Croatian National Bank to Curb All-Purpose Loans

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ZAGREB, February 16, 2019 – The Croatian National Bank (HNB) has been warning since late 2018 about a strong increase in all-purpose personal loans, and in an interview with the Novi List daily of Saturday, Governor Boris Vujčić said the central bank would introduce measures to curb their excessive growth.

HNB statistics show that total household lending in late 2018 was 124.4 billion kuna, 5.5 billion kuna or 4.6% more than at the end of 2017.

With a 38.3% share in total household loans, all-purpose personal loans were 11% up in December 2018 to 47.7 billion kuna. December 2018 was the seventh consecutive month to see a two-digit increase in all-purpose loans.

The HNB said in late 2018 that the high growth of unsecured cash loans with relatively long repayment periods was worrying and that it would have to analyse the situation to see if it required action on its part.

The central bank also warned that all-purpose loans could be obtained very quickly and that clients should therefore be careful not to take loans on impulse.

In the interview with Novi List, Governor Vujčić said that all-purpose personal loans were mostly granted in the national currency kuna, with fixed interest rates, and that therefore risks were much smaller than had been the case with loans pegged to the Swiss franc.

Nonetheless, some parallels can be drawn, he said. “For example, due to the less strict criteria for the assessment of creditworthiness, in some cases banks approve a more expensive all-purpose loan that is less favourable for the client even if they estimate that the client’s creditworthiness for a housing loan of the same value and with the same repayment period is poor,” said the governor.

He said that this called for harmonising criteria for the assessment of creditworthiness for different types of loans.

“Also, we want banks to include potential losses related to this type of loans in their internal estimates of capital requirements as well as secure clear mechanisms for the return of a part of banker bonuses in case of excessive losses related to all-purpose loans,” said Vujčić.

More news on the Croatian National Bank can be found in the Business section.

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