Internal Models for Risk Management in Banks – Implementation Possibilities in Croatia

The research aims of this paper are: to give the global framework of internal models for risk management in banks according to Basel II , to research the compatibility of Croatian banking regulation and practice with the Basel Accord, and specify future development expectations. The achieved level of risk management in Croatia is evaluated through the analysis of the International Monetary Fund and the World Bank, presented in their country report. We also use a survey of the Croatian National Bank presenting questionnaire results concerning the attitudes of Croatian banks according to Basel II. Future expectations of internal models implementation are based on achieved prerequisites and charted development directions. Internal models implementation will be based on a contemporary risk organizational model that will include features and elements presented and described in the paper. New policies and processes of risk management contribute to the business decision process and a broader system of banking business governance and supervision. Their role is to strengthen the soundness and stability of banking system and to diminish competitive inequality among banks