11  
12  
13  

Article 3 of the draft law (introducing Article 11a(2) of the Law on credit institutions). 
Article 2 of the draft law (introducing item (103) in Article 3 of the Law on credit institutions). 
See new Article 11a(2) of the Law on credit institutions. 

In particular for the purpose of new Article 11a(2) of the Law on credit institutions. 

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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  relation  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  emphasised  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 

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