The financial sector in Croatia has undergone significant transformation since the country gained independence in the early 1990s. While the banking industry has shown resilience, there are still inherent risks associated with banks operating in the jurisdiction, such as exposure to external economic shocks and market volatility. It is crucial for retail depositors and small businesses to be aware of these risks and understand the importance of bank deposit insurance.
Bank deposit insurance is essential for retail depositors and small businesses because it protects their deposits in case of a bank’s failure. By providing a safety net, it contributes to maintaining the stability of the financial system and public confidence in the banking sector.
In Croatia, the Deposit Guarantee Scheme (DGS) is administered by the State Agency for Deposit Insurance and Bank Resolution (DAB), located in Zagreb. The DAB operates under the legal framework set out in the Deposit Guarantee Act and the Act on the Recovery and Resolution of Credit Institutions and Investment Firms.
The Deposit Guarantee Scheme of Croatia is activated when a credit institution is declared unable to meet its obligations or is placed under bankruptcy or liquidation. In such cases, the DAB is responsible for compensating eligible depositors up to the coverage limit, which is currently set at 100,000 euros per depositor per bank. Temporarily high balances, such as those arising from real estate transactions, inheritances, or insurance payouts, may be covered up to 500,000 euros, but only for three months from the date of the deposit.
Eligible depositors include individuals, small businesses, non-profit organizations, and local governments. However, there are some exclusions to the coverage, such as deposits made by credit institutions, financial institutions, or investment firms, and deposits related to money laundering or terrorism financing.
Claims must be filed within a specific timeframe, usually set at 3 months from the date of the DAB’s notification. In case of a rejected or ineligible claim, depositors can seek legal remedies through the courts or explore alternative options, such as the sale of their claims to third parties.
If the claim filing period has ended and there are still unclaimed or unsecured surplus deposits, depositors can submit a request to the DAB to access their remaining funds. The DAB will assess the request and determine the appropriate course of action.
In the last decade, several banks in Croatia have experienced difficulties, but none have been declared insolvent or failed. The most notable case is that of Agrokor, a major Croatian conglomerate that experienced a financial crisis in 2017, which significantly impacted several banks exposed to its debt. This event highlighted the importance of adequate risk management and the need for the continuous improvement of regulatory frameworks.
Understanding the Deposit Guarantee Scheme of Croatia is essential for retail depositors and small businesses, as it offers financial protection and contributes to the stability of the financial system. By staying informed about the DGS’s activation process, coverage limits, claim procedures, and recent bank failures, depositors can make better decisions and safeguard their financial future.