Was loan conversion into kuna helpful?
By the end of 2015, Croats have stopped repaying mortgages tied to Swiss franc in the total amount of about three billion kuna, about two billion kuna in loans tied to euro and about half a billion in loans issued in kuna. Although the last year ended with a slight decrease in the number of bad credits – currently standing at less than 17 percent – the amount of the irrecoverable and partly irrecoverable loans keeps growing, as well as the number of people with blocked bank accounts, reports Večernji List on March 5, 2016.
During the three month period, the value of the irrecoverable euro-tied mortgages has recorded a surge of 188 million kuna. The conversion of Swiss franc mortgages to kuna is nearing its completion, but it did not significantly improve the position of the most vulnerable debtor groups. Everyone with mortgages in the franc was offered a conversion into euro, including writing off some of the principal, but rare are those whose debt has decreased enough for them to keep repaying it. One of the “culprits” is the default interest.
In reality, the position of such debtors is even less favourable because the mass write-off has brought losses to the banks. Even if these were the most compassionate financial institutions in the world, it is now becoming difficult for them to write off debts to those who become unemployed, sick or end up in foreclosure for some other reason.
The most transparent explanation for the current situation came from Erste Bank, which said that they had about 400 debtors with loans in the franc who are facing some stage of forced collection. Before conversion, Erste Bank had about 10,100 loans pegged to the franc. About 4 percent of them were clients whose loans have been cancelled already and were facing some stage of forced collection. About 30 percent of such debtors have accepted the mortgage conversion and their debt, now expressed in kuna, has decreased significantly.
“The bank will keep implementing the individual approach, aimed at finding an optimal solution allowing clients to pay the debt due. Forced collection is something unpleasant for both the client and the bank, but the bank has to implement it when all other options have been exhausted”, said Dario Gabrić, Erste Bank official.
