The Croatian legislator recently made a positive move to revive the Croatian capital market by enacting the Act on the Implementation of the Securitization Regulation (EU) 2017/2402 (“Act”).
This Act sets out provisions of a rather technical and regulatory nature determining the competent authorities and their supervisory measures as well as cooperation between the competent authorities. Moreover, the Act specifies penal sanctions for non-compliance with certain supervisory measures and provisions of the Securitization Regulation.
The competent authorities for implementing the Securitization Regulation in Croatia are the Croatian Financial Services Supervisory Agency (“HANFA”) and the Croatian National Bank (“CNB”). HANFA supervises a list of entities such as insurance companies, alternative investment funds (“AIFs”), Alternative Investment Fund Managers (“AIFMs”), UCITS funds, UCITS Management Companies (“ManCos”), Investment Firms (“IFs”), leasing companies, factoring companies and pension funds. Within its supervisory power, HANFA may require access to or delivery of any document in any form as well as a review of data exchange, including records of telephone calls, from any person. The Act authorizes HANFA to impose some supervisory measures (i.e. a warning to a legal or natural person as well as an order to temporarily block financial instruments) and additional measures (i.e. temporarily prohibiting the performance of activities already approved or revoking the licence or consent issued). The CNB regulates credit institutions and securitization special purpose entities formed by the credit institutions defined under the Croatian Credit Institutions Act.
The Croatian legislator clarified who can be servicer in Croatia. The servicer, upon which a sponsor delegates the servicing of securitized exposures, may include AIFMs, ManCos, IFs and Credit Institutions. In this respect, amendments to the Croatian UCITS Act and the AIF Act have also been made to address the exposure to securitization of AIFMs and ManCos and compliance with the general requirements prescribed by the Securitization Regulation.
Introduction of this Act is a step in the right direction for securitization transactions in Croatia; however, provisions of the Act are not fully sufficient to ensure the simple, transparent and standardized securitization (STS) transactions envisaged under the Securitization Regulation. There are still a number of positions applicable under Croatian law that require additional amendments, fine tuning, and more detailed regulations from a legal and commercial standpoint to ensure simple and straightforward securitization transactions.
While the Act was being prepared, the Croatian Ministry of justice announced that they plan to take further legislative action to enhance the current general legislative framework for securitization and establish a higher level of legal certainty when structuring securitization transaction under Croatian law.