ZAGREB, September 18, 2019 - Representatives of the Franak association, which brings together holders of loans originally indexed to the Swiss franc, said on Wednesday that the Supreme Court ruling of Tuesday constituted the final victory in their class action against eight banks and that by June 2023 more than 100,000 citizens were expected to sue banks over unfair terms regarding the currency clause in their loan contracts.

Explaining its ruling, the Supreme Court said on Tuesday that the eight sued banks had breached the collective interests and rights of holders of loans originally pegged to the Swiss franc.

The court reported that it had refused a motion by the banks for a review of the case in which the Croatian Consumer Protection Association sued eight domestic banks to protect their collective interests and rights.

"We have finally proved that we are right. We have won and now 125,000 people can sue banks, 30,000 have already done so, and I expect more than 100,000 lawsuits by June 2023," SNAGA party member of parliament and Franak association activist Goran Aleksić told a news conference outside the Supreme Court.

Aleksić is confident that anyone who opts to sue the banks will win, noting that the Supreme Court ruling was final and binding on all courts. "I maintain that everyone is certain to get their money back," he said.

He stressed that in the meantime the Supreme Court would have a few more things to do, primarily to decide whether loan contracts with a clause indexing loans to the Swiss franc were null and void.

Aleksić says that a ruling by the Court of the EU determined that if a currency clause was null and void, so was a contract in its entirety.

He expects that in the next few months the Supreme Court will determine that loan contracts indexing loans to the Swiss franc are null and void, in which case, he says, compensation will be 100% higher than if only interest and the currency are null and void.

He added that the Court of the EU had established beyond doubt that if contractual terms were found to be unfair and therefore null and void, restitution had to be complete.

According to information from the Finance Ministry in mid-2016, over 58,000 debtors had Swiss franc-pegged loans totalling an amount of 20.9 billion kuna. Ninety-four percent of the debtors accepted a conversion scheme and 85% of them converted their loans. The balance of CHF-denominated loans after the conversion in mid-2016 stood at 15.4 billion kuna.

More news about Swiss franc loans can be found in the Business section.

ZAGREB, August 31, 2019 - In the first half of 2019, banks in Croatia reported pre-tax profits in the amount of 3.8 billion kuna, which is 347.9 million kuna (10%) more than in the same period of 2018, show the latest figures from the Croatian National Bank (HNB).

The data refer to a total of 20 banks operating on 30 June this year, which was three fewer than at the end of June 2018.

The downsizing has been actually the result of mergers: in October 2018, Veneto Bank was added to Privredna Banka Zagreb (PBZ), in December 2018, Splitska Banka to OTP and this April, Jadranska Banka was taken over by the Croatian Postal Bank (HPB).

The total assets of these 20 commercial lenders came to 411.9 billion kuna in the first half of 2019, down by 1.35% on the year.

In terms of volume of gross profit in H1 2019, the top three banks were Zagrebačka Banka (ZABA) with 1.3 billion kuna which was up by 29.5%, and was followed by PBZ (850.9 million kuna, up 15.4%), and OTP (417.8 million).

Of major banks, only Erste&Steiermaerkische Bank had a decline from 622.1 kuna in H1 2018 to 403.2 million kuna.

The state-owned HPB recorded a rise of 32.6% to 153 million kuna in pre-tax profit in H1 2019.

More news about Croatian banks can be found in the Business section.

ZAGREB, August 7, 2019 - The European Central Bank (ECB) said on Wednesday it would carry out a stress test of five Croatian banks, a preliminary step in Zagreb’s bid to join the euro zone, Reuters reported.

According to the article headlined "ECB to test five Croatian banks as country aims for euro entry" those banks are Zagrebačka banka, Privredna banka Zagreb, Erste & Steiermärkische Bank, OTP banka Hrvatska and Hrvatska poštanska banka

The results can be expected in May 2020, the ECB added.

"Croatia last month submitted a formal bid to join the European Exchange Rate Mechanism (ERM-2), an early stage on the path to membership of the euro currency," Reuters reported.

After Croatia submitted a formal letter of intent to join the European Exchange Rate Mechanism II, Eurogroup president Mario Centeno said that the euro area finance ministers welcomed Zagreb's move, news agencies reported in early July.

The letter of intent is an early stage on the path to membership of the euro currency, and the commitments offered by Croatia in its letter were welcomed by the bloc’s finance ministers at a meeting on 8 July.

Croatia sent the letter on July 4 to euro area member states, Denmark and EU institutions, making the first formal step towards participation in ERMII, which precedes the introduction of the euro as the official currency.

Enclosed with the letter was an action plan describing in detail the reforms Croatia will carry out before entering ERMII, the Finance Ministry said.

More news about the introduction of euro can be found in the Business section.

ZAGREB, July 20, 2019 - General purpose cash loans continue to rise at two-digit rates, according to Croatian National Bank (HNB) data, which Raiffeisenbank Austria (RBA) analysts consider a result of positive trends on the labour market and favourable financing conditions.

According to HNB data, general purpose cash loans account for 39.3% of household loans and rose 11.8% on the year to 50.7 billion kuna at the end of May 2019.

Such trends are the result of salary and employment growth, low financing costs and rising consumer optimism, RBA says.

It expects similar trends in the months ahead, albeit at a slower pace in the wake of the HNB's recommendation to banks concerning the approval of non-housing consumer loans.

The HNB recommended to credit institutions at the end of February to impose stricter conditions on general purpose cash loans, and called on consumers to be prudent in borrowing.

According to HNB data, household loans totalled 128.9 billion kuna at the end of May 2019, up 0.9% on the month.

Annual growth rates have been recorded without interruption since September 2017, indicating a recovery of retail lending.

Housing loans account for a majority of retail lending (42.5%), totalling 54.8 billion kuna at the end of May 2019.

More news about banks in Croatia can be found in the Business section.

ZAGREB, May 23, 2019 - Austria’s Raiffeisenbank (RBA) is looking to make acquisitions in Croatia as organic growth alone will not be sufficient to boost its market share in the country, the CEO of the lender’s Croatian unit told Reuters on Wednesday.

RBA is the fifth biggest lender in Croatia, controlling slightly below eight percent of a market dominated by Italian-, Austrian-, and Hungarian-owned banks, according to central bank data.

“Our basic approach is organic growth through a high quality of service. However, organic growth will not be enough to increase market share in a market with limited growth potential,” Michael Georg Mueller told Reuters in an interview.

Croatia currently has around 20, mostly smaller banks, with the five biggest players controlling 80 percent of the market.

UniCredit’s Zagrebačka Banka and Intesa Sanpaolo’s Privredna Banka Zagreb are the country’s two main lenders, followed by Austria’s Erste and Hungary’s OTP, Reuters said. “RBA is seeking possible acquisitions to boost potential for reaching a targeted level of return on capital,” Mueller said without elaborating further.

OTP is also looking at two potential targets in Croatia, including a unit of Raiffeisen, sources and local media reports said last month, having already acquired much of the south east European network of France’s Societe Generale.

A Raiffeisen spokesman at the time said the lender had no intention to sell its Croatian business.

Croatia plans to formalise its bid to join the European Exchange Mechanism (ERM-2) by mid-July, a first step to adopting the euro, which the government wants to do by 2024, Reuters said.

Mueller said Croatia’s economy would benefit from using the single currency, with the advantages outweighing the costs. “The biggest advantage is the removal of the exchange rate risk,” he said. “In addition, positive effects can be expected from lower interest rates and an increase in investments and international trade.”

Around 80 percent of deposits and 60 percent of loans in Croatia are already denominated in euros, but some opposition leaders and analysts argue that the country should follow Poland, Hungary and the Czech Republic and keep its own currency, the kuna.

In a recent poll conducted by the central bank, 52 percent of people were in favour of adopting the euro, with the 40 percent against mostly citing a fear of higher prices.

Mueller said that as prices in Croatia are already relatively high compared with the average in the euro zone, those fears were unfounded. “There is no real reason to fear euro zone entry as it shouldn’t bring a significant rise in prices,” he said.

He added that Croatia could still do more to make its economy more resilient, which in turn would make the country appear less risky to lenders and thus lower its borrowing costs. “A stronger institutional and legal environment would improve the perception of risk in Croatia, while the removal of the barriers to running business, together with the euro adoption, would draw more investment into the country,” Mueller told Reuters.

More news about banks in Croatia can be found in the Business section.

The Vault mobile bank from Great Britain, launched two years ago, is expanding to the Croatian market. The bank, supported by one of the major international financial advisors, DeVere Group, is part of the new business strategy of this company which wants to expand in the fintech sector. Vault offers similar services like Revolut or N26, but claims that their bank accounts are not limited just to the EU, reports Poslovni.hr on May 9, 2019.

Dimitris Litsikakis, head of DeVere’s global fintech business, who spent the previous year running Revolut’s business in Greece, Cyprus and Malta, says that everyone in Croatia can apply through the app, get a bank account and a bank card, and open an account for their children to teach them about financial literacy.

“We have entered retail banking to expand the pool of potential clients for financial consulting services, but also to show banks, retailers and other companies that we can offer them banking and other services through a subscription,” Litsikakis said. He added that DeVere already had users of its financial consulting services in Croatia. The group was established in 2002 and manages ten billion dollars in capital for 80,000 clients in more than 100 countries.

It has offices in 70 countries and employs 500 financial consultants. Litsikakis said that Vault wants to present to the banks a regulated software solution for rapid digital transformation. He added that, due to the liberalisation of payment transactions and links with retail loyalty programmes, this solution could also help traders. “We are testing a project in which the technology underlying Vault has been delivered to a retailer which now has its own payment application, under its brand, and has received it within three months,” said Litsikakis.

He added that before this approach the business cooperation with retailers was most often realised in the form of co-branding, with banks requiring at least half a million cards or customers from the retailer. Fintech companies have reduced this to 250,000, and DeVere sees profitability with as few as 5,000 to 10,000 users. They expect fintech companies to have a strong influence on banks because of the need to capitalise investments in the sector. “According to KPMG’s report last year, investments in the fintech sector have reached 111.8 billion dollars, indicating the trends underlying the sector.”

More news about banking in Croatia can be found in the Business section.

Translated from Poslovni.hr (reported by Bernard Ivezić).

ZAGREB, April 2, 2019 - The Franak association of holders of loans previously denominated in Swiss francs said on Tuesday that the Supreme Court had ruled that people who had converted their CHF-denominated loans into euro loans under the Consumer Credit Act were entitled to sue banks and seek a refund of money that banks had taken from them illegally.

The Supreme Court has found that the fact that consumers signed an annex to their loan agreements and converted their CHF loans into euro-denominated loans does not mean that they automatically lost interest in determining that some of the provisions of the loan agreement were null and void, Franak said.

Opposition MP Goran Aleksić told Hina that claimants would certainly seek the difference between the exchange rate and interest, adding that banks would have to pay back all overpaid amounts plus default interest. He said that the Supreme Court ruling applied to all converted loans.

About 125,000 people concluded CHF-denominated loan agreements, of whom 70,000 had previously become entitled to sue, while the remaining 55,000 have now received legal security that they can sue for a refund of overpaid interest. If they all go to court, banks will eventually have to pay more than 10 billion kuna (1.35 billion euro) in overpaid amounts, Aleksić said.

Franak said that the statute of limitations on overpaid interest runs out on 13 June 2019.

More news on Swiss franc loans can be found in the Business section.

ZAGREB, March 29, 2019 - SNAGA party member of parliament Goran Aleksić said on Thursday that the Supreme Court's decision whereby decisions by banks on the variable interest rate on loans pegged to the Swiss franc in the period from 1 January 2013 to 1 January 2014 were declared unlawful, was good but that loan holders were still waiting for a crucial decision, the one on their right to claim back overpaid interest.

"We are waiting for the Supreme Court to deliver a ruling on whether, after conversion, we have the right to claim back overpaid interest. The current decision does not speak about that because the bank that was sued called only when it appealed for the lawsuit to be dropped due to conversion, however, under the litigation law, it was too late for that," Aleksić told Hina.

The Supreme Court has decided on what it could decide on. It could not decide on loan conversion because that could not be discussed and that is why a decision on converted loans is still being awaited, said Aleksić.

"What is good about this decision is the fact that the Supreme Court has confirmed what we have been saying all along, and that is that banks did not have the right to unilaterally set the parameters to change interest rates but rather that they had to agree on that with their clients," said Aleksić.

The Supreme Court said earlier in the day that decisions by banks on the variable interest rate on loans pegged to the Swiss franc in the period from 1 January 2013 to 1 January 2014 were unlawful because banks had not adjusted their operations concerning variable interest rates to the amended Consumer Credit Act.

Two decisions that are important for loan conversion have been submitted for a review and only the second decision by the Supreme Court is expected to bring a solution to the issue of converted loans, said Aleksić.

"Both decisions refer to converted loans and the second one that we are still waiting for refers to a review of a ruling that was unfavourable for the consumer and only when the Supreme Court rules on that, will we know our status," said Aleksić.

The Franak association, which brings together holders of loans previously pegged to the Swiss franc and converted to euro loans, and the SNAGA party in January called on the Supreme Court to deliver a ruling as soon as possible on reviews related to loan holders' right to compensation following loan conversion, considering the fact that the statute of limitations on their claims for overpaid interest expires in June this year.

More news about Swiss franc loans can be found in the Business section.

ZAGREB, March 28, 2019 - The Supreme Court said on Thursday that decisions by banks on the variable interest rate on loans pegged to the Swiss franc in the period from 1 January 2013 to 1 January 2014 were unlawful because banks had not adjusted their operations concerning variable interest rates to the amended Consumer Credit Act.

"Even though in order to correct the invalid provision, banks had specified in their offer to clients, in line with the law, the way the variable interest rate would be set, they unilaterally and contrary to the law, set an interest rate that was higher than the initially agreed interest rate," the Supreme Court said.

It said that because banks charged an interest rate that was higher than the one initially agreed to clients' demands to be refunded for the overpaid amount were justified.

The court said that its latest decision did not change its conclusion of 20 March 2018 that a class action discontinued the statute of limitations on claims by individual clients.

The Franak association, which brings together holders of loans previously pegged to the Swiss franc and converted to euro loans, and the SNAGA party in January called on the Supreme Court to deliver a ruling as soon as possible on bank audits in relation to loan holders' right to compensation following loan conversion, considering the fact that the statute of limitations on their claims for overpaid interest expires in June this year.

More news on Swiss franc loans can be found in the Business section.

The race between the two largest mobile banks in Europe, Revolut and N26, which are often referred to as Ubers for banking, will be waged on the Croatian summer as well by the summer. Revolut has confirmed that in the next few months it plans to offer its services in Croatia and open an office here. Its main competitor, the German mobile bank N26, has recently entered the Slovenian market, reports Poslovni.hr on March 7, 2019.

Andreas Kapsos, Revolut’s marketing manager, says they are already preparing for the expansion to Croatia. “The official launch of Revolut in Croatia will take place in the next few months, as soon as we add support for the Croatian kuna (HRK) as one of the basic currencies," says Kapsos. He adds that they are already working intensively and that the biggest obstacle is adding the kuna to the app so that users can simply add the funds to their Revolut account. "When we do this, everyone will be able to receive payments in kunas on their account, either from another bank account or from other cards. We will also be looking for a country manager for Croatia," says Kapsos.

Until recently, Revolut was by far the largest mobile bank and the most valuable financial startup (fintech) in Europe. It has more than four million users, more than 650 employees and has more than 1.7 billion dollars of market value. Earlier this year, it was overtaken by N26, with more than 800 employees.

Both banks are expanding intensively across Europe, but also on other continents. Revolut specifically targets Asia while N26 is more focused on America. In the United States, their own mobile banks were launched by JP Morgan and Bank of America.

Mobile banks operate like other mobile apps and are not the same as mobile banking services offered by all the banks in Croatia. Registration of users in mobile banks is done via mobile phones, without paperwork. You immediately receive a current account with an IBAN which is valid throughout Europe. Both Revolut and N26 have European banking licenses, which means they can operate in all EU member states, including Croatia.

The Croatian National Bank (HNB) issued a press release three years ago, warning citizens to carefully read contracts they sign with financial institutions from the Union, which are opening branches in Croatia without the HNB's approval since the HNB has no jurisdiction in those cases.

Although Revolut has so far successfully challenged existing players in the banking market, being the only major bank in Europe which allows direct buying and selling of cryptocurrencies, this year it was hit by the first affair. The British Financial Conduct Authority is investigating Revolut for suspicion that the company neglected some of the money laundering regulations, which the company strongly denies.

More news about banks in Croatia can be found in the Business section.

Translated from Poslovni.hr (reported by Bernard Ivezić).