Official Position of Hanfa on Outsourcing Business Processes of Leasing Companies

1 The Croatian Financial Services Supervisory Agency (hereinafter: Hanfa) has received several inquiries regarding the interpretation of the provisions of the Leasing Act (Official Gazette No. 141/2013, hereinafter: ZOL) and the Ordinance on the Outsourcing of Business Processes of Leasing Companies (Official Gazette No. 66/2014, 142/2022, hereinafter: Ordinance) concerning the outsourcing of business processes of leasing companies. Given that the subject inquiry refers to the necessity of promoting, organizing, and supervising measures for the effective functioning of financial markets in the sense of harmonizing the conduct of supervisory authorities under Article 2, point 2 of the Act on the Croatian Financial Services Supervisory Agency (Official Gazette No. 140/05 and 12/12), the following action is taken. Based on the provision of Article 15, point 4 of the Act on the Croatian Financial Services Supervisory Agency, Hanfa adopted at the meeting of the Board of Directors held on June 28, 2024 OFFICIAL POSITION I. ZOL in Article 71, paragraph 1 establishes the legal framework for the outsourcing of business processes of leasing companies and stipulates that a leasing company may outsource certain of its business processes by transferring them to another person based on a written contract, whereby the outsourcing of business processes is considered the contractual entrustment of performing acts, services, or activities to another person that would otherwise be performed solely by the leasing company. The obligation to notify Hanfa is prescribed in paragraph 5 of the same Article, in that a leasing company intending to outsource business processes is required to notify Hanfa in writing in advance and provide explanations regarding the fulfillment of the conditions set out in paragraph 4. The Ordinance in Article 1, paragraph 3 stipulates that outsourcing within the meaning of ZOL and the Ordinance does not include the outsourcing of standardized services such as services related to the use of telecommunications infrastructure, advertising services, cleaning services, market research services, and similar. This indicates that when assessing whether the transfer of business processes to another person should be considered outsourcing, it is necessary to determine whether the act, service, or activity would otherwise be performed solely by the leasing company and whether it constitutes a standardized service. II. The Ordinance in Article 10, paragraph 1 stipulates that if a leasing company intends to outsource business processes on a significant scale, it is obliged to notify Hanfa in writing before concluding a contract with the service provider, for the purpose of assessing the compliance of the submitted notification and documentation with the provisions of the Act and this Ordinance.

2 The significance of the scope of outsourcing depends on the risk analysis and assessment of the impact of outsourcing business processes on the leasing company as prescribed in Article 6 of the Ordinance, as well as on the assessment of the impact of non-performance of the outsourced act, service, or activity. If the aforementioned could call into question the ability of the leasing company to fulfill its obligations under ZOL, or if an error or omission in the performance of outsourced acts, services, or activities significantly impaired the ability of the leasing company to continuously fulfill the conditions and obligations from its operating permit, obligations under ZOL, to maintain financial stability, and the continuity of providing leasing services, such outsourcing would be considered "outsourcing on a significant scale" and would require notification to Hanfa. III. This official position is published on the Hanfa website. CLASS: 008-02/21-03/01 FILE NUMBER: 326-01-70-72-24-13 Zagreb, June 28, 2024 CHAIRMAN OF THE BOARD OF DIRECTORS dr. sc. Ante Žigman