Zdenko Prohaska

Financial Regulation and Supervision in Croatia

There is a trend towards integration of financial regulation and supervision in Europe and in developed overseas countries. Nevertheless, integrated regulatory bodies are quite unusual worldwide and this relatively new structure should be examined in detail. There are a number of different models of the institutional structure of financial regulation and supervision specific to every country, and the question is what will be the best solution for Croatia?The problems of authority overlapping and insufficient regulation are becoming more complex by the development of Croatian financial sector. Although banks dominate the Croatian financial market, that has been threatened by the rapid growth of non-deposit financial institutions, especially investment funds and compulsory private pension funds. Also, there is a problem of formal or informal financial groups that are gathered around few banks owned by foreigners. Accordingly, one can say that Croatian financial market is dominated by financial conglomerates. That complexity enables them to avoid rules and regulations of financial supervisory authorities. Because of the growing role of financial groups it is necessary to coordinate work of different supervisory authorities and consider unification of different regulatory bodies.Only two years ago, supervision of Croatian financial system consisted of six independent regulatory institutions entrusted with different financial services (“solo” supervision), without any sufficient coordination of their activities. By adopting new laws in 2005, their partial integration started, based on two separate agencies. Croatian supervisory model at the moment is consisted of two regulators of the financial system, i.e. Croatian National Bank (HNB) and Croatian Financial Services Supervisory Agency (HANFA). This is an example of the twin peaks system, when banking supervision is carried out by the central bank (HNB), while non-bank financial institutions are regulated and supervised by another supervisory authority (HANFA).The aim of this paper is to discuss the present institutional structure and effectiveness of financial regulation and supervision in Croatia and to point out possible future development of the Croatian supervisory model.

Valuation of options by using Excel

Options represent the right to buy or to sell a specific number of underlying assets (stocks, indexes, commodities etc.) at a given price in a predetermined period of time. To analyze the value of options the Black and Scholes model will be presented and special spreadsheets will be developed using only “plain vanilla” Excel, i.e. its basic financial functions, for call and put options in the case of stocks which are paying or not paying dividends. The reason for using only “plain vanilla” Excel is a better portability of such spreadsheets for students at faculties of economics and in the public sector on different platforms or computers with various operating systems.

PaintArt 2.0 — Computer program for education of visual arts in secondary schools

This article presents a computer program consisting of a paint program and a database of specially prepared forms in bitmap format for education of visual arts in secondary schools. Since more theoretical issues are prevailing on the secondary school level this computer software, which is actually a paint program, is equipped with different forms in bitmap format, with yes/no questions, multiple choice questions, classic questions demanding full text answers and questions where school boys and girls have to apply the solutions of the questions on specific paintings presented in the questions. By using this program, secondary school boys and girls can compare their own answers with the provided solutions in PaintArt 2.0 and enhance their knowledge of arts.

Valuation of common stocks using the dividend valuation approach and excel

The valuation of common stocks using the dividend valuation method is useful for stocks in so called no-growth or constant-growth situations.

National competition of photography as visual art in Croatian primary schools, high schools and schools of applied arts

Photography as a visual art is studied in subjects in Croatian primary schools, high schools and schools of applied arts and design.

Use of computer programs in teaching photography courses at schools of applied arts and design in Croatia

By going digital photography becomes very popular in general and more and more special photography courses are introduced at Croatian schools of applied arts and design. In this article different computer programs for optimizing photographs, which are actually used in class, will be presented and their advantages and eventual disadvantages will be discussed and statistically evaluated by using average values and standard deviation values.

Supervision of Non-Banking Financial Institutions in Croatia

Financial sector has a specific role in the country’s economy as a driving force of growth and development. In the same way as the efficiency of the national economy can be fostered by the development of financial mechanism, it can be also threatened by possible financial crisis and instabilities.Therefore, a question of regulation and supervision of all parts of financial system are of major importance for any country. The regulations refer mostly to maintenance of financial stability and consumer protection. In order to protect the interest of the society and to accelerate the economy development it is necessary to provide adequate legal framework as well as independent supervision institutions.The structure of the financial sector in the Republic of Croatia is underdeveloped and characterized by domination of the banking sector and the issue of regulatory model of financial sector is solved by adopting the model of a group of independent agencies for each activity. The Croatian National Bank is in charge of the supervision of operations conducted by banks and savings banks. Non-banking financial institutions (investment funds, pension funds, insurances) are regulated by a wide range of regulatory institutions – The Securities Commission of the Republic of Croatia, Agency for Supervision of Pension Funds and Insurances, Directorate for Supervision of Insurance Companies, State Agency for Deposit Insurance and Bank Rehabilitation and Ministry of Finance. Because of such a wide range of regulatory institutions, the problems of authority overlapping and insufficient regulation unavoidably arises, especially by the development and deregulation of financial markets.Because of that, it seems reasonable to investigate the existing regulatory framework of non-banking financial institutions in Croatia. The aim of this paper is to determine if the introducing of an integrated financial supervision of non-banking financial sector is justified. In order to give an answer to this complex question, a comparative analysis will be carried out by presenting a models of consolidated supervision of financial institutions and markets for several European countries.The authors conclude that there are measures to ensure a stable and more efficient financial system.

Optimisation of decay factor in time weighted (BRW) simulation: implications for VaR performance in Mediterranean countries

Abstract In this paper we propose an optimisation approach to determining the optimal decay factor in time weighted (BRW) simulation. Testing of BRW simulation with different decay factors and competing VaR models is performed on a sample of nine Mediterranean countries, over a four year period that includes the ongoing financial crisis. After optimisation the BRW simulation is among the best performing tested VaR models, second only to EVT approaches. Optimising the decay factor in regards to Lopez function results in decay factor estimates that are higher than usually employed 0.97 and 0.99. The optimal decay factors are stable over time and provide significantly better backtesting results than the standard assumptions.