Croatia Gets Green Light from ECB on Path to Banking Union

(Bloomberg) -- Croatia's financial industry got a clean bill of health from the European Central Bank, clearing one of the hurdles on the Adriatic nation's road to adopting the euro.

The comprehensive assessment of the country's five biggest banks showed they face no capital shortfall and have passed an asset-quality review, the ECB said in an emailed statement on Friday.

Nations that want to adopt the euro are required to join the ECB's system of banking supervision and the bloc's bank-failure mechanism.

Prime Minister Andrej Plenkovic said last month that Croatia has fulfilled all the criteria needed to enter the pre-euro exchange-rate mechanism known as the ERM-2 and the banking union. He said the heavily euroized economy expects to spend about 2 1/2 years in the euro waiting room, before the currency switch.

The ECB, the group of nations already sharing the euro, and Eurostat will now have to evaluate Croatia's compliance before the country can formally ask to be admitted into the ERM-2. Central bank Governor Vujcic has said that should be done in the second half of the year, regardless of the Covid-19 crisis.

The assessment covered Zagrebacka Banka, Privredna Banka Zagreb, Erste & Steiermaerkische Bank, OTP banka Hrvatska and Hrvatska Postanska Banka, all of which consented to the disclosure of the exercise's findings, the ECB said.

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