With regard to the specificity of their operation and the interest of the government that they operate in a stable manner and not take too much risk because they operate with a large amount of the funds of others, credit institutions are subject to a special and complex regulatory framework, stricter than for the other segments of the economy.
The majority of the quantitative requirements that are set before credit institutions is determined in the Regulation (EU) No 575/2013 (Capital Requirements Regulation), including the basic supervisory rule, the rule on capital adequacy, which prescribes the minimum of own funds that must be readily available to credit institutions in relation to risks they take in their operation. Other quantitative and qualitative requirements are governed by the Credit Institutions Act (by which Directive 2013/36/EU, the Capital Requirements Directive is transposed).
Therefore, the CNB verifies whether credit institutions operate in accordance with the set rules and standards by:
- exercising supervision by collecting and analysing reports and information, ongoing monitoring of operation of credit institutions,
- carrying out on-site examinations of credit institutions' operation,
- imposing supervisory measures, and
- issuing opinions, authorisations and approvals and assessing credit institutions.
In the course of supervision, the CNB verifies the legality of the credit institution's operation and evaluates risks in the operation of credit institutions. On the basis of the exercised supervision the CNB determines whether the organisational structure, strategies, policies, processes and procedures implemented by the credit institution and the own funds and liquidity held by it ensure an adequate management and coverage of its risks. If illegalities, weaknesses or deficiencies in operation are identified, the CNB orders credit institutions to implement supervisory measures, with the aim to eliminate those illegalities or deficiencies.
In accordance with its competence under law, the CNB cooperates and exchanges information with other supervisors and competent authorities, both home and foreign, and enters into cooperation agreements.
The regulatory framework for credit unions is determined by the Credit Unions Act, which lays down conditions for the establishment and operation of credit unions (to a much lesser extent than for credit institutions), and oversight over credit unions is exercised in a similar manner as it is exercised over credit institutions.