A small spanner in the works in government plans to convert Swiss Franc loans?
The Croatian plan for the conversion of loans in Swiss francs into euros is an infringement of the law of the European Union and bilateral investment agreements, claims a consortium of foreign banks, according to Bloomberg, reports Index.hr on Setember 3, 2015.
The consortium consisting of Erste Group Bank AG, UniCredit SpA, OAO Sberbank, Raiffeisen Bank International AG and Hypo Group Alpe Adria AG, which are the owners of the largest banks in Croatia, intends to challenge the conversion plan in court. They claim that the main issue is the intention of the finance minister Boris Lalovac for the loans to be converted at the exchange rate which was in effect on the date when the loan agreements were signed. Similar court cases have already been launched in other European countries such as Hungary and Poland.
“We are concerned about the developments and statements by Croatian officials. Forced conversion without considering the financial situation of debtors and the possibility for debt repayment seriously interferes with existing contracts”, said the banks in a joint statement.
Finance minister Lalovac said that the decision is not very smart. “When the citizens were overpaying, they did not object. When the billions went out of the country while Croatia was going through the most difficult times, then the bank headquarters did not complain. They should now call their parent companies in Italy and Austria and tell them they need to return the money”, said Lalovac.
“It is the constitutional right of the government to protect its citizens. For banks, it is not wise to sue the country in which they live and work. It is not wise for anyone, especially if we know they make money from the budget. We pay to these banks 10 billion kuna and we are never late. It is not wise to go against your own people and country. I think they should listen to the voice of the people”, said Lalovac.
Minister of entrepreneurship Gordan Maras had this to say: “We defend the interests of citizens. Their interests are a lot more important to us than the interests of the banks.”
Bloomberg says there are around 55,000 loans in Swiss francs in Croatia. These are mainly housing loans, which the citizens are having an increasingly hard time repaying due to strong growth of the Swiss franc. The government has therefore decided to intervene, and it has been announced that the plan for conversion will start to be implemented as early as October. The borrowers would have reduced instalments, and the amount they still have to pay off would be drastically reduced. In return, the banks would receive tax benefits.