boris vujcic : croatia's joining the euro area makes it an active participant in defining a common monetary policy speech by mr boris vujcic, governor of the croatian national bank, at the conference " croatia, the 20th member of the euro area ", zagreb, 24 january 2023. * * * your excellencies, esteemed guests, ladies and gentlemen, it is my honour and pleasure to welcome you to the conference that marks an outstanding success of our country, our economy and our society as a whole, to which many of you have directly contributed : the introduction of the euro in croatia. allow me to extend my deepest gratitude to you for all your effort, hard work and dedication to this, in all respects, complex and demanding project. commenced in 2017 with the eurostrategy, a strategic document outlining significant and lasting economic benefits to be brought to the croatian economy by the euro and, in contrast, relatively small and mostly one - off costs, the project involved a lot of stakeholders in croatia and abroad. exposed to a great many risks, it demanded that quite a few goals be achieved and challenges overcome in the process, which was done successfully and in the shortest possible period, notwithstanding all external shocks and requirements that had to be met along the way. some of them are widely known, while only a narrow circle of those involved is familiar with the others. still fresh in our memories are the covid pandemic and the devastating earthquake that hit zagreb in march 2020. both happened in a critical moment, only a few months before our accession to the erm ii, at the time when we were taking the last structural reform measures that we were obligated to implement. additionally, the pandemic caused the eu focus to shift to other pressing issues. it is with great effort that we managed to overcome all these shocks and obstacles that spring. however, just as we thought that everything was under control, we were taken by another surprise : our project was once again subjected to a test. in the second half of 2021, due to an uneven post - pandemic recovery and supply chain disturbances, global inflation picked up and inflation rates became much more dispersed across eu member states. the unfavourable inflationary dynamics was further exacerbated by the russian aggression of ukraine in february 2022, which happened only a few months before croatia's fulfilment of the nominal convergence criteria was to be assessed by the convergence report. given that

demonstrated that the relaxation given to banks in august 2008 for restructuring of loans helped them and their borrowers to tide over the impact of the global financial crisis. however, the working group observed that there has been an extraordinary rise in the level of restructured “ standard ” assets, even surpassing the quantum of gross npas of the banking sector. as seen from an updated table below, standard restructured assets continuously exceeded the gross npas since 2010 : bis central bankers ’ speeches on top of that a rating agency has estimated that restructured standard assets may increase sharply to reach rs. 3, 25, 000 crore by march 2013. public sector banks bear a disproportionate burden of the restructured loans. gross npa ratio, which was hitherto the main financial ratio to gauge the level of impairment in the banking sector assets, is now being complemented with the ratio of restructured standard advances to gross advances as a measure of latent impairment of the banking sector ’ s financial assets. this is in view of the perception by some of the market players that a significant portion of these standard advances are actually impaired or will turn non - performing with passage of time. the credibility of the indian banking system is at stake. the economist ( london ), in its august 18 – 24, 2012 issue has also commented that india ’ s public sector banks are sitting on something unpleasant ( restructured loans ). our own indian economic daily, the economic times on september 9, 2012 commented that the present practices are completely defeating restructuring. regulatory forbearance the concept of standard restructured assets arose when the rbi allowed project loans to retain their standard asset classification on extension of their repayment schedule in may 1999. that is if in the opinion of the bank the bottleneck in achieving regular commercial production was of a temporary nature not indicative of any long - term impairment of the unit ’ s economic viability and the unit was likely to achieve cash break - even if some time was allowed. this was extended to treatment of restructured accounts in march 2001. with the issue of comprehensive guidelines on restructuring in august 2008, this regulatory forbearance was made available to all types of loan restructuring except commercial real estate exposures, capital market exposures and personal and consumer loans. as a basic premise it should be understood that the need for restructuring arises when a standard account borrower faces difficulties in repayment and such an account should be classified as impaired on restructuring. the working group studied the international best practices