Indicators of credit institution operations

Published: 30/12/2020

Data on the credit institutions system contain tabulations of selected indicators of the structure, concentration and operation of credit institutions, a breakdown of credit quality by sector and geographic distribution of  loans, data on sold claims and selected statement of profit or loss items, own funds and risk exposure.

Methodology of supervisory indicators

Published: 29/12/2020

Number of credit institutions

The number of credit institutions refers to credit institutions with head offices in the Republic of Croatia that at the end of the reporting period have authorisation issued by the Croatian National Bank. Credit institutions are banks, savings banks and housing savings banks.

Number of employees in credit institutions

The number of employees refers to the number of paid employees on the last day of the reporting period, which are, under employment contracts, employed by the reporting institution for a fixed or indefinite period.

Herfindahl-Hirschman Index for assets

The Herfindahl-Hirschman Index (HHI), which is used to measure the degree of concentration of assets, is calculated on the basis of the following formula:

\(H H I=\sum\left(\frac{\text {assets of a credit institution}}{\text {total assets of all credit institutions}} \times 100\right)^{2}\)

Liquidity coverage ratio (LCR)

The liquidity coverage ratio (LCR) is the ratio of the liquidity buffer (liquid assets) to net liquidity outflow (difference between outflow and inflow). As of 2018, LCR must be at least 100%.

Leverage ratio

The leverage ratio is the ratio of tier 1 capital to the total exposure measure. The total exposure measure is the sum of the exposure values of assets (unless they are deducted when determining the tier 1 capital), derivatives, add-ons for counterparty credit risk in some transactions and off-balance sheet exposures.

Cost-to-income ratio (CIR)

The cost-to-income ratio (CIR) is the ratio of general operating expenses (general administrative expenses and depreciation) to total operating income (net).

Coverage ratio of non-performing loans and advances

The coverage ratio of non-performing loans and advances is the ratio of accumulated impairments of non-performing loans to total non-performing loans. Accumulated impairment is the cumulative amount of impairment losses of loans.

Return on assets (ROA)

Return on assets (ROA) is the ratio of profit or (–) loss for the year (on an annual basis) to the average assets of credit institutions. The average assets are calculated as the arithmetic mean of the balance in assets at the end of the reporting period and the balance in assets at the end of the previous year.

Return on equity (ROE)

Return on equity (ROE) is the ratio of profit or (–) loss for the year (on an annual basis) to the average equity of credit institutions. The average equity is calculated as the arithmetic mean of the balance in equity at the end of the reporting period and the balance in equity at the end of the previous year.

Tier 1 capital ratio

The tier 1 capital ratio is the ratio of tier 1 capital to total risk exposure. Total risk exposure comprises the following: credit risk exposure (including exposures to counterparty credit and dilution risks and free deliveries), settlement/delivery risk exposure, position, foreign exchange and commodities risk exposure, operational risk exposure, credit valuation adjustment risk exposure and total risk exposure amount related to large exposures in the trading book. The tier 1 capital ratio must be at least 6% at all times.

Common equity tier 1 capital ratio

The common equity tier 1 capital ratio is the ratio of common equity tier 1 capital to total risk exposure. Total risk exposure comprises the following: credit risk exposure (including exposures to counterparty credit and dilution risks and free deliveries), settlement/delivery risk exposure, position, foreign exchange and commodities risk exposure, operational risk exposure, credit valuation adjustment risk exposure and total risk exposure amount related to large exposures in the trading book. The common equity tier 1 capital ratio must be at least 4.5% at all times.

Total capital ratio

The total capital ratio is the ratio of own funds to total risk exposure. Total risk exposure comprises the following: credit risk exposure (including exposures to counterparty credit and dilution risks and free deliveries), settlement/delivery risk exposure, position, foreign exchange and commodities risk exposure, operational risk exposure, credit valuation adjustment risk exposure and total risk exposure amount related to large exposures in the trading book. The total (own funds) capital ratio must be at least 8% at all times.

Share of credit institutions’ assets in total assets of credit institutions

Asset size is the criterion for showing the share of assets of the two largest credit institutions, the first five largest credit institutions and the first ten largest credit institutions in total assets of credit institutions.

Share of non-performing debt instruments in total debt instruments (NPE)

The indicator of the share of non-performing debt instruments in total debt instruments (non-performing exposures, NPE) is the ratio of non-performing debt instruments to total debt instruments. Debt instruments are exposures arising from debt securities and loans and advances other than held for trading or trading. Non-performing debt instruments include material exposures that are more than 90 days past due and exposures in relation to which repayment in full is unlikely without realisation of collateral, regardless of the existence of any past due amount or of the number of days past due.

Share of non-performing loans in total loans (NPL)

The indicator of the share of non-performing loans in total loans (non-performing loans, NPL) is the ratio of non-performing loans to total loans. Loans are debt instruments that are not securities and that are included in financial assets at amortised cost and financial assets at fair value through other comprehensive income. Non-performing loans are material loans that are more than 90 days past due and loans in relation to which repayment in full is unlikely without realisation of collateral, regardless of the existence of any past due amount or of the number of days past due.

Ownership structure of credit institutions

With respect to ownership structure, credit institutions are divided into credit institutions in domestic private ownership, credit institutions in domestic state ownership and credit institutions in foreign ownership, with both direct and indirect ownership being the subject of oversight. A credit institution is classified as a credit institution in domestic private ownership if it is majority owned by domestic natural and legal persons (which are not controlled by a foreign person), or as a credit institution in domestic state ownership if it is majority owned by governmental units. A credit institution is classified as a credit institution in foreign ownership if it is majority owned by foreign natural and legal persons or domestic legal persons which are controlled by a foreign person.

The calculation of key performance indicators of credit institutions has been aligned with the methodology used by the European Banking Authority (EBA).