Subject matter Article 1. the criteria for membership in the management board and supervisory board of a credit institution;

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1 Pursuant to Article 38, paragraph (3), Article 45, paragraph (5), Article 50, paragraph (6) and Article 54, paragraph (4) of the Credit Institutions Act (Official Gazette 159/2013) and Article 43, paragraph (2), item (9) of the Act on the Croatian National Bank (Official Gazette 75/2008 and 54/2013), the Governor of the Croatian National Bank hereby issues the Decision on the assessment of the suitability of the chairperson of the management board, members of the management board, members of the supervisory board and key function holders in a credit institution I GENERAL PROVISIONS (1) This Decision prescribes in detail: Subject matter Article 1 the criteria for membership in the management board and supervisory board of a credit institution; the procedure for granting prior approval and documentation to be enclosed with the application for granting prior approval for the appointment of the chairperson or a member of the management board and a member of the supervisory board of a credit institution; the criteria to be taken into account by a credit institution when assessing the suitability of a key function holder in a credit institution; the content of policies on the selection and assessment of the suitability of, as well as compliance with the criteria, and the assessment dynamics of compliance with the criteria, for the chairperson and members of the management board and members of the supervisory board of a credit institution; the content of policies on the selection and assessment of the suitability of, and the assessment dynamics of compliance with the criteria for, key function holders in a credit institution; and the conditions for the establishment and operation of the appointment committee, including the method and scope of their application. (2) The provisions of this Decision shall apply mutatis mutandis to the appointment of the persons to be responsible for directing the business of and key function holders in a branch of a third-country credit institution. (3) The provisions of Article (3) of this Decision shall apply mutatis mutandis to the appointment of members of the management board of a financial holding company having its registered office in the Republic of Croatia or a mixed financial holding company having its registered office in the Republic of Croatia.

2 Definitions Article 2 (1) For the purposes of this Decision, "procedures" means: investigations, criminal prosecutions and criminal proceedings; and proceedings that preceded a judgement with final force and effect, final enforcement measures or minor offence and administrative sanctions. (2) For the purposes of this Decision, "connected persons" means all persons closely linked in accordance with Article 4, paragraph (1), item (38) of Regulation (EU) No 575/2013 and persons linked by consanguinity in the direct line without restraint and in the collateral line ending to the second degree, as well as by in-law kinship. For the purposes of this Decision, persons linked by in-law kinship are relatives related by marriage and not by blood, including: the parents, brothers and sisters of the spouse, the children of the spouse which are not the children of the person whose connectedness is being assessed, and the spouses of the children of the person whose suitability is being assessed. (3) For the purposes of this Decision, "significant business relationship" means a business relationship which meets any of the following criteria: the total liabilities of the chairperson or a member of the management board or a member of the supervisory board, including the persons connected with them, to a credit institution exceed their total claims against and holdings in that credit institution by an amount higher than 2% of the credit institution's initial capital but not lower than HRK 3,000,000.00; a credit institution or a person connected with it has a holding in the initial capital instruments exceeding 25% of the initial capital of an undertaking controlled by the chairperson or a member of the management board, or a member of the supervisory board; or an undertaking connected with the chairperson or a member of the management board, or a member of the supervisory board of a credit institution derives most of its income from the provision of services to that credit institution. (4) For the purposes of this Decision, "conflict of interest" means circumstances under which a person's private interests are contrary to the interests of a credit institution, particularly when a person's private interest influences or may influence the person's impartiality in the performance of his/her duties. (5) For the purposes of this Decision, "candidate" means a person on behalf of whom a credit institution or the founders have applied for granting prior approval for the appointment of the chairperson or a member of the management board or a member of the supervisory board. (6) For the purposes of this Decision, "group" consists of a parent undertaking and its subsidiaries, including members of a group of credit institutions in the RH.

3 (7) For the purposes of this Decision, the terms "credit institution", "financial institution", "subsidiary" and "parent undertaking" shall have the meaning ascribed to them in Article 4, paragraph (1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, , hereinafter: "Regulation (EU) No 575/2013"). II CRITERIA FOR MEMBERSHIP IN THE MANAGEMENT BOARD AND SUPERVISORY BOARD OF A CREDIT INSTITUTION Suitability Article 3 (1) The Croatian National Bank shall grant prior approval to perform the function of the chairperson or a member of the management board to a person it assesses as suitable. A person shall be considered as suitable if he/she: meets the criteria laid down in Article 38 of the Credit Institutions Act; ensures, in accordance with Article 35, paragraph (2) of the Credit Institutions Act, that the management board collectively has sufficient knowledge, skills and experience to perform its duties independently and without undue influence from other persons, and that it has a sufficiently diversified structure; and proves by his/her work programme that he/she will ensure lawful, safe and stable operation of a credit institution. (2) The Croatian National Bank shall grant prior approval to perform the function of a member of a credit institution's supervisory board to a person it assesses as suitable. A person shall be considered as suitable if he/she: meets the criteria laid down in Article 45 of the Credit Institutions Act; and ensures, in accordance with Article 35, paragraph (3) of the Credit Institutions Act, that the supervisory board collectively has sufficient knowledge, skills and experience to perform its duties independently and without undue influence from other persons, and that it has a sufficiently diversified structure. (3) In assessing the diversity of the structure of the management and supervisory boards, the Croatian National Bank shall take into account the nature, scope and complexity of a credit institution's operations and the risks to which it is or may be exposed. (4) In assessing the diversity of the structure of the management and supervisory boards, the Croatian National Bank shall take into account the diversity of the required knowledge, skills and experience. Good repute of the chairperson and members of the management board and members of the supervisory board Article 4

4 (1) The Croatian National Bank shall, within the meaning of Article 38, paragraph (1), item (1) and Article 45, paragraph (1), item (1) of the Credit Institutions Act consider the following persons as persons of no good repute: 1) a person who has been convicted by a judgement with final force and effect, or who is subject to criminal prosecution for any of the crimes referred to in Article 25, paragraph (1), item (1), sub-item (i) of the Credit Institutions Act; 2) a person who has been convicted by a judgement with final force and effect, or who is subject to criminal prosecution for any crimes not listed in Article 25, paragraph (1), item (1), sub-item (i) of the Credit Institutions Act, but which could affect the good repute of the person; 3) a foreign national who has been convicted by a judgement with final force and effect, or who is subject to criminal prosecution for any of the crimes which by definition correspond to the crimes referred to in items (1) and (2) of this paragraph; 4) a person who has been convicted by a judgement with final force and effect, or who is subject to proceedings conducted by the competent courts or authorities for irregularities or non-compliance with any of the regulations governing banking, financial or insurance activities or governing securities markets, securities or payment instruments, regulations governing the provision of financial services or any other relevant regulations, which may raise doubts about the good repute of the candidate; 5) a person who manages, or managed at the time of the offence, the undertaking which has been convicted by a judgement with final force and effect, or who is subject to measures or proceedings referred to in item (4) of this paragraph, which may raise doubts about the good repute of the candidate; 6) a person who has not achieved good results by his/her past professional work and personal integrity; 7) a person whose business results compromise the person's good repute; 8) a person whose financial stability compromises the person's good repute; and 9) a person for whom there are some other grounds for suspicion about his/her good repute. (2) In assessing the criteria referred to in paragraph (1), items (2), (3), (4) and (5) of this Article, the Croatian National Bank shall take into account all available information relating to the type of conviction, degree of the proceedings, legal redress offered, sanctions imposed and effects of the rehabilitation measures, the existing extenuating and aggravating circumstances of the case, the significance of the offence or violation, the period that elapsed since the commitment of the offence and the person's behaviour during that period. The Croatian National Bank shall also take into account several minor offences which do not individually, but might cumulatively undermine the person's good repute. (3) In addition, in assessing the criteria referred to in paragraph (1), items (4) and (5) of this Article, the Croatian National Bank shall take into account the data on all relevant previous measures, judgements and proceedings relating to the candidate or the undertaking that the candidate manages or has managed, which the Croatian National Bank or another competent authority conducts or has conducted. (4) In assessing the criteria referred to in paragraph (1), item (6) of this Article, the Croatian National Bank shall analyse the information suggesting incorrect behaviour of the candidate in his/her past professional work, such as non-transparent behaviour and lack of co-operation with

5 the competent authorities, refusing or revoking approval for the performance of managerial functions or professional occupations or activities and shall, where feasible, also analyse the reasons for the termination of the employment contract, removal from a key or similar function and ban on directing the business or representation of a legal person imposed by the competent authority. (5) In assessing the criteria referred to in paragraph (1), items (7) and (8) of this Article, the Croatian National Bank shall take into account the financial and business results of an undertaking in which the candidate is or has been a significant shareholder, or in which the candidate has or has had significant holdings, or in which he/she had performed the managerial function or the function of a supervisory board member before it has been established that the undertaking has committed a major irregularity or legal offence in its operation, before the prebankruptcy settlement proceedings over the undertaking have been carried out, the bankruptcy proceedings have been initiated, a decision on the compulsory winding-up has been rendered or the undertaking's authorisation has been withdrawn, which could affect the candidate's good repute. The Croatian National Bank shall assess whether the person's behaviour contributed to these events. (6) In assessing the criteria referred to in paragraph (1), item (8) of this Article, the Croatian National Bank shall take into account the financial stability of a candidate and its potential influence on the candidate's good repute. In doing so, it will analyse: whether the candidate's property threatens the meeting of his/her financial obligations in the future; whether the candidate's name is included on any list of unreliable debtors (e.g. the Croatian Central Credit Register (HROK) list, the Ministry of Finance's tax defaulter list, "black list", credit registers, etc.); whether personal bankruptcy has been declared over the candidate's property; whether any civil or administrative proceedings are pending against the candidate to which the candidate is a party; whether the candidate has been convicted by a judgement with final force and effect, or whether he/she is subject to criminal prosecution for any crimes not listed in Article 25, paragraph (1), item (1), sub-item (i) of the Credit Institutions Act; evidence that the candidate has not been convicted of a minor offence and evidence on whether minor offence proceedings are pending against the candidate; and large investments or exposures and loans taken out by the candidate. Knowledge and skills of members of the management board and members of the supervisory board Article 5 (1) The Croatian National Bank shall consider as adequate knowledge within the meaning of Article 38, paragraph (1), item (2) and Article 45, paragraph (1), item (2) of the Credit Institutions Act, at least the possession of a graduate degree in a relevant area, in accordance with the regulations governing scientific activity and university education, as well as the recognised foreign educational qualifications. (2) By way of derogation from paragraph (1) of this Article, one member of a credit institution's supervisory board, who can prove by his/her experience and past work in the supervisory board

6 that he/she meets the criteria referred to in Article 45, paragraph (1), item (2) of the Credit Institutions Act does not have to possess a graduate degree. (3) The relevant area referred to in paragraph (1) of this Article shall include: economics and other related areas (e.g. finance or management); law and related fields (e.g. administration); or mathematics, physics, computer science, electrical engineering and similar. (4) In assessing the knowledge of a candidate for the chairperson or a member of the management board or for a member of the supervisory board, the Croatian National Bank may, in addition to the educational degree attained in accordance with paragraphs (1) and (3) of this Article, review the ongoing professional development of the candidate in the following areas: financial markets; accounting; regulatory framework and prudential requirements; strategic planning and the knowledge of the business strategy, business plan and the accomplishment thereof; risk management (identifying, assessing, monitoring, controlling and managing the main types of credit institutions' risks); corporate governance, including the internal control system; and the analysis of a credit institution's financial information. (5) In assessing the skills of a candidate for a member of the management board within the meaning of Article 38, paragraph (1), item (2) of the Credit Institutions Act, the Croatian National Bank may assess his/her decisiveness, strategic vision, judgement on risks, leadership, independence of mind, persuasive power, and the ability and willingness to engage in continuous learning and professional development. (6) In assessing the skills of a candidate for a member of the supervisory board within the meaning of Article 45, paragraph (1), item (2) of the Credit Institutions Act, the Croatian National Bank may assess the candidate's ability to understand and critically review the credit institution's operation and the risks to which it is exposed, as well as his/her, decisiveness, strategic vision, judgement on risks, independence of mind, and willingness to engage in continuous learning and professional development. Experience of members of the management board Article 6 (1) The Croatian National Bank shall consider as adequate experience within the meaning of Article 38, paragraph (1), item (2) of the Credit Institutions Act: experience of serving on the management board of a credit institution; experience in the management of a credit institution's organisational units essential for performing its activity; or experience in the management of a branch of a credit institution.

7 (2) By way of derogation from paragraph (1) of this Article, the Croatian National Bank may also consider as adequate experience, within the meaning of Article 38, paragraph (1), item (2) of the Credit Institutions Act: experience of serving on the management board of a financial institution; experience in the management of financial operations at the management board level or the level immediately below that in other institutions or legal entities that are classified as large entrepreneurs under the Accounting Act; work in key managerial positions including a relatively high degree of autonomy with a government administration body or an authority competent for the supervision of credit institutions; or experience of a procurator or advisor to the management board of a credit institution. (3) In assessing the experience referred to in paragraph (2) of this Article, the Croatian National Bank may in particular analyse a candidate's work experience concerning: financial markets; accounting; regulatory framework and requirements; strategic planning and the knowledge of the business strategy, business plan and the accomplishment thereof; risk management (identifying, assessing, monitoring, controlling and managing the main types of credit institutions' risks); the assessment of the effectiveness of a credit institution's procedures and measures, creating effective governance, oversight and controls; and the interpretation of a credit institution's financial information, identification of key issues based on this information and appropriate controls and measures. (4) The experience referred to in paragraph (1) of this Article shall mean at least three consecutive years of experience in the same institution or the same group of credit institutions during the last ten years. The experience referred to in paragraph (2) of this Article shall mean at least five consecutive years of experience in the same institution or the same group of credit institutions during the last ten years. (5) In assessing the length of a candidate's experience, the Croatian National Bank may take into account several short-term or temporary positions if it establishes that, including the candidate's past positions, he/she has acquired at least three consecutive years of experience in the activities referred to in paragraph (1) of this Article, or five consecutive years of experience in the activities referred to in paragraph (2) of this Article. (6) In addition to the criteria referred to in paragraphs (1) to (5) of this Article, the Croatian National Bank may, with respect to the function and institution to which a candidate is appointed, additionally assess the candidate's experience according to the following criteria: the nature and complexity of operations carried out by the candidate, including the organisational structure within which the operations were carried out; the scope of competences, decision-making powers and responsibilities; and the number of subordinates.

8 Conflicts of interest of members of the management board Article 7 (1) Within the meaning of Article 38, paragraph (1), item (3) of the Credit Institutions Act, it shall be considered that a conflict of interest exists if: 1) a member of the management board or a person connected to him/her has a significant business relationship with a credit institution; 2) a member of the credit institution's management board is also a member of the supervisory board of a credit or a financial institution entered into the register of companies in the Republic of Croatia; or 3) any other circumstances suggest the existence of a conflict of interest. (2) By way of derogation from paragraph (1), item (2) of this Article, a conflict of interest shall not be considered to exist if a member of a credit institution's management board is also a member of the supervisory board: of the credit institution's subsidiary credit or financial institution; or of a credit or financial institution which belongs to the same group of credit institutions of which that credit institution is a member. (3) In assessing other circumstances suggesting that a candidate is in a conflict of interest, the Croatian National Bank shall also take into account: past and present positions held by the candidate in a credit institution or other undertakings; personal, professional or other economic relationships with the members of the management board, members of the supervisory board, key function holders and senior management of the credit institution or its parent or subsidiary undertaking; and personal, professional or other economic relationships with the holders of qualifying holdings in the credit institution or its parent or subsidiary undertaking. Experience of supervisory board members Article 8 (1) The Croatian National Bank shall consider as adequate experience for the supervisory function, within the meaning of Article 45, paragraph (1), item (2) of the Credit Institutions Act: 1) experience in the management board or supervisory board of a credit institution; 2) experience in the management board or supervisory board of a financial institution; 3) work with an authority competent for the supervision of credit or financial institutions; 4) experience gained from working for many years in academic positions; 5) experience gained from working for many years in key managerial positions including a high degree of autonomy with government administration bodies or public authorities; 6) long-year experience in the management of the organisational units of credit or financial institutions, essential for performing their activities; 7) experience in the management of a credit or financial institution's branch;

9 8) experience of a procurator or advisor to the management board of a credit or financial institution; or 9) long-year experience in the management of financial operations in legal entities with high significance for the economy and a considerable scope of operations. (2) The experience referred to in paragraph (1), item (1) of this Article shall mean at least five consecutive years of experience in performing the function of a management board or a supervisory board member in a credit institution, or at least seven consecutive years of experience in performing other functions set out in paragraph (1) of this Article. (3) In assessing the experience of a candidate for a supervisory board member, the Croatian National Bank shall verify whether a candidate has sufficient experience to provide constructive challenge to the decisions and effective oversight of the credit institution's management board, as well as to fulfil other obligations stipulated for supervisory board members. Conflicts of interest and independence of supervisory board members Article 9 (1) Within the meaning of Article 45, paragraph (1), item (3) of the Credit Institutions Act, it shall be considered that a conflict of interest exists if: 1) a member of the supervisory board or a person connected with him/her has a significant business relationship with a credit institution; 2) a member of the supervisory board is also a member of the supervisory or management board of another credit institution, a financial institution, a mixed financial holding company or a financial holding company, which does not belong to the same group of credit institutions of which that credit institution is a member; or 3) any other circumstances suggest the existence of a conflict of interest. (2) Within the meaning of item (3) of the previous paragraph, other circumstances suggesting the existence of a conflict of interest shall be the circumstances referred to in Article 7, paragraph (3) of this Decision. (3) Within the meaning of Article 45, paragraph (2) of the Credit Institutions Act, a member of the supervisory board shall be considered to be independent if: 1) he/she is not a shareholder of the credit institution or of an undertaking connected therewith; 2) he/she is not a member of the management board of an undertaking connected with the credit institution, or did not hold such a position in the last five years; 3) he/she was not a member of the management board of, or a key function holder in, that credit institution in the last five years; 4) he/she is not an employee of an undertaking connected with the credit institution, or was not an employee of that credit institution or an undertaking connected therewith, covered by item (3) of this paragraph, in the last three years; 5) he/she does not receive, and has not received any significant remuneration, in addition to the remuneration for the performance of the function of a supervisory board member, from the credit institution and an undertaking connected therewith;

10 6) he/she is not, and was not in the last three years, a member, partner or an employee of an audit firm which provides or has provided audit services to the credit institution or an undertaking connected therewith; 7) he/she is not a member of the management board of another undertaking in which a member of the credit institution's management board is a member of the supervisory board; 8) he/she is not connected with the members of the credit institution's management board; and 9) he/she was not a member of the credit institution's supervisory board for over 12 years. Commitment to performing the duties Article 10 (1) In accordance with Article 38, paragraph (1), item (6) and Article 45, paragraph (1), item (4) of the Credit Institutions Act, it shall be considered that the chairperson or a member of the management board or a member of the supervisory board cannot commit sufficient time to perform his/her duties, if he/she simultaneously performs: the function of the chairperson or a member of the credit institution's management board and another function of a member of the management board of another company or a limited partnership; the function of a member of the management board and more than two functions of a supervisory board member; or more than four functions of a supervisory board member. (2) For the purpose of the assessment referred to in paragraph (1) of this Article, one function shall mean the function of a member of the management board or of the supervisory board of: undertakings within the same group; and undertakings in which the credit institution holds a qualifying holding. (3) The restrictions referred to in paragraph (1) of this Article shall not apply to the members of the supervisory board representing the Republic of Croatia or another Member State in these bodies. (4) The functions of a member of the management board or a member of the supervisory board in organisations not established for the sole purpose of generating profit shall not be taken into account for the purpose of the assessment referred to in paragraph (1) of this Article. III PROCEDURE FOR GRANTING APPROVALS FOR THE CHAIRMAN OR A MEMBER OF THE MANAGEMENT BOARD AND A MEMBER OF THE SUPERVISORY BOARD OF A CREDIT INSTITUTION AND DOCUMENTATION TO BE ENCLOSED WITH THE APPLICATION Application for prior approval Article 11

11 (1) A credit institution may appoint or select as the chairperson or a member of the management board or a member of the supervisory board a person for whom it obtained prior approval from the Croatian National Bank. (2) The application for prior approval shall be submitted to the Croatian National Bank no later than three months before the expiry of the term of office of the chairperson or a member of the credit institution's management board or a member of the supervisory board. In case of removal, resignation or death of a supervisory board member, due to which the supervisory board does not have the minimum number of members required by law or the Articles of Association for taking valid business decisions, the credit institution shall submit the application for prior approval to the Croatian National Bank no later than two months after the occurrence of such events. (3) By way of derogation from paragraphs (1) and (2) of this Article, a credit institution shall not be required to obtain prior approval from the Croatian National Bank for persons appointed by a court in accordance with Article 39, paragraph (3) and Article 46, paragraph (3) of the Credit Institutions Act, or the supervisory board in accordance with Article 39, paragraph (14) of the Credit Institutions Act. (4) The application referred to in paragraph (2) of this Article shall include the function and responsibilities of the appointee, grounds for the candidate selection decision, and at least the following: 1) personal information on the appointee, including his/her name, surname, maiden name, place and date of birth, domicile or habitual residence, citizenship and other personal information; 2) educational background, including a chronological list of all educational levels completed, completion years, completion periods and academic titles received; 3) professional training information, including a chronological list of all vocational courses attended, course topics, organisers and durations and the years of taking vocational examinations or obtaining certificates, licences, etc.; 4) for foreign nationals, the Croatian proficiency level; 5) work experience information, including a chronological list of all employers and positions held up to date, or functions performed outside the regular job, including the periods of duty in each position; 6) for the positions held or functions performed by a candidate in the last ten years, the following shall be specified: the activities carried out by the candidate within the position or function concerned; the organisational structure of the employer at the time of performing the function or holding the position; the scope of competences, decision-making powers and responsibilities; and the number of subordinates; 7) at an initial appointment to that credit institution, references given by the immediate superior or, in the case of management board members, a member of the supervisory board of the employer with which the candidate worked in the last three years, if available and, if not, the reasons for unavailability;

12 8) information on whether any proceedings are pending against the candidate, or whether the candidate has been convicted by a judgement with final force and effect of one or more crimes referred to in Article 25, paragraph (1), item (1), sub-item (i) of the Credit Institutions Act or Article 239, paragraph (2) of the Companies Act, or of any other crime; 9) information on whether the candidate has been convicted by a judgement with final force and effect or is subject to any measures, and whether any proceedings are pending against the candidate, conducted by the competent courts or authorities for irregularities or non-compliance with any of the regulations governing banking, financial or insurance activities or governing securities markets, securities or payment instruments, regulations governing the provision of financial services or any other relevant regulations, which may raise doubts about the good repute of the candidate; 10) information on whether any proceedings are pending against the candidate, or whether the candidate has been convicted by a judgement with final force and effect of any minor offence not listed in item (9), which might adversely affect the candidate's financial stability and good repute; 11) information on whether the candidate or the undertaking he/she has managed has become a debtor in bankruptcy or similar proceedings; 12) information whether the candidate participates as a party in any civil or administrative proceedings which might adversely affect his/her financial stability and good repute; 13) information on the candidate's financial position, including the information on whether the candidate's property threatens the meeting of his/her financial obligations in the future, whether the candidate's name is included on any list of unreliable debtors (e.g. the Croatian Central Credit Register (HROK) list, the Ministry of Finance's tax defaulter list, "black list", credit register, etc.), and whether enforcement, bankruptcy or personal bankruptcy proceedings have been initiated over the candidate's property; 14) information on the financial and business results of undertakings in which the candidate is or has been a significant shareholder, or in which the candidate has or has had significant holdings, or in which he/she has performed the function of a member of the management board or another managerial function, including the information whether pre-bankruptcy settlement proceedings have been carried out or bankruptcy proceedings initiated over the undertaking, whether a decision on the compulsory winding-up has been rendered or the undertaking's authorisation has been withdrawn; 15) information whether any previous suitability assessment of the candidate has been conducted by another competent authority (including the identity of that authority and evidence of the outcome of such an assessment); 16) information on any business relationship of the candidate or the person linked therewith with the credit institution, members of the management board and supervisory board and key function holders, as well as with the holder of a qualifying holding in that credit institution, or its parent and subsidiary undertakings; and 17) information on the outcome of the suitability assessment carried out by the credit institution, including the statement of grounds. (5) The application referred to in paragraph (2) of this Article shall be submitted on the form set out in Appendix 1 of this Decision, which shall be accompanied by: 1) a decision on the appointment of a candidate for the chairperson or a member of the management board or a member of the supervisory board, or, if the Articles of Association provide that a certain shareholder appoints a certain number of supervisory

13 board members, the decision of that shareholder on the appointment of the supervisory board member; 2) the outcome of the suitability assessment carried out by the credit institution, including the statement of grounds; 3) a certified copy of the identity card (for foreign nationals, a certified copy of the passport); 4) a certified copy of the diploma (or the Croatian translation of a foreign university diploma certified by a certified court interpreter); 5) for candidates who, at the time of application, do not perform the function of the chairperson or a member of the management board, or a member of the supervisory board of a credit institution in the Republic of Croatia, a certificate issued by the legal entity in which the candidate has acquired the experience referred to in Article 6, paragraphs (4) and (5) and Article 8, paragraph (2) of this Decision, including the scope of his/her competences, decision-making powers and responsibilities and, where feasible, the number of subordinates; 6) the completed questionnaire set out in Appendix 2 of this Decision; 7) if available, the references given by immediate superiors of the employer at least for the last three years; 8) a statement as to whether the candidate has been convicted by a judgement with final force and effect of one or more crimes referred to in Article 25, paragraph (1), item (1), sub-item (i) of the Credit Institutions Act or Article 239, paragraph (2) of the Companies Act, or of any other crime, whether the candidate has been convicted by a judgement with final force and effect of any minor offence, and whether any proceedings are pending against him/her; 9) if available, proof from the criminal history and minor offence records, in particular: for the nationals of the Republic of Croatia, a municipal court certificate of whether criminal proceedings are pending against the candidate, not older than three months; and for foreign nationals, evidence that the candidate has not been convicted of a minor offence, evidence on whether criminal or minor offence proceedings are pending against the candidate and on whether the candidate has been convicted of a crime by a judgement with final force and effect, not older than three months; and 10) for a candidate to be appointed as chairperson or a member of the management board, his/her work programme referred to in Article 12 of this Decision. (6) Where a person is reappointed to a credit institution's management board or the supervisory board, the documents referred to in items (4), (5) and (7) of paragraph (5) of this Article are not required to be attached to the application for prior approval. (7) In addition to the documents referred to in paragraph (5) of this Article, the application may be accompanied by other documents testifying to the candidate's good repute, knowledge, skills and experience. (8) The Croatian National Bank may require from a credit institution which has filed an application for granting prior approval for the appointment of the chairperson or a member of the management board or a member of the supervisory board to submit other documents, data and information as proof that the candidate meets the criteria for the chairperson or a member of the management board or a member of the supervisory board.

14 Work programme Article 12 (1) The work programme referred to in Article 11, paragraph (5), item (10) of this Decision shall include the following: 1) a brief description of the condition, including the risk exposure, of the credit institution wherein he/she is proposed to be appointed as chairperson of the management board; 2) a description of the business environment of a credit institution and its position in relation to peer credit institutions and in relation to the competition (stating the advantages and also some disadvantages in relation to peer groups); 3) a description of the macroeconomic and other assumptions used in planning; 4) a detailed description of the activities planned for the period of the term of office (including the implementation dynamics), with an emphasis put on major changes to the current condition; 5) balance sheet and income statement projections for the period of the term of office on the forms used for submitting supervisory reports to the Croatian National Bank; 6) planned activities and infrastructural adjustments related to the information technology system, internal policies and procedures, internal control system and other activities supporting core activities; 7) depending on the activities planned, an assessment of organisational adjustments required and a detailed breakdown of the new scheme indicating new appointments to key function holders in the credit institution; and 8) the allocation of powers among the management board members, including the chairperson of the management board, with an explanation and stating the changes to the current condition and the changes, if any, to the management board. (2) In compiling the work programme referred to in the previous paragraph of this Article, a candidate for a member of the management board of a credit institution shall take into consideration the credit institution's business strategy and financial plan. On this basis, a candidate for a member of the management board shall elaborate in detail the elements contained in the mandatory framework of the work programme of a candidate for the chairperson of the management board which are relevant for the realisation and effects of the activities planned within the scope of his/her future work and responsibilities. Deciding on the application Article 13 (1) In the process of deciding on granting the prior approval, the Croatian National Bank may, pursuant to Article 39, paragraph (8) of the Credit Institutions Act, invite a candidate for the chairperson or a member of the management board to present his/her programme of work and management of a credit institution's operations for the following term of office. (2) In the case referred to in paragraph (1) of this Article, the Croatian National Bank shall notify a candidate of the venue and date of the presentation at least seven days before the presentation is scheduled.

15 Information updating Article 14 (1) A credit institution shall, at least once a year, not later than 30 June of the current year for the previous year, submit to the Croatian National Bank the updated questionnaire set out in Appendix 2 of this Decision, for the chairperson and members of the management board and members of the supervisory board, accompanied by a reasoned outcome of the regular suitability assessment which the credit institution has carried out. (2) By way of derogation from paragraph (1) of this Article, a credit institution shall immediately notify the Croatian National Bank of any change in the information from the questionnaire which might suggest that a candidate no longer meets the prescribed criteria, but not later than eight days after such a change is observed. IV ASSESSMENT OF THE SUITABILITY OF KEY FUNCTION HOLDERS Key function holders Article 15 (1) A credit institution shall identify key functions in the credit institution in accordance with the nature, scope, complexity of operations and its organisation. (2) A credit institution shall consider as key function holders the persons responsible for the operation of control functions, persons responsible for corporate and retail operations, a person responsible for the operation of the treasury and other persons whose positions give them significant influence over the direction of the credit institution, but who are not members of the management or the supervisory board. (3) A credit institution's management board shall adopt and implement policies for selecting and assessing the suitability of key function holders in the credit institution. (4) A suitable key function holder shall be a person who: 1) is of good repute; 2) possesses adequate knowledge, skills and experience to perform his/her function; 3) is not in a conflict of interest in relation to the credit institution, shareholders, supervisory board members, management board members and senior management of the credit institution; 4) is able to commit sufficient time to perform his/her function; and 5) meets the prescribed criteria for the performance of that function. Appointment committee Article 16 (1) For the purposes of this Decision, "significant credit institution" means any credit institution whose average assets at the end of the preceding three years, reported in audited financial statements, exceed HRK 7,000,000,

16 (2) For the purposes of this Decision, "appointment committee" means an appointment committee established by a credit institution or an appointment committee established by a credit institution's parent credit institution in accordance with Article 50, paragraph (5) of the Credit Institutions Act. (3) In addition to the activities laid down in Article 51 of the Credit Institutions Act, the appointment committee shall perform the following activities: 1) prepare a description of duties and qualifications to perform the function of a member of the management or the supervisory board and the expected commitment to performing that function; and 2) determine the target percentage of the less represented gender in the credit institution's management and supervisory boards and propose a strategy to increase the number of the less represented gender. (4) A credit institution shall disclose the target percentage of the less represented gender and the method to achieve such percentage in accordance with Article 435, paragraph (2), item (c) of Regulation (EU) No 575/2013. V CONTENT OF A CREDIT INSTITUTION'S POLICY AND DYNAMICS OF THE SUITABILITY ASSESSMENT OF THE CHAIRPERSON AND MEMBERS OF THE MANAGEMENT BOARD, MEMBERS OF THE SUPERVISORY BOARD AND KEY FUNCTION HOLDERS Internal bylaws of a credit institution Article 17 (1) A credit institution shall adopt and implement a policy governing the target structure of the management and supervisory boards, with respect to the: 1) nature, scope and complexity of the credit institution's operations; 2) the credit institution's risk profile; and 3) the credit institution's business strategy. (2) The policy referred to in paragraph (1) of this Article: for the management board, shall be adopted by the management board, subject to the prior approval of the supervisory board; and for the supervisory board, shall be adopted at the credit institution's general meeting. (3) A credit institution shall, through its policy related to the target structure of the management and supervisory boards, further regulate the criteria for the chairperson and members of the management board and of the supervisory board, as well as key function holders, including: 1) their specific competence; 2) adequate knowledge, skills and experience to perform their functions; 3) the requirement regarding ongoing education; and 4) the requirement regarding commitment to performing their functions.

17 (4) When assessing the good repute and conflicts of interest, a credit institution shall keep in mind that the chairperson of the management board, members of the management board, members of the supervisory board and key function holders should in any case have good repute and must not be in a conflict of interest, and shall consider all available information which may raise doubts about the good repute, or suggest a potential conflict of interest of these persons. (5) A credit institution shall determine an ongoing professional development procedure for the chairperson and members of the management board, members of the supervisory board and key function holders, to ensure ongoing suitability of their knowledge. Requirements regarding the suitability assessment procedure Article 18 (1) A credit institution shall, prior to applying to the Croatian National Bank pursuant to the provisions of Articles 39, 40 and 46 of the Credit Institutions Act, carry out the suitability assessment of each candidate. (2) A credit institution shall carry out the suitability assessment of each candidate for a key function holder in a credit institution before his/her appointment to that function. Exceptionally, a credit institution may carry out the suitability assessment of a key function holder after his/her appointment, where the circumstances of the appointment have not allowed a prior suitability assessment to be carried out. In such a case, a credit institution shall carry out the suitability assessment of a key function holder within six weeks from the appointment date. (3) A credit institution shall, at least once a year, perform a reassessment of the suitability of the chairperson and members of the management board and of the supervisory board, as well as of key function holders in a credit institution, in order to verify their ongoing suitability for performing their functions. (4) When performing regular annual suitability assessments of the chairperson and members of the management board and of the supervisory board, a credit institution shall take account of the suitability of the management board or supervisory board as a whole. (5) By way of derogation from paragraph (3) of this Article, a credit institution shall perform an extraordinary suitability assessment of the chairperson or a member of the management board, a member of the supervisory board or a key function holder when circumstances arise for the suitability verification prescribed in the policy set out in Article 20, paragraph (1), item (4) of this Decision. (6) Within the procedure referred to in the previous paragraph of this Article, a credit institution may perform only a partial assessment of the impact of the changed circumstances on the suitability of the chairperson or a member of the management board, a member of the supervisory board or a key function holder. Activities following the suitability assessment procedure Article 19

18 (1) A credit institution shall propose as a candidate for the chairperson or a member of the management board or a member of the supervisory board, or appoint as a key function holder, a person whom it has assessed as suitable. (2) Should a credit institution conclude, in the process of the reassessment of the suitability of the chairperson or a member of the management board, or a member of the supervisory board, that the chairperson or a member of the management board or a member of the supervisory board is no longer suitable, it shall replace this person. Exceptionally, should a credit institution conclude that the suitability shortcomings are not serious and that they can be removed in the short term, the credit institution may take appropriate measures to restore the suitability of the person. (3) In the case referred to in paragraph (2) of this Article, a credit institution shall, within eight working days from the date of completion of the assessment procedure, notify the Croatian National Bank on the outcome of the assessment, on its decision and on the measures it has decided to take in order to restore the suitability of the person, or a decision to replace him/her by a new candidate. The credit institution shall state the reasons for the outcome of the assessment and its decision. (4) Should a credit institution, in the process of suitability reassessment, conclude that a key function holder in a credit institution is no longer suitable, it shall replace him/her. Exceptionally, should a credit institution conclude that the suitability shortcomings are not serious and that they can be removed in the short term, the credit institution may take appropriate measures to restore the suitability of the person. (5) A credit institution shall appropriately document all suitability assessment procedures conducted for the chairperson or members of the management board, members of the supervisory board and key function holders in a credit institution. (6) A credit institution shall oblige the chairperson and members of the management board, members of the supervisory board and key function holders to notify the credit institution of any relevant event or circumstance having a significant impact on their suitability to perform the functions to which they have been appointed, or to confirm, at least once a year, that the data underlying the initial suitability assessment have not changed. Policy on the suitability assessment procedure and decisions on suitability Article 20 (1) A credit institution shall prescribe in its policy at least the following: 1) an expert service responsible for carrying out the suitability assessment of the chairperson or members of the management board, members of the supervisory board and key function holders in a credit institution; 2) the suitability assessment procedure, including time limits for the delivery of documentation, time limits for and the method of carrying out the procedure, the manner of giving opinions by the assessed person and reporting on the results of the procedure;