Press release from Croatia's central bank HNB issued on Tuesday rejected allegations that governor Boris Vujcic, and his deputy, Sandra Svaljek, breached any regulations, in response to an article published by Index.hr news website alleging that several central bank employees, including Vujcic, had traded in bonds of banks which are regulated by the central bank.

Index reported on Monday that over the past 20 years more than 40 central bank employees had traded in bonds of banks regulated by HNB. The trades involved more than 400 transactions worth more than 10 million kuna (€1.3m) in total, according to publicly available documents of the Central Depository and Clearing Company (SKDD).

In its unsigned press release, carried by state agency Hina, the central bank said that bank’s executives and advisers to the governor must not, under Croatian law, own shares in the legal entities to which the HNB issues operating licences or whose operations it oversees.

“In line with the relevant regulations, HNB Council members, executive directors and advisers to the governor submit to the HNB once a year a statement in which they provide, among other things, information regarding ownership of stocks and shares in the supervised and related legal entities and auditing agencies,” the press release said.

“Should it arise from the content of a statement that an employee holds stocks or shares in the legal entities concerned, the HNB informs them in direct communication that it expects the employee to align their actions with applicable legal regulations,” the HNB said, noting that it has “no other legal ground to independently inquire or investigate if the persons concerned respect the prescribed restrictions.”

‘Distinction should be made between stocks and shares and banks’ corporate bonds’

The HNB notes, however, that stocks and shares should be distinguished from banks’ corporate bonds.

“It is not against the law if an employee, including the governor, an HNB Council member or executive director, holds banks’ corporate bonds. However, that rule has changed, so under the new Decision on special restrictions for insiders and other HNB employees, as of 1 March 2022, some of the HNB employees will not be allowed to trade in the corporate bonds of banks which were established or have an affiliate in the European Union,” the HNB said.

The HNB notes that in 2019 it established the Office for Business Compliance, which ensures integrity and highest ethical standards, and that its new Code of Ethics went into force on 6 October 2020. By establishing close cooperation with the European Central Bank, the HNB has also adopted the ECB’s guidelines on ethics framework and will continue to advance supervision and mechanisms ensuring HNB employees’ compliance not only with all legal regulations but also with the letter and spirit of the HNB Code of Ethics and the ECB guidelines, the HNB said.

As for specific allegations by Index.hr that refer to central bank executives, Governor Boris Vujcic and his deputy Sandra Svaljek, the central bank said that Vujcic had bought stocks of Rijecka Banka and Zagrebacka Banka in the 1990s, “prior to his appointment as senior central bank official,” back when the law did not ban either central bank governor and senior officials to own stocks of the banks regulated by HNB.

Vujcic sold Erste and ZABA stocks month before Law on Central Bank entered into force

“It was the new HNB leadership that in 2000 initiated changes to the law which banned the governor, HNB Council members, and HNB executive directors, to own stocks and shares in banks supervised by the HNB,” the press release said.

Vujcic thus sold his stocks of Erste & Steiermarkische Bank – which in the meantime had bought Rijecka Banka – and of Zagrebacka Banka, in March 2001, a month before the new law came into force, which was reported by the media at the time.

Sandra Svaljek, who between 2000 and 2013 was an “external member of the HNB Council,” bought corporate bonds of Erste & Steiermarkische Bank on 23 November 2012, and held them until their maturity in 2017.

“As already stated, there is no legal restriction that would forbid a member of the HNB Council to own bonds of legal persons to which the HNB issues operating licences or whose operations it oversees,” the HNB said, adding that Svaljek did not violate any regulations.

As regards Davor Holjevac, also mentioned in the Index.hr article, who currently serves as a “senior adviser in the Office of the HNB Governor,” and who was HNB vice-governor from 2006 to 2012, according to his regular declarations, the HNB said they do not have any information about Holjevac owning stocks or shares in the legal persons supervised by the HNB at the time he was HNB vice governor.

According to his statement, Holjevac bought a bond of Erste & Steiermarkische Bank in 2009 and held it until its maturity in 2014, the HNB said.