The Croatian Financial Services Supervisory Agency has published its fifth Financial Stability report, finding that the financial services sector remained profitable, well capitalized and resilient during 2025 despite increasing macro-financial risks and greater exposure to global markets. Risks stemmed from persistent inflation, rising residential property prices, deepening external imbalances and heightened geopolitical uncertainty, while elevated global asset valuations, investment concentration and volatility increased the sector’s sensitivity to external shocks. Pension and investment funds recorded strong asset growth and recovered quickly from market volatility in early 2026. Insurers maintained high profitability, liquidity and capitalization, although market and interest rate risks remained their main vulnerabilities, while leasing companies continued to expand with low credit risk. A stress test covering prolonged geopolitical tensions, energy market disruption, stronger inflation, tighter financing and falling asset prices indicated adverse effects on asset values, profitability and portfolio quality, but found that strong liquidity, sound capitalization and stable pension fund inflows would preserve sector-wide resilience. The report also found that Croatia’s stock market is highly integrated with international markets and is a net recipient of foreign shocks. Increased interconnectedness during crises largely reflected higher volatility abroad rather than financial contagion in the narrower sense, underscoring the need to monitor cross-border transmission channels in macroprudential risk assessments.

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