The CNB website (www.hnb.hr) provides detailed information on the structure of the banking system in its new Bank Bulletin publication.
A significant segment of the Croatian banking system came under stress in 1998/99 when several banks turned out to be vulnerable to adverse macroeconomic developments. The crisis exposed weaknesses in risk management, substantial related party lending and single client exposure, inadequate provisioning and political interference in lending decisions in a system dominated by public sector banks.
Macroeconomic developments are described in detail in the staff report for 2002 Article IV Consultation (SM/02/230, July 18, 2002).
In response to exchange rate pressures in August 2001, it was decided to require 20 percent of the reserve requirement on liabilities denominated in foreign exchange to be maintained in kuna, to be phased-in in two steps over successive reserve maintenance periods starting on September 8, 2001. The Lombard rate was also raised from 9.5 percent to 10.5 percent. In December, the ratio of foreign currency reserve requirements to be held in kuna was further raised to 25 percent, while the reserve requirement ratio was reduced from 22 percent to 19 percent and the Lombard rate from 10.5 percent to 10 percent.
Detailed recommendations in this regard have been provided by the IMF’s December 2001 technical assistance mission.
Total assets refer to total assets of deposit money banks as published in the CNB’s monthly bulletin.
As of June 2001, one of the ten largest banks reported a capital adequacy ratio (CAR) was just above the statutory requirement (10 percent).
Another approach would be to simulate the impact on the CAR of an increase in nonperforming assets. This assumption, based on the average banking system, is indicated on the second horizontal axis in Figure 2. Since the capital base and the level of nonperforming assets are not unequivocally related, the second horizontal axis is an approximation.
It is noteworthy that a few banks recently have been able to revoke provisions, as they succeeded in recovering more than originally expected.
Smaller banks, in general, appear to be relatively most vulnerable to risk concentration, that is, geographical risk, large exposures, and loans to shareholders and affiliated persons.
In the event of problems in a financial conglomerate, there should be an agreement regarding the “lead” regulator.
The Customs Service is required to send notification to the MoF regarding the legal transfer or any attempt at legal transfer across state borders of cash or checks in domestic or foreign currency amounting to HRK 40,000 or more.
See the Ministry of Finance’s web-site regarding anti-money laundering measures: http://www.tel.hr/crofin/
A division consists of departments.
Principle 1 really consists of 6 principles, accordingly 30 principles are assessed.