ESRB European Systemic Risk Board : Notification by the Croatian Hrvatska narodna banka on seven other systematically important institutions (O-SIIs)

Notification template for Article 131 CRD - Other Systemically Important Institutions (O-SII)

Please send this template to

• •[e-mail] when notifying the ESRB;

• •[e-mail] when notifying the ECB;

• •[e-mail] when notifying the EBA.

Emailing this template to the above-mentioned addresses constitutes an official notification, no further official letter is required. In order to facilitate the work of the notified authorities, please send the notification template in a format that allows electronically copying the information.

1. Notifying national authority
1.1 Name of the notifying authority	Hrvatska narodna banka (HNB)
2. Description of the measure
2.1 Concerned institution or group of institutions	As the process of integration of OTP banka Hrvatska d.d. and Splitska banka d.d. into one entity was finalized on December 1, 2018, the number of O-SII institutions with regard to the last classification declined from 8 to 7.
2.2 Level of the buffer applied	Name of institution concerned Level of the O-SII buffer Zagrebačka banka d.d., Zagreb 2.0% Erste&Steiermärkische Bank d.d. Rijeka Privredna banka banka Zagreb d.d., Zagreb Raiffeisenbank Austria d.d., Zagreb 2.0% 2.0% 2.0% OTP banka Hrvatska d.d., Zagreb Addiko Bank d.d. 2.0% 2.0% Hrvatska poštanska banka d.d., Zagreb 0.2%

Date of template version: 2016-03-01

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2.3 Name of the EU ultimate parent institution	Name of institution concerned Zagrebačka banka d.d., Zagreb Name of the parent institution UniCredit S.p.A. LEI Code (parent inst.) 549300TRUWO2CD2G5692 Erste&Steiermärkische Bank d.d. Rijeka Privredna banka banka Zagreb d.d., Zagreb Raiffeisenbank Austria d.d., Zagreb OTP banka Hrvatska d.d., Zagreb Addiko Bank d.d. Erste Group Bank AG Intesa Sanpaolo S.p.A. Raiffeisen Bank International AG OTP Bank Nyrt. PQOH26KWDF7CG10L6792 2W8N8UU78PMDQKZENC08 9ZHRYM6F437SQJ6OUG95 529900W3MOO00A 18X956 AI LAKE (Luxembourg) S.a.r.l. 222100LC9TDJEKDXOQ07 Hrvatska poštanska banka d.d., Zagreb
2.4 Names of subsidiaries	n/a
3. Timing of the measure
3.1 Timing of the Decision	20th December 2018
3.2 Timing of the Publication	8th January 2019
3.3 Disclosure	Official decision to identified institutions by registered post and publication on HNB's web page.
3.4 Timing of Application	Timing of application depends on the delivery of the decision (see 3.3) to each of the banks in question.
3.5 Phasing in	None
3.6 Review of the measure	At least annually. HNB intends to perform its review each year in autumn, based on reported data as of end-December of the preceding year.
4. Reason for O-SII identification and activation of the O-SII buffer
4.1 Scores of concerned institution or group of institutions, as per EBA guidelines on the assessment of O-SIIs (Article 131.3)	ImportanceName of the institution Size (including substitutability / financial system infrastructure) Complexity / Cross-borderInterconnecte dnessScore Zagrebačka banka d.d., Zagreb 2777 3034 3960 2191 2991 Erste&Steiermärkische Bank d.d. Rijeka Privredna banka banka Zagreb d.d., Zagreb Raiffeisenbank Austria d.d., Zagreb 1444 1523 1630 4241 2209 2270 1930 2376 906 1870 739 972 794 547 763 OTP banka Hrvatska d.d., Zagreb Addiko Bank d.d. 968 429 495 674 642 465 500 345 562 468 Hrvatska poštanska banka d.d., Zagreb 440 423 29 157 262
4.2 Methodology and indicators used for designation of the O-SII (Article 131.3)	a. The identification process followed the methodology set out in the EBA Guidelines (EBA/GL/2014/10). b. Threshold: 275 basis points. Lower threshold is used to account for institutions with scores lower than 350 basis points, but still distinctively higher from scores of other institutions. According to their size, complexity and potential impact on the economy they belong to the group of institutions with systemic importance. c. Please see 4.1. above. d. Institutions listed in 2.1 were identified through the two-step procedure as laid down in EBA guidelines. In the first step, standard scoring approach for the assessment of O-SIIs,
using exclusively mandatory indicators was used. In the second step, classification of credit institutions by scoring approach was subject to supervisory assessment, taking into account all available qualitative and quantitative information on systemic importance of individual institutions from the point of view of assessment of potential consequences that possible disturbances in such credit institutions would generate in the system. e. One additional institution (Hrvatska poštanska banka d.d.) with the score below the threshold was identified as an O-SII institution upon supervisory judgement based on one optional indicator (number of retail deposit accounts) and its former O-SII status. In addition, it was taken into account that the bank in question gained an approval from HNB to acquire a qualifying holding equalling and exceeding 50 percent of the capital of Jadranska banka d.d. in July 2018, that will raise its score after the process of integration is completed. f. Croatian banking market is relatively traditional and conservative, with the retail sector playing an important role. By the number of retail deposit accounts, Hrvatska poštanska banka with a share of 9% (score 895) comparable to O-SII institutions and stands out clearly above the other credit institutions. g. All credit institutions were included in calculation (including ones not exceeding 0.02% of relative total assets and branches for purpose of calculating system-wide aggregates - denominators). h. Non-banks are not included.
4.3 Supervisory judgement	Supervisory assessment (quantitative and qualitative) complemented the scoring process and helped determine the range of relevant sub-scores and total scores. Quantitative supervisory judgement was based on one optional indicator: number of retail deposit accounts. One additional institution (Hrvatska poštanska banka d.d.) with a score below the threshold was identified as an O-SII institution upon supervisory judgement based on optional indicator and its former OSII status. In addition, it was taken into account that the bank in question gained an approval from HNB to acquire a qualifying holding equalling and exceeding 50 percent of the capital of Jadranska banka d.d. in July 2018, that will raise its score after the process of integration is completed.
4.4 Calibrating the O-SII buffer	HNB uses the combination of equal expected impact along with the bucketing approach, recommended by The ESRB Handbook on Operationalising Macro-prudential Policy in the Banking Sector. Potential impact of O-SIIs and non-SIIs in distress is equilibrated via adjusting the probability of distress for O-SII in relation to the probability of distress of a (reference) non-SII based on historical distribution of the ratio of income to RWAs (return on RWA, or RORWA). Empirical findings confirm that in case of six banks identified as O-SIIs the optimal requirement exceeds the legal maximum capital requirement of 2% (thus 2% O-SII buffer rate is applied), while to the remaining institution identified as O-SII applies 0.2% O-SII buffer rate.
4.5 Effectiveness and proportionality of measure	Effectively, the O-SII buffer rates will not be additive to the combined capital requirement consisting of, among others, the SRB buffer rate applied to all exposures (domestic and foreign).
5. Cross-border and cross-sector impact of the measure
5.1 Assessment of cross-border effects and the likely impact on the internal market (Recommendation ESRB/2015/2)	The HNB's framework (Decision, OG 60/2017) provides the assessment of cross-border effects (leakages and regulatory arbitrage) for the implementation of Croatian macroprudential policy measures in own jurisdiction, in other Member States and on the Single Market, following the Recommendation/2015/2. Results of this assessment show that cross-border effects of the measure are expected to be non-significant.
5.2 Assessment of leakages and regulatory arbitrage within the notifying Member State	See 5.1 above.
6. Combinations and interactions with other measures
6.1 Combinations between G-SII and O-SII buffers (Article 131.14)	There are no G-SII in Croatia.
6.2 Combinations with SRB buffers (Article 131.14 + Article 133.5)	All banks are subject to systemic risk buffer applied to all exposures (domestic and foreign). Both O-SII buffers and SRBs should be maintained on both an individual and consolidated level. Where an institution is subject to an O-SII buffer and a SRB buffer, the higher of the two applies. This is currently the SRB rate. Name of institution concernedLevel of the O-SIIbufferSystemic risk buffer rateScope of application of SRB Zagrebačka banka d.d., Zagreb 2.0% Erste&Steiermärkische Bank d.d. Rijeka Privredna banka banka Zagreb d.d., Zagreb Raiffeisenbank Austria d.d., Zagreb 2.0% 2.0% 3.0% 3.0% 3.0% 2.0% OTP banka Hrvatska d.d., Zagreb Addiko Bank d.d. 2.0% 2.0% Hrvatska poštanska banka d.d., Zagreb 0.2% 3.0% 3.0% 3.0% 1.5% All exposures
6.3 O-SII requirement for a subsidiary (Article 131.8)	Name of institution concerned Name of the parent institutionO-SII buffer G-SII bufferrate* Zagrebačka banka d.d., Zagreb UniCredit S.p.A. 1.0% Erste&Steiermärkische Bank d.d. Rijeka Privredna banka banka Zagreb d.d., Zagreb Raiffeisenbank Austria d.d., Zagreb OTP banka Hrvatska d.d., Zagreb Erste Group Bank AG Intesa Sanpaolo S.p.A. Raiffeisen Bank International AG OTP Bank Nyrt. 2.0% 0.75% 2.0% 2.0%rate* 1.0% - - - - * G-SII and O-SII buffers applicable after phase-in period
6.4 Interaction with other measures	There are no interactions with other measures.

7. Miscellaneous
7.1 Contact person(s) at notifying authority	Ms. Lana Ivicic Financial Stability Department Hrvatska narodna banka Phone: ++385 1 456 50 09 E-mail:[e-mail]
7.2 Any other relevant information	Announcement of the HNB Council:Hrvatska poštanska banka granted approval to acquire Jadranska banka, July 4, 2018