Banks Warn Government It Does Not Have Much Time for Agreement

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Banks want the government to urgently come to an agreement about the issue of conversion of Swiss franc loans into euros.

The next government should try to reach an agreement with the banks about the issue of conversion of loans in Swiss franc into euros before other banks follow UniCredit and decide to sue the state because they have to pay the full burden of the conversion, said director of the Croatian Banking Association (CBA) Zdenko Adrović in an interview with Bloomberg, reports Večernji List on October 6, 2016.

Bloomberg cited data of CBA that banks were forced to take over the entire cost of the conversion, which is estimated at 7.6 billion kuna, after the government last year adopted amendments to laws which forced them to convert Swiss franc loans to euros at a low exchange rate. Therefore, on 16 September, UniCredit, which owns the largest Croatian bank Zagrebačka Banka, filed a request for the initiation of arbitration proceedings at the International Centre for Settlement of Investment Disputes in Washington.

This issue will be the first real test for the future government, and Adrović said that the new government may reach a compromise with the banks, but added that the time was running out. “We do not have much time available. The situation will change after three, four or five banks begin the process of arbitration, and we know that several banks are already prepared to do”, said Adrović, but did not specify which banks were also preparing for lawsuits.

Adrović said that the law was “radical” and added that the Croatian law, unlike laws in other EU member states, had been adopted without consultations with the European Central Bank or the European Commission.

Finance Minister Zdravko Marić said he was trying to reach an agreement with the banks. On the other hand, MOST leader Božo Petrov said that possibility of introducing a tax on bank assets was one of the topics of negotiations about forming a government with HDZ.

“We have exchanged information with the government, but I would not say that negotiations have already started”, said Adrović for Bloomberg, adding that, if the government were to impose a tax on bank assets, foreign-owned banks might hypothetically “seek protection of their investments in Croatia and merge their Croatian subsidiaries with parent banks abroad, leaving in Croatia only a retail network without any assets”.


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