Hanfa Council Meeting: Legislative changes in the fund industry and the application of DORA as the main topics of the meeting
At today's meeting, the Hanfa Council discussed the proposal for amendments to the Act on Open-Ended Investment Funds with a Public Offering and the Alternative Investment Funds Act and the preparation of the non-banking financial sector for the application of DORA (EU Regulation on digital operational resilience for the financial sector) and its impact on pension fund management in Croatia.
In addition to the existing proposals for amendments to the Act on Open-Ended Investment Funds with a Public Offering and the Alternative Investment Funds Act, a representative of the Association of Investment Fund Management Companies presented additional amendment proposals.
As regards the operation of open-ended investment funds, the discussion focused on the regulation of the date of entry in the fund register and the disposal of funds paid in, the definition of the term “seed money” in the initial payment to the fund, the reduction of the minimum requirement to suspend the issue and redemption of units in the event of a merger of funds, and the exclusion of portfolios from the total exposure of an individual company to a single issuer.
As regards the amendments to the Alternative Investment Funds Act, the Association proposes three additional amendments. They concern the regulation of the date of entry in the fund register and the disposal of funds paid in, the facilitation of cross-border activities, and the supplementing of Article 16 of the Act as a technical supplement / correction.
In addition, members of the Council were informed that draft sectoral regulations and the Act on the Implementation of the DORA Regulation have been prepared and are expected to enter into force within the prescribed deadline, 17 January 2025. It should be noted that the Ministry of Finance has accepted the proposal to postpone the application of DORA for pension companies for a year.
This Regulation has been adopted at EU level in view of the fact that the financial sector is heavily dependent on technology and technology companies providing financial services and that ICT risks can cause significant disruptions in the provision of financial services and lead to significant financial losses.
Its implementation will offer a number of benefits to pension fund members, such as better operational resilience, more effective risk management, faster and stronger response to cyber incidents and faster recovery in such cases. The application of DORA will encourage companies to adopt new technologies and operational practices, resulting in innovation and higher business efficiency for their members.
However, in addition to the benefits, its application will also bring about new challenges, such as compliance and implementation costs, more demanding reporting requirements, the complexity of regulations, vendor supervision etc.
For Hanfa as a regulator, this will mean an additional regulatory burden and increased oversight activities, which will also require additional human and material resources.
Another topic of the meeting related to the exposure of the financial services sector to climate risks, with a comment on the current situation and the natural disasters insurance gap. Members of the Council were also informed of current issues falling within the scope of the Sector for Financial Markets and Financial Literacy of the Ministry of Finance and of the impact of the new Directive 2023/2225 on credit agreements for consumers (CCD 2) on finance leasing contracts. The discussion also covered recent issues on the capital market and the development strategy, as well as the cyber exercise carried out.
Hanfa Council is Hanfa’s advisory body that meets regularly and provides opinions and expert and scientific advice to develop and improve supervisory practice. It consists of nine members: President of the Hanfa Board (ex officio), five members elected by the representatives of supervised entities’ associations at the Croatian Chamber of Economy and three members appointed by the Government of the Republic of Croatia.
