Croatia updates bank crisis management law to align with EU rules

Zagreb (Photo: Mister No/CC BY 3.0)

ZAGREB, 1 May 2026 (Hina) – Croatia’s parliament has adopted amendments to its law governing the resolution of credit institutions and investment firms, further aligning the country’s financial crisis management framework with European Union standards developed after the global financial crisis.

The changes focus on how authorities intervene when banks face serious financial difficulties, aiming to ensure timely and controlled action before a collapse occurs. The reforms follow ongoing obligations to harmonise national legislation with EU directives, after the European Commission requested additional clarification on Croatia’s implementation of existing rules.

At the core of the amendments is a strengthened system for absorbing losses and recapitalising banks during crises. The goal is to stabilise institutions without relying on public funds, instead applying the EU’s “bail-in” principle, where shareholders and creditors bear losses according to clearly defined rules.

State Secretary at the Ministry of Finance, Matej Bule, told parliament that the changes are designed to ensure losses are covered and banks recapitalised “with minimal impact on financial stability and without burdening taxpayers”.

The updated framework also introduces clearer ranking of financial instruments within insolvency procedures, placing certain loss-absorbing instruments between regulatory capital and other senior liabilities, such as employee claims.

Although officials say it is unlikely the new resolution regime will need to be activated soon, recent experience has highlighted the importance of preparedness. Bule pointed to the unexpected resolution of Sberbank as an example of how quickly situations can escalate.

“Legal certainty and readiness are essential,” he said, emphasising the need for a fully aligned framework in advance of any potential crisis.

The reforms are part of a broader EU effort to reduce risks in the banking sector and establish consistent rules across member states. They are based on the Bank Recovery and Resolution Directive (BRRD), which forms a cornerstone of the EU’s banking union.

The European Parliament played a key role in shaping these rules, particularly in clarifying creditor hierarchies and introducing new categories of subordinated debt to strengthen banks’ loss-absorbing capacity.

Former MEP Gunnar Hökmark previously highlighted that such legislation improves the resilience of European banks and supports the development of capital markets. Similarly, Othmar Karas stressed the importance of ensuring taxpayers are no longer required to bail out failing banks.

The amendments also streamline decision-making during crisis situations. The Croatian National Bank and the Croatian Financial Services Supervisory Agency will only need approval from the Ministry of Finance when decisions deviate from pre-approved resolution plans or have direct fiscal implications.

This adjustment is intended to enable quicker responses in high-pressure situations where delays could worsen financial instability.

While the law further clarifies how losses are distributed within banks’ capital structures, its primary aim is to ensure institutions can be stabilised and continue operating. Liquidation remains a last resort if recovery measures fail.

The legislation was adopted under an urgent procedure, reflecting Croatia’s commitment to meet EU alignment deadlines by mid-2026.