Croatia’s Banking Sector Sees Major Overhaul in 2023: Euro Adoption, Regulatory Changes, and Sustainable Financing on the Rise
=====================================================
In a significant move to align itself with European Union directives, Croatia has undergone major transformations in its banking and financial sector this year. The country officially adopted the euro as its official currency, implemented stricter regulations on anti-money laundering and cryptocurrency businesses, and witnessed a surge in sustainable financing.
Euro Adoption: A Major Milestone
The adoption of the euro as the official currency was a major milestone for Croatia, with the transition period set to end on December 31, 2023. To ensure consumer protection during this time, dual disclosure requirements have been put in place, obliging businesses to state their prices in both euros and kuna using a fixed conversion rate.
Technical Adaptations
The change has required technical adaptations from banks, financial institutions, the Zagreb Stock Exchange, and the Central Depository & Clearing Company Inc (SKDD). Despite the challenges posed by a high inflation rate, Croatia’s banking and finance market was well-prepared for the new currency.
Regulatory Changes: A Focus on Transparency and Security
Regulatory changes have also been a significant focus area in 2023. The country has enacted two key acts:
Acts Enacted
- Amendment to the Croatian Act on the Prevention of Money Laundering and Funding of Terrorism, which came into effect on January 1, 2023.
- Regulation on managing the register of virtual asset service providers and assessing the “good reputation” of individuals in this field, which took effect on July 6, 2023.
Anti-Money Laundering Regulations
Croatia is aligning itself with European Union directives concerning anti-money laundering, extending these regulations to encompass cryptocurrency businesses. This move aims to ensure greater transparency and security in the sector.
Sustainable Financing: A Growing Trend
Sustainable financing has also seen significant progress in Croatia. Banks have begun offering sustainable loans to entrepreneurs seeking to make their businesses climate-resilient. The country has also witnessed a surge in sustainability-linked bond issuance.
Sustainability-Linked Bonds
- In 2022, Meritus Ulaganja Joint Stock Company for Managing of Companies of Mplus Group allocated €40 million in sustainability-linked bonds, committing to reduce carbon emissions by 25% and increase the representation of women in management teams to 51%.
- This year, Zagrebacki Holding issued a record-breaking €305 million in sustainability-linked bonds, with performance goals including elevating waste separation through investments and increasing renewable energy consumption.
Looking Ahead to 2024
As the country looks ahead to 2024, it is expected that the banking and financial services sector will continue to grow in a positive direction. With its focus on sustainable financing and regulatory changes, Croatia appears poised for further progress in the years to come.