The Council of the Croatian National Bank adopted a decision at its session on 24 May 2016, at 15:00 hours to submit a request to the Commercial Court in Split to open bankruptcy proceedings against Banka splitsko-dalmatinska d.d., Split, 114 brigade 9.

            The decision was adopted based on the provisions of Article 265, item (1) and Article 267, paragraph (1) of the Credit Institutions Act (Official Gazette 159/2013, 19/2015 and 102/2015 ) and Article 28, paragraph (6) of the Act on the Resolution of Credit Institutions and Investment Firms (Official Gazette 19/2015) and Article 42, paragraph (3), item (9) of the Act on the Croatian National Bank (Official Gazette 75/2008 and 54/2013).

            This was decided following a decision of the CNB Council determining that Banka splitsko-damatinska d.d. was failing, that the shareholders were not ready to strengthen the capital and that it was not reasonable to expect that other measures of the private sector, institutional protection schemes, supervisory measures, supervisory measures in the early intervention phase or a decline in the value or the conversion of relevant capital instruments could prevent its failure within a reasonable timeframe. The CNB Council also determined that resolution of Banka splitsko-dalmatinska d.d. was not necessary in the public interest and that the two grounds for bankruptcy referred to in Article 266, paragraph (1), item (1) and item (2), in connection with paragraph (2), items (3) and (4) of the Credit Institutions Act were found to exist, namely:

• that there were objective elements supporting the determination that the assets of Banka splitsko-dalmatinska d.d. would soon be less than its liabilities, and
• that there were objective elements supporting the determination that Banka splitsko-dalmatinska d.d. would soon be unable to pay its liabilities as they fell due and that, given the fact that the Bank did not meet the own funds requirements and that the Croatian National Bank estimated, in the context of its supervisory authorities that it was possible that Banka splitsko-dalmatinska d.d. would not be able to meet all its due monetary liabilities.

In the context of its supervisory authorities, the Croatian National Bank carried out an on-site examination of operations of Banka splitsko-dalmatinska d.d. from 14 September 2014 to 7 October 2015 and determined that the Bank had acted contrary to the Credit Institutions Act and Regulaton (EU) No 575/2013, in an extent which jeopardises its stability and sustainability of its business operations. The CNB issued a Decision on 28 December 2015, imposing a range of measures on the Bank to eliminate the established illegalities and irregularities, the most important of which was to increase own funds. Since Banka splitsko-dalmatinska d.d. did not meet the supervisory measures, the Council of the CNB acted in accordance with its legislative obligations, estimating that the grounds for bankruptcy referred to in Article 266, paragraph (1), item (1) and item (2) and in connection with paragraph (2), items (3) and (4) of the Credit Institutions Act have been found to exist and proposed that a bankruptcy proceeding be initiated against Banka splitsko-dalmatinska d.d. For the purpose of implementing this decision, CNB Governor issued a Decision to appoint a special administration which would, pending the adoption of a court decision on the initiation of a bankruptcy proceeding, take over the authorities of the Management and Supervisory Boards of the credit institution for the purpose of preserving the assets of Banka splitsko-dalmatinska d.d.

            At the end of 2015, the assets of Banka splitsko-dalmatinska d.d. stood at HRK 454 941 thousand and the Bank's market share stood at 0.11 percent.

            From the moment of the adoption of the said decision by the Council of the Croatian National Bank and pending the decision of the Commercial Court on the request to open a bankruptcy proceeding, in accordance with law, temporary restriction measures prescribed by the provisions of Article 267, paragraph (2) of the Credit Institutions Act will take effect.

"Article 267, paragraph (2);

The decision of the Council of the Croatian National Bank on the submission of the request to open bankruptcy proceedings against a credit institution shall have the following effects:

1) temporary restriction of executions of orders for forced collection of payments debited to the credit institution's account and to the accounts of its clients in accordance with the law governing the execution of cash assets;

2) temporary restriction of credit institution's payments from all its accounts for its own account and of payments to its accounts;

3) temporary restriction of credit institution's provision of payment services to its clients;

4) temporary restriction of credit institution's payments and transfers from the accounts of its clients."

In practice this means that no payments from and to the accounts of Banka splitsko-dalmatinska d.d. will be made and no payments will be made from and to the accounts of clients of Banka splitsko-dalmatinska d.d., and that no execution over the accounts of Banka splitsko-dalmatinska d.d., governed by the Act on the Execution of Cash Assets will be carried out, regardless of the payment basis (debentures, writs of execution, etc.). Consequently, pending the day of adoption of a decision by the Commercial Court on the request to open a bankruptcy proceeding, the clients of Banka splitsko-dalmatinska d.d. may not receive payments from their accounts nor can their accounts be charged with transfers and the Bank may not provide payment services by means of payment cards. The debtors of Banka splitsko-dalmatinska d.d. are obligated to continue meeting all their obligations towards the Bank by cash payments in the Bank or by payments to the Bank's transaction account opened with another credit institution, the decision on which will be communicated to the public by special administration without delay.

            The CNB will issue a decision on the unavailability of deposits within the prescribed time limit and in accordance with the prescribed procedure which will enable the activation of the deposit-guarantee scheme.