CROATIA - Croatia is to merge three of its four financial institution regulators in a move that is unpopular with the pensions industry.

The merger will involve Hagena, which supervises pension fund and pension insurance companies, the Securities and Exchange Commission, which regulates the stock exchange and investment funds, and the insurance company regulator.

The Croatian National Bank, the central bank, which regulates the banking sector, will remain a separate entity.

The proposal has cross-party support, having been discussed by the previous Social Democrat-led government and is being implemented by the current Croatian Democratic Union administration.

“There was an initiative a few years ago to co-ordinate their activities and it was concluded that the non-banking regulators should be merged into one institution, with separate departments covering the different areas,” said pension fund association head Damir Grbavac.

“The aim is to make regulation more efficient and perhaps cheaper, although whether it will be cheaper remains to be seen,” he added.

The plan has been finalised by a finance ministry working group. It is expected that the merger will be completed by the beginning of 2006, with the proposal being approved by the cabinet next month, enabling legislation being put to parliament in July and passed by November.

“Hagena did a good job,” Grbavac said. “Let us hope that the good things will be kept.”

The association was not consulted on the principle of the merger, although the working group has contacted it on some details, Grbavac said, adding that the association has not taken an official position on the move.

However, some of its members have made their regret clear. “I am upset by this,” said Dubravko Stimac, president of PBZ Croatia osiguranje obvezni mirovinski fond, one of four second-pillar mandatory funds. “It runs the risk of interfering with something that is good and missing fixing other things that are bad – like other regulators.”

Stimac added: “The pension fund industry is one of best organised and best controlled parts of the Croatian economy. The people in Hagena did not act as an administration but they were pro-industry and pro-business and I know that my colleagues in the other pension funds appreciate what it has done.

“As an industry we expect to see at least the same level of quality from the new regulator as we had from Hagena.”

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