Opinion of the European Central Bank of 18 March 2020 on Hrvatska narodna banka (CON/2020/8)
Date: 2020-03-18
Institutions: European Central Bank
Subjects: Croatia, accounting, central bank, financial stability, foreign-exchange reserves, interest, money, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 18 March 2020  

on Hrvatska narodna banka 

(CON/2020/8) 

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 laws’) 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 laws 

1.1  HNB’s institutional and personal independence and international cooperation 

The draft law on HNB clarifies that the institutions and bodies of the European Union (EU) and the 

governments, 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  referred  to  in  Article  6.1  of  the  Statute  of  the 
European System of Central Banks (ESCB) and of the ECB (the ‘Statute’) 4. 

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2  

3  

4 

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.  

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). 

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. 

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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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 
deposits may be negative5. 

1.3  Foreign reserves of Republic of Croatia 

The draft law on HNB streamlines the existing provisions 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,  including  securities  and  all  other  assets  in  the  convertible 

currency of a non-resident debtor or in units 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 financial statements in accordance with ECB Guideline (EU) 2016/2249 

The  draft  law  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  reporting  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 2021 8. 

1.5  HNB’s general 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  provides  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 assets 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 determined by the 
HNB Council10. HNB may also establish provisions for financial risks in accordance with a decision 

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6  
7  

8  

9  
10  

See Article 7 of the draft law on HNB (introducing Article 13(2) of the Law on HNB). 
See Article 8 of the draft law on HNB (amending Article 18(2)-(3) of the Law on HNB). 

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). 

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. 
See Article 55 of the Law on HNB. 

See Article 35 of the draft law on HNB. 

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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  expenditures 12.  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 State budget. 

However, if 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 excess shall be covered from the profit of the 
following years 14. 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 planning 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 defence 16. 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  kuna  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  

12  
13  

14  
15  
16  
17  

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. 
See Article 14 of the draft law on HNB (amending Article 56 of the Law on HNB). 

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), 
decreased  by  general  administrative  expenses  and  depreciation,  as  well  as  assets  allocated  to  specific  reserves. 
See Article 56 of the Law on HNB. 

See Article 15 of the draft law on HNB (amending Article 57 of the Law on HNB). 
See Article 57(5) of the law on HNB. 
See Article 3 of the draft law on HNB (introducing Article 2(10) of the Law on HNB). 

See Explanation accompanying the draft law on HNB, Article 3, p. 26. 

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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 coins 18. 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 1339/2001 19. While performing activities related to 

the  protection  of  euro  banknotes  and  coins  against  counterfeiting,  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 regulations 20. 

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  security  and  intelligence  agency  at 
HNB’s request 21. 

1.10  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 provides that the national reference rate of the average cost of 

financing  the  Croatian  banking  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 publicly 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. 

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20  
21  
22  
23  

See Article 22 (amending Article 76) and Article 23 (introducing Article 77b) of the draft law on HNB.  
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). 

See Article 23 of the draft law on HNB (introducing Articles 76a and 76b of the Law on HNB). 
See Article 11 of the draft law on HNB introducing Article 52(5) of the Law on HNB. 
See Article 59 of the draft law on credit institutions (amending Article 306 of the Law on credit institutions). 

See Explanation accompanying the draft law on credit institutions, Article 59, p. 55. 

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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 
ECB 24.  

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  Guideline.  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 accounts 25. 

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  tasks,  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 allocated 27, 

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 
covered 28.  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 covered from general reserves shall be covered 

from the State budget. Notwithstanding HNB’s current financial 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  

25  

26  
27  
28  

See  ECB  Convergence  Report  2018,  p.  177-178;  ECB  Convergence  Report  2016,  p.  169-170;  see  ECB 
Convergence Report 2014, p. 239-240. 

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. 

See paragraph 3.1.9 of Opinion CON/2018/23 and paragraph 3.1 of Opinion CON/2013/96. 
See ECB Convergence Report 2016, p. 27. 
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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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  tasks.  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  tasks  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 confers 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  amounted  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  independence  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  
30  
31   

32  

See ECB Convergence Report 2018, p. 25-26. 
See Article 76 of the Law on HNB. 

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. 
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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2.8.2  Ensuring that Member States implement a sound budgetary policy is one of the key objectives of 
the  monetary  financing  prohibition,  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  providing  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 financing and the maintenance 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 obligations 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 Regulation (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 government 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  existing  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  ancillary  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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(b)  whether without new financial resources the performance of the new task is disproportionate 

to  the  NCB’s  financial  or  organisational  capacity,  and  may  have  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  criteria  set  out  in  paragraph  2.8.3,  the  following  paragraphs  assess  whether 

HNB’s new task is in line with the monetary financing 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 system 34. 

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  determination  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 the tasks on the independence of HNB 

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 ensuring they exercise their activities 
with  integrity  and  in  an  independent  manner 36.  Accordingly,  HNB  would  have  full  discretion  to 

develop  the  methodology  for  determining  the  NRR  so  as  to  ensure  its  accuracy,  integrity  and 

34  

35  

36  

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. 

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). 

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, 29.6.2016, p. 1). 

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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 appropriate 37. The 

degree  to  which  internal  procedures  of  a  central  bank  should  meet  best  practice  standards  will 

depend on its assessment of the risks to which 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  might  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 tasks, 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 legal proceedings for damages in relation to the exercise of its powers under the draft law or 

37  

38  

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. 

See OICU-IOSCO Principles for Financial Benchmarks (July 2013), p. 27. 

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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 accordance 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  HNB’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  HNB’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  the 

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 

10