engleski

Croatian banking regulation` perspectives in light of EU accesion

Banking regulation accomplishes safety of banking system by the regulation processes and by risk limitations for banks. In that sense, regulators aims to connect banks` risk exposures with their capital. Capital has a protective function, where in the case of losses is used for paying customers. Taking into account all above- mentioned measures and decisions one can assume that regulatory costs in Croatian banking system are very high. These costs mainly come from the fact that big parts of funds are imobilizated in some forms of reserves. Croatian banking system is, in comparison with other sectors of Croatian economy, relatively well developed and has good perspectives for the future. In the last few years there were many efforts in adjustment of banking regulation with the standards of European union. According to the International Monetary Fund, during the last few years, has introduced all required regulatory changes. In that sense, IMF has specially mentioned new Banking Law and Decision on capital adequacy. Moreover, according to the Croatian government, the biggest part of Croatian banking legislation is adjusted with European union directives. However, there is also the question of adopting Basel II accords in banking regulation. Due to that, Croatian National Bank is currently working on the new legislation that will be based on Basel II. The problem lies in the fact that banking sector regulatory burden is substantially higher then in EU or in neighboring countries. Moreover, Croatian specialty is a marginal obligatory reserve Similar regulation currently exists only in Serbia and Romania. However, according to Stabilization and Association Agreement, Republic of Croatia would need to remove all capital restrictions. The treatment of marginal obligatory reserve as a capital restriction is questionable, but there will surely be discussions on that topic. Croatian banking system is highly regulated and costs of regulations are substantially higher then in the peer country group. However, due to the processes of EU accession and EMU introduction it is expected that banking regulation would change substantially.

EU accession ; European Monetary Union ; Croatian banks ; banking regulatory changes

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