ZAGREB, 27 Jan 2022 - The HANFA regulator is checking the accounts of 725 current and 463 former employees of the central bank as well as other available accounts, with 529 transfers involving 26,940 stocks of credit institutions having been determined for 58 of the 1,188 former and current employees.

This was stated on Thursday by the head of the Croatian Financial Services Supervisory Agency (HANFA), Ante Žigman, at a thematic session of the parliament's Finance and State Budget Committee, entitled "HNB employees' trading in securities of banks supervised by the central bank", which was also attended by Croatian National Bank (HNB) Governor Boris Vujčić and his deputy Sandra Švaljek.

Žigman said that those transfers, registered by the Croatian depository agency SKDD, did not mean that all those stocks were traded but rather that the SKDD registered any change to the legal status of a transaction, such as transfer from one broker to another.

"That should be underlined, so that one does not think that all those stocks were traded," he said.

On 10 January, the Index news portal said that in the past 20 years more than 40 HNB employees had traded in the securities of banks supervised by the HNB, with more than 400 transactions worth more than HRK 10 million having been registered.

After that, on 12 January, HANFA launched an inspection to determine if HNB employees had violated the Market Abuse Regulation and the Capital Market Act, and if they had traded in banks' securities based on insider information.

HANFA said at the time that violation of the HNB Act and HNB's internal rules by HNB employees by trading in credit institutions' securities does not necessarily constitute market abuse in the sense of the Capital Market Act and Market Abuse Regulation.

As for possible violation of the HNB Act and HNB's internal rules, HANFA does not have the authority to launch an inspection, the agency said at the time.

Vujčić: No indication of insider trading

HNB Governor Vujčić said in his introductory address today that the HNB does not have indications that its employees had traded in securities based on insider information, which is a criminal offence, but he recalled having called on HANFA to investigate the matter and also having asked for internal checks to be made for 41 persons.

An internal inspection is currently under way into 31 persons, but it is not as nearly as thorough as inspections by HANFA because the HNB does not have access to SKDD data, said Vujčić.

On the other hand, five HNB employees who hold stocks and are not among the 41 employees have also come forward, Vujčić said.

There is no legal ban on holding bonds, says Švaljek

The current deputy governor, Sandra Švaljek, was in 2012 an external member of the HNB Council and at the time she invested in the Erste Bank corporate bonds. She said at today's session that neither at that time nor currently there were any legal restrictions for the Council's members to hold bonds.

Švaljek said there was a significant difference between shares and bonds and that possessing bonds has the nature of saving, explaining that she had not traded in those bonds but held them until their maturity, and that the yield earned had been defined in the relevant prospectus.

Švaljek said that she had been informed by her personal banker about the possibility of purchasing those bonds, and emphasised that the HNB Council had never discussed such matters.

"I am confident that this case has nothing to do with market manipulation regarding the bonds that I used to hold at the time when I was not employed in the HNB."

Responding to media claims about possible wrongdoing, the central bank said recently that Vujčić bought stocks of Riječka Banka and Zagrebačka Banka in the 1990s, when he was still not HNB vice governor or HNB Council member, and when the HNB Act did not forbid the HNB governor and HNB Council members to own stocks of the banks supervised by the HNB.

The HNB emphasised that it was the new HNB leadership that in 2000 initiated changes to the HNB Act which forbid the governor, HNB Council members and HNB executive directors to own stocks and shares in banks supervised by the HNB. Vujčić thus sold his stocks of Erste&Steiermärkische Bank, which in the meantime bought Riječka Banka, and of Zagrebačka Banka, in March 2001, a month before the entry into force of the HNB Act, which was reported by the media at the time.

Švaljek, who between 2000 and 2013 was an external member of the HNB Council, bought corporate bonds of Erste&Steiermärkische Bank on 23 November 2012 and held them until their maturity in 2017.

"As already stated, there is no legal restriction that would forbid a member of the HNB Council to own bonds of legal persons to which the HNB issues operating licences or whose operations it oversees," the HNB said, adding that Švaljek did not violate any legal regulations.

ZAGREB, 4 Jan 2022 - The volume of loans issued in Croatia totaled HRK 237.6 billion at the end of November 2021, which is an increase of 3.7% compared with November 2020, according to data from the Croatian National Bank (HNB).

Total lending by monetary institutions to domestic sectors (except the central government) was HRK 243.4 billion, an increase of HRK 700 million or 0.3% compared with October 2021 and of 4.5% compared with November 2021.

Loans accounted for the majority of lending, reaching HRK 237.6 billion in November 2021. They increased by 0.3% from October 2021 and by HRK 8.5 billion or 3.7% from November 2020.

Broken down by sector, compared with October 2021, corporate loans increased by HRK 400 million, or 0.5%, to HRK 84.8 billion, while household loans rose by HRK 200 million, or 0.2%, to HRK 141.8 billion. A slight rise, of HRK 100 million or 0.5% to HRK 11 billion, was also observed with other financial institutions.

The majority of household loans included housing loans, which increased by HRK 300 million or 0.4% month on month to HRK 67.5 billion, while general-purpose cash loans remained almost unchanged, at HRK 53.3 billion.

Compared with November 2020, corporate loans rose by HRK 600 million or 0.7%, and household loans by HRK 5.7 billion or 4.2%. Loans to other domestic sectors went up by HRK 2.2 billion or 25.1%.

On an annual level, total loans to households slowed down from 4.9% in October to 4.8% in November, reflecting the slowdown in the growth of housing loans, from 11.3% to 10.5%, due to the marked growth of subsidized loans issued in the same period of last year.

The slowdown in household lending on an annual level was partly mitigated by the stagnation of general-purpose cash loans, which decreased in the same month of the previous year, which increased their annual growth rate from 1.6% to 2.0%. On the other hand, corporate loans continued to accelerate on an annual level, from 1.8% to 2.2%, after stagnating earlier in the year.

(€1 = HRK 7.5)

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ZAGREB, 20 Dec 2021 - The Croatian National Bank (HNB) is the central monetary institution that had a crucial stabilizing role in the past and now has an important role on Croatia's path to the euro area, a ceremony marking 30 years of the HNB was told on Monday.

On 25 June 1991, parliament adopted a constitutional decision on Croatia's sovereignty and independence and the following 8 October, a decision severing all ties with the former Yugoslavia. That day, the government adopted a decree on the HNB which went into force on 23 December.

Prime Minister Andrej Plenković said the HNB was the central institution of Croatia's monetary system and that its 30th anniversary was occurring in challenging circumstances due to the pandemic as well as at a time of transformation as Croatia was integrating with the euro area.

He said the HNB had an important stabilizing role in the first decade of Croatia's independence as well as significance which manifested when the global financial crisis broke out in 2008.

Then, with monetary policy measures, the HNB cushioned the effects of the crisis on the economy, preserving exchange rate stability, releasing additional liquidity, and contributing to the state's stability, he added.

Croatia completing euro area preparations as the fourth decade of independence begins

Speaking of Croatia's goal to join the euro area on 1 January 2023, Plenković said the common currency was a logical instrument not just to achieve deeper integration, but primarily to fully exploit the potential of the single market.

With a population of over 340 million, the euro area is the second largest world economy, accounting for 15% of the world's GDP, while the euro is the second most important world currency, accounting for 38% of global transactions, the prime minister said.

Surveys show that 79% of the euro area population support the common currency, while only 15% are against it, although support has gone up during the pandemic, he added.

At the start of the fourth decade of its independence, Croatia is completing preparations for adopting the euro and achieving closer integration with the EU, he said.

"Adopting the euro will be a key step for Croatia towards boosting the economy's competitiveness and bigger economic sovereignty," he said, adding that it is certainly in Croatia's interest to share the same currency with its main trade partners.

Plenković said the decision on Croatia's accession was expected in mid-2022 and that when it joined the euro area six months later, the currency risk and exchange costs would disappear for businesses and citizens, it would have a positive effect on exports and tourist arrivals from the euro area as well as stimulate foreign investment.

He cited the example of Lithuania, which introduced the euro in 2015, saying that since then gross pay has gone up 59% and prices 10%.

In Croatia, between 2015 and 2020, gross pay went up 21% and prices 2.4%.

President wistful about Croatia losing its currency

President Zoran Milanović said that besides the Croatian Army, the HNB was the institution that had done a good job in these 30 years, while all the rest, including courts, the State Attorney's Office,  and all governments, had ups and, unfortunately, more downs.

Regarding euro area accession, the president said he was looking at Croatia's losing its currency with a dose of wistfulness.

He said the decision to adopt the euro was a political one and that it would be good for the economy because of its structure, including the high share of services and tourism.

However, he added, Hungary, the Czech Republic, and Poland have not introduced the euro and, with good arguments and acceptance from their citizens, show tendencies and a clear direction to do things their way.

He said the Czech Republic was borrowing cheaper and more favorably than some euro area member states, wondering how to explain that. Therefore, he added, one should not have absolute views and there should be no dogmas.

The president said Lithuania was the only example of pay rises in the euro area. On the other hand, he added, there are countries where salaries are stagnating or even falling. The Italian economy has been stagnating for 20 years and has never adjusted to the euro, he said.

Speaking of cryptocurrencies, Milanović said everything should be done to control that segment and ban it if necessary. "It's terribly dangerous."

He said abolishing paper money was educationally bad as children must see money to understand its value.

Governor proud of central bank

HNB governor Boris Vujčić said he was proud that they had built such an institution, underlining the real autonomy which the political authorities had given it. Thanks to this autonomy, "we have managed to build an institution which is recognized the world over," he said, adding that the HNB promotes excellence and competence.

Asked by the press if he, too, was wistful about the changes that joining the euro area would bring, Vujčić said he was convinced that it would benefit all citizens, which would prove important in the next crisis.

He said Croatia's accession would be a new challenge for the HNB, which would keep all its functions as the central bank, except decisions on the monetary policy.

As for Milanović's mention of the Czech Republic, Vujčić said it would profit by introducing the euro, but considerably less than Croatia because it is much less euroized.

Asked about cryptocurrencies, he said everyone should be aware of the risks and advised extreme caution "because it's an absolutely speculative type of investment. It's not money that replaces the money issued by central banks."

Finance Minister Zdravko Marić told the press he did not agree with the president's claim that Lithuania was perhaps the only positive example of euro adoption, saying that Slovenia, the Baltic countries, Cyprus and Malta had benefited from it.

Deputy Parliament Speaker Željko Reiner recalled that the kuna was introduced as the national currency on 30 May 1994, replacing the dinar, but said Croatia had aspired to European monetary integration since 1991.

He noted that euro coins will have Croatian motifs, including the marten (kuna) on the €1 coin.

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ZAGREB, 8 Nov, 2021 - Croatia's gross international reserves reached €24.5 billion in October 2021, their new highest level to date, increasing by €100 million or 0.6% from September, according to the data provided by the Croatian National Bank (HNB).

Since the start of the year, gross international reserves have increased by €5.5 billion or 29.3%. Compared to October 2020, they are €6.34 billion higher.

The increase is mostly the result of the government's foreign currency deposits with the HNB following the disbursement by the European Commission of €818.4 million as an advance payment for the purposes of the National Recovery and Resilience Plan.

All adequacy indicators of the country's gross international reserves suggest that they are sufficient to ensure the smooth running of the central bank's monetary policy.

Net reserves remained almost the same as in September, at €19.5 billion, the HNB said.

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ZAGREB, 28 Oct 2021 - A two-day conference on economic trends in central, eastern, and southeastern Europe, the consequences of the corona crisis, climate change, and inflation, which was organized by the European Bank Coordination "Vienna" Initiative and the Croatian National Bank (HNB), started in Split on Thursday.

The European Bank Coordination “Vienna” Initiative is a framework for safeguarding the financial stability of emerging Europe. The Initiative was launched at the height of the first wave of the global financial crisis in January 2009.

Opening this annual conference, the HNB Governor and Chairman of the Vienna Initiative Steering Committee, Boris Vujčić, said that the availability of bank lending was currently much better than in 2019, before the start of the COVID-19 pandemic.

Of course, during the lockdown of economies there was no need for taking funds, as economic activity was suspended, but the price of the money today is more favorable, the governor said in his opening speech.

Asked whether he feared inflation, Vujčić said that he could now, perhaps, be more afraid of inflation than other citizens, however, inflation was not currently an important issue.

He elaborated that this year's 2.3% inflation rate should not be a rate that caused concern.

It will grow into a bigger problem if such a rate remains present for a long period, he explained.

The governor also admitted that a part of bankruptcy proceedings that had not happened during the pandemic could ensue later and that state grants for job-keeping measures helped to achieve employment even higher than before the corona crisis.

He said that Croatia would get an exact date for the euro changeover next summer.

HNB survey shows that 61% of Croats are for switching to the euro

As for a referendum initiative by a few right-wing parliamentary and non-parliamentary parties against the adoption of the euro in Croatia, Vujčić said that not one country that introduced the euro had experienced a decline in living standards.

He went on to say that opinion polls conducted by the central bank show that 61% of Croatians support the euro, 19% are against it, and the remaining respondents are also in favor of the euro on certain conditions. 

The HNB reports on its website that the participants in the Split conference include Vice-President of the European Bank for Reconstruction and Development, Mark Bowman, the European Investment Bank Vice-President, Lyiana Pavlova, World Bank Vice-President for Europe and Central Asia, Anna Bjerde, who will join virtually, as well as central bank Governors of Estonia, North Macedonia, Montenegro, Slovenia, and Ukraine.

Representatives of the International Monetary Fund, the European Central Bank, the European Commission, and the European Investment Fund will also be participating in the conference together with commercial banks and other financial sector stakeholders.

As the region recovered, the Initiative’s focus shifted to addressing the remaining and new challenges in the financial industry, including the resolution of non-performing loans, the development of local capital markets in emerging Europe, funding innovation, and green transition.

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ZAGREB, 21 Oct 2021 - Croatia's gross international reserves reached €24.4 billion in September 2021, their highest level to date, increasing by €300 million or 1.3% from August, according to the data provided by the Croatian National Bank (HNB).

The increase was mostly the result of the government's foreign currency deposits with the HNB following the disbursement by the European Commission of €818.4 million as an advance payment for the purposes of the National Recovery and Resilience Plan.

Gross international reserves have increased by €5.4 billion or 28.6% since the start of the year.

All adequacy indicators of the country's gross international reserves suggest that they are sufficient to ensure the smooth running of the central bank's monetary policy.

Net reserves remained almost the same as in August, at €19.5 billion, the HNB said.

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ZAGREB, 18 Oct 2021 – Croatian National Bank (HNB) Governor Boris Vujčić said on Sunday that Croatian citizens should not fear a sudden rise in loan installments as a result of the rise in the inflation rate.

Speaking in an interview with the HRT public broadcaster on Sunday evening, Vujčić said there was no room for panic that interest rates would rise abruptly, and with the loan payments, for citizens who have long-term loans with variable interest rates.

He noted that the interest rates had been at record low levels since 2015 and that throughout that time the HNB was warning that at one point they would get back to normal and start increasing.

He said that this approach and the HNB's recommendation to the banks to offer fixed interest rates to citizens had led to the share of the variable interest rate in loans decreasing from 90 to the present 38 percent. He added that the majority of citizens have a fixed interest rate for the first five to ten years of loan repayment, after which the interest rate becomes variable.

"This means that in normal scenarios no one will feel any significant rise in interest rates in the short term," Vujčić said.

Should the inflation rate remain high for a longer period of time, interest rates might grow at a greater speed, he said, illustrating this with an example: "If your loan matures in 20 years or more, then a one percentage point rise in the interest rate might increase your loan installment by approximately 9.5 percent, provided you have no protection such as a fixed interest rate."

Vujčić said it was not possible to make a general recommendation to citizens with long-term loans and variable interest rates to apply for a switch to loans with fixed interest rates. He, however, recalled that in 2017 the HNB had recommended to the banks to make this possible for those who make such a request.

The HNB governor said he did not expect the rise in energy prices to have the same inflationary impact it had this year.

"Energy contributed to half of the total rise in prices, which is absolutely the greatest contribution to inflation. Looking at the markets, next year energy prices are expected to stabilize or even start falling slightly," he said.

He, however, warned there was still considerable uncertainty because if prices continued to rise, that would definitely put additional pressure on inflation.

"However, we cannot expect, in any reasonable scenario, the rise that we had this year when prices rebounded from the very low levels in the pandemic year 2020 to normal levels. I do not expect anything similar to the inflationary pressure we saw this year, but energy prices are definitely important for the overall inflation trend," Vujčić said.

The HNB expects inflation to pick up to 2.3 percent this year before slowing to 2.1 percent in 2022.

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ZAGREB, 17 Oct, 2021 - Prime Minister and HDZ party leader Andrej Plenković said on Sunday that intraparty elections at which the leaders of the HDZ's city and county branches will be elected, were democratic and transparent.

"Anyone who wanted to run as a candidate could do so, and the process has been transparent and democratic. I do not see any relevant objections or anything that is not in line with democratic standards," said Plenković, who cast his vote in regular intraparty elections.

He expressed hope that local HDZ branches, which are to elect their presidents and vice-presidents today, would contribute to their local communities as well as the HDZ's national policy.

HNB governor should explain his statement about loan installment increase

Plenković was also asked to comment on Croatian National Bank (HNB) Governor Boris Vujčić's warning in an interview with the Novi List daily that loan installments of debtors with long-term loans approved with a variable interest rate could increase from 10% to as much as 20%. Vujčić did, however, note that that scenario was not very likely.

"I have not read the interview, he should explain what he meant. As far as I understand, that is not a very likely scenario. If he has an opinion on the matter, he should make a statement," Plenković said.

In a comment on the International Day to Eradicate Poverty, which is observed today, Plenković said that the government's national development strategy stated that maximum effort should be invested to reduce the number of Croatians who were at risk of poverty or were poor.

"The 20% rate is still very high, as an EU country we must reduce it, not only through social policy but through a policy that enables wage growth and a general atmosphere of equal opportunities," he said, adding that his government would continue working towards that goal in the next three years.

Plenković believes that the progress made in the past five years in the fight against poverty is visible, albeit not as great as one would want it to be.

He wondered what the percentage of people at risk of poverty would be if the government had not intervened with job-keeping measures during the coronavirus crisis.

Asked about the investigation into police violence against migrants on the border with Bosnia and Herzegovina, Plenković reiterated that the case was contrary to the government and Ministry of the Interior's policy, that it was an isolated incident and that the government would do its best to prevent any similar incidents.

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ZAGREB, 2 Sept 2021 - Croatian National Bank (HNB) governor Boris Vujčić has said that the HNB's legal proposal is aimed at regulating tacit overdrafts the same way authorized overdrafts are regulated, which would result in greater consumer protection but also cause a drop in bank revenue of more than HRK 100 million annually.

Addressing a news conference on Thursday, Vujčić recalled the HNB's proposal for amendment of the Consumer Credit Act in the segment concerning authorized and tacit overdrafts. The HNB will agree to those changes with the government and it will also meet with bank representatives, Vujčić said, noting that the final form of the bill had still not been defined.

Vujčić said that the HNB completed a market analysis in Q1 2021 and that its findings, together with legal proposals, were presented to the Finance Ministry in April.

The analysis of the overdraft market was launched in 2020, showing that a large portion of overdrafts had changed from authorized to tacit overdrafts.

Vujčić stressed that the Consumer Credit Act, adopted much earlier, was designed to make tacit overdrafts an exception, but that when it was established that most overdrafts had turned into tacit overdrafts, a decision was made to impose the same regulation mechanism for those overdrafts as for authorized overdrafts.

In the case of authorized overdrafts, the effective interest rate is capped and banks have the obligation, when opting to cancel that service, to offer their client the possibility of repaying their debt in 12 installments.

"This legal proposal is an attempt to set a maximum effective interest rate (on tacit overdrafts) and make banks offer repayment in installments if their clients get into problems. Banks can do that now but they are not obliged to. In the future, they will have to do just that," said Vujčić.

He noted that the legal proposal was not about abolishing tacit overdrafts.

New agreements on tacit overdrafts will thus have to be limited to 90 days and HRK 1,500, and Vujčić said that the adoption of the new law could result in a drop in bank revenue of HRK 100 million annually, noting that that would depend on the final version of the bill, however, the estimate was not expected to change significantly.

Depending on the type of loan, wage, and overdraft amount, consumers would be able to save between HRK 150 and 450 a year.

Interest rates should reflect product-related risks 

Vujčić also said that of some 1,000 consumer complaints the HNB received in 2020, seven referred to tacit overdrafts, and when asked if the HNB could have reacted sooner, he said that this was not a problem previously as the effective interest rate on tacit overdrafts was not high.

The average effective interest rate for overdrafts grew in 2020 because banks raised their fees, not interest rates. "Before that, we did not have any reason to intervene, and now we do," he said.

Vujčić said that the matter was a very complex and sensitive one and that putting a cap on the interest rate was not, as believed by some, necessarily the best solution because it could exclude a large number of citizens from the market.

He noted that interest rates should reflect product-related risks and that in principle tacit overdrafts indeed entailed the most risk as there was no collateral and the client's creditworthiness was not checked, hence the high-interest rate.

He added that interest rates on tacit overdrafts in Croatia were lower on average than in EU countries that had not introduced the euro and higher than in those that were part of the euro area, but that that was not the case with other financial products.

Speaking of inflation, Vujčić said that there was no risk of very high inflation rates.

"However, in the euro area the inflation rate is slightly higher than forecast but we are still between 2% and 3%, which should not be worrying," he said.

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ZAGREB, 31 Aug, 2021 - Household deposits rose by 1.4% that is by 3.3 billion from June to July, and increased 8.4% on the year, according to the data released by the Croatian National Bank in its "Comments on monetary developments for July 2021" publication.

Total deposits in Croatia reached HRK 350.7 billion in July, going up by 8.5 billion kuna or 2.5% from June, and jumped by 31.1 billion kuna or 9.7% comapred to July 2020.

"The growth in total placements of monetary institutions to domestic sectors continued to accelerate in July, mirroring growing household lending, primarily in the form of housing loans that rose fuelled by the government subsidy programme. The placements to other financial institutions also rose, while placements to corporates fell," the HNB says in its comment.

"Total placements of monetary institution to domestic sectors (except the central government) rose in July by HRK 1.5bn or 0.6% (transaction-based) from June and stood at HRK 242.2bn at the end of the month. The annual growth rate of total placements accelerated from 3.8% in June to 4.1% in July. The monthly increase in placements was almost entirely due to the growth in loans which stood at HRK 236.5bn at the end of July," says the central bank.

Broken down by sectors, household loans rose the most (HRK 1.3bn or 1.0%) driven by the government subsidy programme, which continued to propel a strong growth in housing loans (HRK 1.1bn or 1.7%), while general-purpose cash loans continued to rise moderately (HRK 0.2bn or 0.4%).

On an annual level, the growth in housing loans continued to accelerate, having risen from 10.1% to 10.6% and so did the growth in general-purpose cash loans, which rose from 0.2% to 0.6%, resulting in an acceleration in the growth of total loans to households from 4.0% to 4.3%, the central bank reports.

(€1 = HRK 7.483066)

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