The Council of the Croatian National Bank resumed its yesterday's meeting by discussing the issue of responsibility in the case of Riječka banka.
The Council pointed out that the competencies and duties of all participants in the control of banking operations were clearly defined and divided by virtue of both international standards and domestic laws and by-laws. As illustrated by the available documentation, the expert departments of the Croatian National Bank once again acted entirely in accordance with the relevant laws and regulations, as well as in accordance with supervision standards, concluded the Council.
The responsibility for a bank's operations rests primarily with the bank's management board, which is obliged to provide for accounting records and financial reports and to establish an internal control and audit system. The internal control and audit fall within the competence of the management board, with the aim of protecting the assets, preventing and detecting errors and frauds and ensuring the correctness and integrity of the accounting records.
External audit falls within the competence of shareholders and its tasks can be divided in three groups. The first group comprises the audit of basic financial statements pursuant to the Accounting Act and the International Accounting Standards. This includes the examination of the data and methods applied in drawing up of the statements. Based on that, the auditor gives his expert opinion on whether the presented balance of assets, liabilities, capital, cash flow and operating results are realistic and objective. The second group includes examination and assessment of special financial statements, in accordance with the CNB by-laws. The third group of the external auditor's tasks relates to the assessment of the management and efficiency of the bank's business operations, which also includes the assessment of the organization and efficiency of the internal control and audit, as well as the quality of the bank's by-laws and their implementation.
The role of the bank supervision, falling within the field of activity of the central bank, is to protect savers and depositors and to maintain stability and safety of the banking system in general. For this purpose it establishes the lawfulness of the bank's operations and assesses its risk management facilities. Without questioning the necessity of a further improvement of the bank supervision, the CNB Council emphasizes that it does not control every single business transaction or a decision of a bank, which is neither done, nor can be done by any other bank supervision authority in the world.
As to the anonymous letters, the documents show that the central bank acted appropriately by advising the bank management of such information, requiring the examination of the allegations. It is the bank itself that is the most interested, the most responsible and the best equipped party to detect such frauds, if any, and to prevent them. After all, the fraud in question was detected by the bank's internal control.
Consequently, the CNB Council emphasizes, it is utterly unfounded to expect from the central bank and its expert departments to assume responsibility for what comes explicitly within the authority of the bank and its internal control, or the external auditor. That is why in the similar cases of frauds in the foreign exchange operations abroad the question of the supervisor's responsibility has never been raised.
The CNB Council concluded that the implementation of all appropriate measures should be continued in order to close the investigation into this case as quickly as possible and to reveal all the circumstances that resulted in the fraud. Furthermore, the responsibilities should be established, the criminals punished and the public properly informed of that. The management and the expert departments of the central bank are providing and will continue to provide full support to such endeavors.