NIS PROPERTY CROATIA

There are 30 brokerage companies and 18 banks in the Croatian capital market which have obtained a licence to trade in securities from Croatian Financial Services Supervisory Agency. All these companies, including Zagreb stock exchange, Central Depository Agency and the Zagreb Money Market, are members of the CCE Association for Financial Market Operations and Intermediation.

All companies are members of the Investment Fund Management Companies Association within Croatian Chamber of Economy. In order to promote the development and raise the general level of business dealings, professional relations and execution of activities related to investment fund management, according to economic principles and professional regulations and good business practice and business ethics, and to ensure the qualitative protection and business conduct on the market, the Association passed the Code of Business Conduct for Investment Fund Management Companies.

The associations mentioned above have been established in order to achieve greater professional co-ordination and to ensure the institutional protection of its members common interests. They co-operate successfully with Croatian Financial Services Supervisory Agency, Central Register of Insured Persons, Ministry of Finance and other institutions.

The Securities Market Act defines, among other things, procedure for the issuance of securities, transactions in securities and persons authorised to deal in securities, terms for public dealing with securities, protection of investors and bearers of rights derived from securities, dematerialised securities, as well as the organisation and responsibilities of the Central Depository Agency, stock exchanges and regulated public markets.

A foreign issuer may issue securities in the Republic of Croatia by public offering only through an authorised company engaged to act as an agent or sponsor for the issue. A domestic issuer intending to issue securities in a foreign market is obligated to notify the Agency beforehand about the characteristics of the planned securities issue. Business transactions in securities can be conducted in the Republic of Croatia only by authorised companies - brokerage companies and banks - which have been granted a licence for this type of business by the Agency and which have had this activity entered in the Court Register. Foreign brokerage companies authorised to deal in securities may set up branch offices in the Republic of Croatia upon obtaining a licence from the Agency.

The bank may carry out its securities transactions through its own brokerage company (it can have stocks or stakes in one brokerage company only). Banks have custody of securities based on the Agencys licence for such activity. Organised trading in securities is performed on exchanges and regulated public markets, which are established in order to create conditions for integrating the supply of and demand for securities. The Agencys licence is a requirement.

There are currently 33 commercial banks in the Croatian banking market, the Croatian Bank for Reconstruction and Development and 5 building societies. Six banks based outside the Republic of Croatia have their representative offices in Croatia. The reduction in the number of banks since 1998 has resulted from amalgamation, take-overs and the bankruptcy of some banks. The share of banks in the total assets of financial intermediaries at the end of the first six month in 2006 amounted to 76%, while the share of the building societies amounted to 1.5%.

The legal reserve ratio is uniform and amounts to 17%. The basis for calculating legal reserves consists of a domestic currency portion and a portion in foreign exchange. The Croatian National Banks (HNB) discount rate is 4.5%. The HNB calculates and charges an annual interest rate of 7.5% a year on collateral loans.

Foreign ownership share of total assets in 2006 was 90.8%. 15 banks are either fully or majority-owned by foreign entities and two banks are fully of majority-owned by the state.In 2006 commercial banks granted credits to a total amount of 190,125.3 millions HRK (both in HRK and in foreign currency). This is a 22.7% increase compared with the end of the previous year. At the end of 2006 the share of credits granted to the citizens with regard to the total amount of granted credits reached 50.33%, and the share of credits granted to companies 41.17%. Other credits were granted to central and local government (7.67%), other banking institutions (0.19%) and non-banking financial institutions (0.64%).

Croatian banks continue to invest heavily in technology development in order to increase the number and quality of financial products and services. Banks offer Internet banking, telephone banking, mobile banking, drive-in banking etc. to clients. Card transactions have become an increasingly important sphere of business for Croatian banks in the past few years, and bank clients have recognised the advantages of using cards. The research of card transactions in Croatia conducted every three months by the CCE Banking and Finance Department shows a continuous increase in the number of cards issued, of ATMs and EFT/POS terminals in Croatia.

The Croatian National Bank is the central bank of the Republic of Croatia and is entirely owned by the Republic of Croatia. It operates autonomously and independently, while being responsible to the Croatian Parliament. The primary objective of the CNB is to achieve and maintain price stability.

The CNBs tasks include the formulation and implementation of monetary and foreign exchange policy; maintaining and managing Croatian international reserves; issuance of banknotes and coins; issuing and revoking operating licences for banks, bank supervision and enactment of subordinate legislation governing bank operations; maintaining banks accounts and executing payments through them, granting loans to banks and receiving deposits from them; regulation, improvement, and supervision of the payment system; performing operations on behalf of the Republic of Croatia as defined by law; enactment of subordinate legislation relating to operations within its field of competence as well as performing other operations as provided by law.