March 23 (SeeNews) - Croatia's central bank said it has barred local lenders from distributing dividend for last year, in order to make sure that the liquidity of the banking system will support the domestic economy amidst the ongoing coronavirus crisis.
Apart from retaining their 2019 net profit, commercial banks are also expected to refrain from distributing various additional remunerations, including bonuses and severance payments, the central bank, HNB, said in a statement on Friday.
These measures are part of the HNB's broader set of adjustments in its approach to the supervision of credit institutions, in compliаnce with the latest positions of the European Banking Authority and the European Central Bank.
The HNB believes that banks should contribute to the efforts for alleviating the social and economic consequences of the coronavirus pandemic. Therefore, the central bank said, it has decided to take a flexible approach in applying the existing regulatory framework in the current exceptional circumstances.
As a result, the HNB is postponing certain supervisory activities such as stress-tests and direct supervision on local credit institutions, instructing the latter to use liquidity reserves and the classification of existing and new exposures to regular debtors until the end of March 2021.
Thus, banks will be able to postpone the payment of obligations and to grant new loans to their regular clients classified as A-clients at the end of 2019, whose operations have already been or will be affected by the coronavirus pandemic, in order to avoid further deterioration of the clients’ financial condition.
Within the one-year period, lenders can still classify such customers as A-clients, without the need to set aside provisions for them, the HNB said, adding that A-clients account for over 90% of all loan placements of credit institutions in Croatia.
"Taking into consideration the high level of capitalisation and liquidity of credit institutions as a whole, the meeting of supervisory expectations should alleviate the negative impact of the coronavirus pandemic on economic activity in the Republic of Croatia," the HNB explained.
Last week, Croatia's parliament approved legislative changes aimed at letting state-owned development bank HBOR and commercial banks freeze and delay loan repayments, as well as provide financing for working capital and for restructuring of existing loans, including loans for financing the payment of salaries, overhead costs and other basic operating costs, in order to support the domestic economy suffering from the spread of the coronavirus disease.