engleski

The Application of Derivative Financial Instruments in Croatian Banking Sector

In today's globalized financial markets, derivative financial instruments make the significant and the most dynamic part of modern developed financial markets. Derivative financial instruments are usually contracted and, therefore, traded on financial markets either for speculating or hedging purposes. The purpose of this paper is to indicate which derivative financial instruments and for what purposes are these derivatives applied in Croatian banking sector as well as to point out on the accounting effects of derivatives recognition and measurement. The research results indicated that derivative financial instruments still haven’t significant effect on financial position of Croatian banking sector. Derivative financial instruments are not traded on regulated financial markets in Croatia (Zagreb Stock Exchange), but are usually contracted between banks and their clients. The most common types of derivative financial instruments applied in Croatian banking sector are forwards and swaps. These derivatives are primarily used for hedging purposes, not for trading, although the majority of these hedging relationships don’t meet the criteria of hedge accounting defined in International Accounting Standard 39 „Financial Instruments: Recognition and Measurement“. According to the research results, it can be concluded that Croatian banking sector is still oriented on primary financial instruments and Croatian financial market is still not enough developed due to the lack of derivatives and other similar financial instruments that are regularly traded on developed financial markets.

derivative financial instruments; accounting treatment; Croatian banking sector

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