HANFA Head: 1,188 Accounts of Former, Current HNB Employees Being Checked

By 27 January 2022
HANFA Head: 1,188 Accounts of Former, Current HNB Employees Being Checked
Anna Nekrashevich/Pexels

ZAGREB, 27 Jan 2022 - The HANFA regulator is checking the accounts of 725 current and 463 former employees of the central bank as well as other available accounts, with 529 transfers involving 26,940 stocks of credit institutions having been determined for 58 of the 1,188 former and current employees.

This was stated on Thursday by the head of the Croatian Financial Services Supervisory Agency (HANFA), Ante Žigman, at a thematic session of the parliament's Finance and State Budget Committee, entitled "HNB employees' trading in securities of banks supervised by the central bank", which was also attended by Croatian National Bank (HNB) Governor Boris Vujčić and his deputy Sandra Švaljek.

Žigman said that those transfers, registered by the Croatian depository agency SKDD, did not mean that all those stocks were traded but rather that the SKDD registered any change to the legal status of a transaction, such as transfer from one broker to another.

"That should be underlined, so that one does not think that all those stocks were traded," he said.

On 10 January, the Index news portal said that in the past 20 years more than 40 HNB employees had traded in the securities of banks supervised by the HNB, with more than 400 transactions worth more than HRK 10 million having been registered.

After that, on 12 January, HANFA launched an inspection to determine if HNB employees had violated the Market Abuse Regulation and the Capital Market Act, and if they had traded in banks' securities based on insider information.

HANFA said at the time that violation of the HNB Act and HNB's internal rules by HNB employees by trading in credit institutions' securities does not necessarily constitute market abuse in the sense of the Capital Market Act and Market Abuse Regulation.

As for possible violation of the HNB Act and HNB's internal rules, HANFA does not have the authority to launch an inspection, the agency said at the time.

Vujčić: No indication of insider trading

HNB Governor Vujčić said in his introductory address today that the HNB does not have indications that its employees had traded in securities based on insider information, which is a criminal offence, but he recalled having called on HANFA to investigate the matter and also having asked for internal checks to be made for 41 persons.

An internal inspection is currently under way into 31 persons, but it is not as nearly as thorough as inspections by HANFA because the HNB does not have access to SKDD data, said Vujčić.

On the other hand, five HNB employees who hold stocks and are not among the 41 employees have also come forward, Vujčić said.

There is no legal ban on holding bonds, says Švaljek

The current deputy governor, Sandra Švaljek, was in 2012 an external member of the HNB Council and at the time she invested in the Erste Bank corporate bonds. She said at today's session that neither at that time nor currently there were any legal restrictions for the Council's members to hold bonds.

Švaljek said there was a significant difference between shares and bonds and that possessing bonds has the nature of saving, explaining that she had not traded in those bonds but held them until their maturity, and that the yield earned had been defined in the relevant prospectus.

Švaljek said that she had been informed by her personal banker about the possibility of purchasing those bonds, and emphasised that the HNB Council had never discussed such matters.

"I am confident that this case has nothing to do with market manipulation regarding the bonds that I used to hold at the time when I was not employed in the HNB."

Responding to media claims about possible wrongdoing, the central bank said recently that Vujčić bought stocks of Riječka Banka and Zagrebačka Banka in the 1990s, when he was still not HNB vice governor or HNB Council member, and when the HNB Act did not forbid the HNB governor and HNB Council members to own stocks of the banks supervised by the HNB.

The HNB emphasised that it was the new HNB leadership that in 2000 initiated changes to the HNB Act which forbid the governor, HNB Council members and HNB executive directors to own stocks and shares in banks supervised by the HNB. Vujčić thus sold his stocks of Erste&Steiermärkische Bank, which in the meantime bought Riječka Banka, and of Zagrebačka Banka, in March 2001, a month before the entry into force of the HNB Act, which was reported by the media at the time.

Švaljek, who between 2000 and 2013 was an external member of the HNB Council, bought corporate bonds of Erste&Steiermärkische 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 Švaljek did not violate any legal regulations.