Banking and financial matters on Croatia's road to the European Union

The ability of a country to meet the criteria for financial convergence on the EU depends on four key factors: the behaviour and structure of the banks and non-banking financial service providers, the degree of development of the money and capital markets, the regulatory environment and the openness of the country to international financial currents. In this work the factors that work in favour of a rapid accession by Croatia to the EU and those that are the key areas of vulnerability on the same road are identified. The first group of factors includes the developmental level of the banking system, whose structural characteristics (competitiveness, ownership structure and scope of financial mediation) work in favour of rapid integration. This group also includes the standardising regulatory framework, the changes in which over the last few years have brought Croatia very close to the standards of the EU. Non-banking financial service providers are relatively undeveloped; however, where the investment and pensions funds are concerned, their development and the regulatory environment, rapidly converging on international standards, guarantee imminent ability to be included in the integration processes. The main areas of vulnerability are the undeveloped share capital market and a restrictive attitude with respect to international financial flows.