ECB to Conduct Comprehensive Assessment of Five Croatian Banks
ECB announced that it will comprehensively assess financial soundness of five Croatian banks: Zagrebačka banka, Privredna banka Zagreb, Erste & Steiermärkische Bank, OTP banka Hrvatska, and Hrvatska poštanska banka. The exercise will comprise an asset quality review (AQR) and a stress test. This assessment is the result of submission of a request by Croatia in May 2019, under which Croatia seeks to establish close cooperation between ECB and Hrvatska narodna banka. The exercise is expected to start in September 2019, with the results due to be finalized in May 2020. ECB also published the frequently asked questions about the request of Croatia to establish close cooperation with ECB.
Banks will be assessed on the basis of data as at June 30, 2019. A comprehensive assessment is required as part of the process of establishing close cooperation between ECB and the national competent authority of an EU member state whose currency is not the euro. The general objectives of every comprehensive assessment conducted by ECB are to assess whether banks are fundamentally sound, enhance the quality of information available on the condition of banks, and identify problems and implement the necessary corrective actions. The AQR and the stress test will be based on the methodologies applied by ECB Banking Supervision in its regular comprehensive assessments of credit institutions that have recently been classified as significant or could potentially become significant. The AQR will be performed using the updated AQR methodology, which ECB had published in June 2018 and which considers the impact of IFRS 9.
The five banks have been chosen to ensure a level of coverage that is consistent with Article 6(4) of the Single Supervisory Mechanism (SSM) Regulation and is broadly comparable with the previous comprehensive assessments conducted by ECB since 2014. Institutions are selected on the basis of their size, risk profile, and overall significance for the national economy and this involves taking account of several elements such as the business model of the institution, its internal governance and risk management, its capital risk, its liquidity and funding risk, and its interconnectedness with the rest of the financial system. ECB will also assess the relevant Croatian legislation, ensuring that Hrvatska narodna banka will be obliged to adopt all measures requested by ECB in relation to Croatian credit institutions. ECB Banking Supervision is working closely with Hrvatska narodna banka in view of its potential future role as a national competent authority within SSM. The steps that are being taken in this regard are in line with the process that was recently followed for Bulgaria.
Related Links
Keywords: Europe, EU, Croatia, Banking, Comprehensive Assessment, Asset Quality Review, Stress Testing, IFRS 9, Hrvatsa Narodna Banka, SSM, ECB
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Previous Article
MAS Updates Guide to Digital Token Offerings in SingaporeRelated Articles
CBUAE Issues Regulation for Low-Risk Specialized Banks
CBUAE has issued a regulation that introduces the licensing and supervision framework for low-risk, specialized banks.
APRA Proposes Guidance to Support Prudential Standard on Remuneration
APRA is consulting on CPG 511—the draft Prudential Practice Guide on remuneration for banks, insurers, and superannuation licensees—with the comment period ending on July 23, 2021.
MAS Announces Grant Scheme to Spur Adoption of Regtech Solutions
MAS announced a new RegTech grant scheme and an enhancement of the Digital Acceleration Grant (DAG) scheme to accelerate technology adoption in the financial sector.
PRA Review Finds Most Banks Compliant with Regulatory Reporting Rules
PRA published a letter that sets out findings from the 2020 Internal Audit Review of the Collections function of a sample of non-systemic banks and building societies.
EIOPA Launches Consultation on Interbank Offered Rate Transitions
EIOPA launched a consultation on the Interbank Offered Rate (IBOR) transitions, in context of the EU Benchmarks Regulation.
EIOPA Seeks Feedback on Approach to Blockchain and Smart Contracts
EIOPA published a discussion paper on uses cases of, and the European approach to, blockchain and smart contracts in the insurance sector.
HKMA Outlines Work Priorities for 2021, Grants License to NH Bank
HKMA granted a banking license to NongHyup Bank (also NH Bank), which is incorporated in the Republic of Korea.
PRA Proposes Options for Regulatory Framework for Non-Systemic Banks
PRA published a discussion paper that explores options for developing a simpler but resilient prudential framework for banks and building societies that are neither systemically important nor internationally active.
ECB Issues Opinion on Proposal for Market Infrastructures Based on DLT
ECB published an opinion on the proposal for a regulation on the pilot regime for market infrastructures based on distributed ledger technology.
EBA Proposes Standards to Determine Risk-Weight for Immovable Property
EBA proposed regulatory technical standards that specify how to identify the appropriate risk-weights and conditions when assessing minimum loss given default (LGD) values for exposures secured by immovable property.
