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Croatian Parliament amends laws to enable Swiss franc loan conversion

Xinhua, September 19, 2015 Adjust font size:

The Croatian parliament on Friday adopted amendments to the Consumer Credit Act and the Credit Institutions Act, base on which loans in Swiss franc would be converted into euros.

After amended laws put into force on Sept. 30, all commercial banks in Croatia have 45 days to exchange all existing 53,000 franc loans in euro according the exchange rate on the day of loan disbursement.

Additionally, loan interest rate in Swiss franc will be replaced by the interest rate applicable to euro loans.

The banks which failing to apply the laws will risk from fiscal sanctions from the state.

Following the Swiss franc rising by 20 percent to the Croatian kuna in a week in Jan. 2015, Croatian government froze the exchange rate until a long-term decision could be made.

The government, Croatian National Bank (HNB), commercial banks and lenders negotiated for a long time and tried to find a solution.

There are loans worth around 3.1 billion euros (3.5 billion U.S. dollars), of which some 2.7 billion euros is private housing loans. Mortgages in francs represent 38 percent of all housing loans.

The Croatian Supreme Court made a decision in May 2015 that interest rates on Swiss francs were illegal, it paved the state legal grounds for amending laws.

Earlier this month, consortium made up of Austria's Erste Group Bank AG, Italy's UniCredit SpA, Russia's OAO Sberbank, Austria's Raiffeisen Bank International AG and the Austrian Hypo Group Alpe Adria AG, said that they would file a lawsuit against the state, if the laws were passed.

The Banks claimed that the laws breach EU legislation and bilateral investment agreements. Endtiem