November the 27th, 2021 - Croatian banks will have a hefty sum on their hands as the country's Eurozone entry approaches. The costs of the transition alone are eye-watering.

As Poslovni Dnevnik/Jadranka Dozan writes, based on the Action Plan for the Adjustment of the Financial System to the Introduction of the Euro as the Official Currency, about a month ago the Croatian National Bank instructed commercial Croatian banks to prepare a simulation of the costs of adjusting to the euro.

Estimates of the expected effects on revenues and expenditures directly related to the adjustment process, from the beginning of this year to 12 months after the date of the introduction of the euro, must be submitted to the CNB by the end of this year.

According to the CNB's instructions, the simulation includes all points of the Action Plan related to the implementation of the conversion, the double reporting of prices, the notification of users and adjustments following the introduction of the euro.

Among other things, it should include all foreseeable costs of pre-supply, indirect pre-supply and the cost of additional processing and the transportation of cash and additional cash insurance in branches of Croatian banks, as well as all foreseeable costs related to changes in the operation of payment systems. In addition, Croatian banks are expected to calculate related to regulatory reporting requirements, but also with all the expected savings associated with the conversion.

On their behalf, the Croatian Association of Banks provided a rough estimate. "For the needs of the technical process of adjusting the banking system, one-time costs are estimated at between 80 and 100 million euros. In addition to the above, the turnover on the foreign exchange market of kuna/euro will stand at about one billion kuna per year,'' stated the director of HUB, Zdenko Adrovic. One-time costs related to the introduction of the euro, he says, are primarily related to the adjustment of information systems and ATM networks.

However, HUB emphasised that both Croatian banks and their clients will find it easier to manage any currency risk in the long run, which means that risks will generally be reduced, and the collectibility of placements will be higher on average than it would be if Croatia were to keep the kuna.

HUB also emphasised that the introduction of the euro is extremely important for increasing investment, financing conditions and long-term growth of the Croatian economy. They add that the technical introduction of the euro is a very complex process that requires intensive engagement and cooperation of all bank employees.

"Croatian banks will play an important role in the whole process, given that they'll adjust the software of their POS devices and digital services and the entire ATM network so that people have the opportunity to use all banking services and withdraw their cash from the moment the euro is introduced. In addition, banks will convert deposits and loans and inform their clients in a timely and detailed manner about all they need to know,'' they concluded.

In any case, despite the instructions of the CNB to Croatian banks, this year was largely marked by the preoccupation with the euro project and all of the related preparatory activities. Although the Government continues to insist on the "fast track" move, so the target date for entry into the Eurozone is still the 1st of January 2023 (the earliest possible date according to the rules related to ERM II), the exact date will be known only next year.

Whether it is the beginning, middle or end of the year, operational activities to replace the kuna require very careful coordination. This is especially true for IT system customisations, which also account for a large share of the aforementioned costs. Regarding technical and technological adjustments to the transition to the common European currency, it is enough to mention, for example, that the number of devices on which payment cards are accepted in Croatia exceeds 113 thousand.

Most of them, slightly less than 108 thousand, refer to EFTPOS devices for payments at points of sale, and despite the long-term trend of reducing the ATM network, there were almost 4900 ATMs at the beginning of this year. Like most other banks, Erste Bank says they're already working intensively on the euro adjustment process to prepare in time for the introduction of the new currency. In terms of costs, most of it relates to the IT segment.

For more, follow our politics section.

October 30, 2021 - Croatian authorities such as the President, the PM, the FinMin and the HNB have recently commented on the process of euro introduction. Meanwhile, a collection of signatures is being carried out throughout the country to promote a euro introduction referendum to reaffirm the kuna as the official currency in Croatia.

Marko Milanović Litre, Member of Parliament of the Croatian Sovereignists and a representative of the Organizing Committee of the euro introduction referendum initiative Let's Protect the Croatian Kuna, said in Zagreb today that 157,000 signatures had been collected in five days and that the organizers were satisfied with the collection dynamics, reports Index.hr.

The initiative for the euro introduction referendum was launched by the Croatian Sovereignists, the Croatian Party of Rights, the Independent for Croatia, and the Generation of Renewal, and by November 7 they should collect 368,867 valid signatures of citizens. 

Signatures are collected at 250 locations throughout the country, and citizens thus declare whether they are in favor of the provision in the Constitution that the currency of the Republic of Croatia is the kuna, which is divided into one hundred lipa, and that the decision to change the currency is made by voters in a referendum.

"In the first five days, thanks to our volunteers, members of the Croatian Party of Rights, and Croatian Sovereignists, we managed to collect 157,000 signatures by 5 pm yesterday'', Milanović Litre told a news conference at the place where signatures are collected in Zagreb's central square.

He expressed satisfaction with the dynamics of collecting signatures.

"At the moment, we are satisfied with the dynamics of collecting signatures, especially after the first day and the media presence we received. It is much clearer to people what we stand for and what our goal is with this referendum initiative, which is greater democracy in Croatia", Milanović Litre said.

He assessed that the ruling party is ignorant of their initiative and stated that Croatia has the right to decide at what point it will accept the euro.

"They can repeat their mantras that it has already been decided in a referendum on joining the EU, which is not true. That is half the truth. Croatia has the right to decide when to adopt the euro. It must not be a decree of one person and his interests, but the decision of the Croatian people to decide on their own destiny", Milanović Litre said, among other things.

"We will fight for the kuna to remain because we are currently in the biggest economic crisis in human history and we cannot rush into a new monetary union that will have its own interests'', said Croatian Sovereign MP Milanović Litre.

For more, check out our politics section.

September the 14th, 2021 - As Croatia prepares to adopt the euro as its national currency and send the kuna to the history books, just how much time do we actually have to switch any kuna cash to euros?

As Poslovni Dnevnik writes, last Friday, at a Eurogroup meeting in the Slovenian capital city of Ljubljana, a "Memorandum of Understanding" was signed between the European Central Bank, the Croatian National Bank and the European Commission. Tihomir Mavricek, Executive Director of the CNB's Cash Department, spoke about the bureaucratic phrase (memorandum of understanding) regarding the issuance and production of euro coins in Croatia on HRT's Studio 4 show.

Mavricek simplified the memorandum, why it is important and whether it means that Croatia can mint the euro itself.

The memorandum signed has its own symbolism and practical side. It is symbolic because it is the first official document signed between the three parties, and practical because it completes all of Croatia's preparations for accession to the Eurozone.

How much does it cost to mint the euro?

When asked who will do it in Croatia and how much it will cost, Mavricek said that it will be minted by the Croatian Monetary Institute.

''They've already started their preparations, and the real minting of euro banknotes is possible only after the Council of the European Union makes a decision on Croatia's accession to the Eurozone,'' said Mavricek.

''Based on the memorandum, we can make one million test pieces of each of the eight denominations of euro coins. We can test how ready we'd be to mint all the necessary quantities of euro coins after the Council's decision,'' he said, adding that the cost of making one euro coin costs about 10 cents on average.

Kuna cash and its storage

As for the storage of the Croatian kuna, which will soon be replaced by the euro, he said that since the beginning of the introduction of the kuna, the CNB has produced 2.8 billion pieces of kuna coins.

''If we lined them up next to each other and vertically, we'd get 4500 km of coins, which is from Zagreb to Riyadh in Saudi Arabia. They weigh about 10,000 tonnes. Based on the experience of other countries, we expect that about 35 percent of those coins will be returned, or 1.13 billion pieces. That's about 5200 tonnes, which corresponds to the weight of 124 new Zagreb trams. If a truck can load 20 tonnes of coins, we're talking about about 260 trucks of kuna coins,'' Mavricek illustrated.

He said that there would be fewer euro coins, but not because of the exchange rate or the ratio of approximately 7.5: 1.

''There's a conversion methodology developed by the European Monetary Institute, which is based on the fact that we have the same number of coins and banknotes as we had for our national currency. According to the budget formula, we'll get approximately the same number of coins and banknotes, but it will still be a little less,'' Mavricek explained.

He added that according to information from the Deutsche Bundesbank, a huge amount of German marks remained everywhere, and still do. According to some estimates, it amounts to almost 6 billion marks. Even today, stamps can be converted into euros.

''The CNB is preparing for the safe storage of both kuna cash (banknotes) and coins. Banknote issues have already been resolved, and for coins it is currently being resolved. It will be in a safe location that will be guarded non-stop,'' Mavricek said.

Deadlines for exchange of kuna cash and coins

-''Unlike kuna banknotes that will be exchanged for euros indefinitely, kuna coins will only be able to be exchanged for a period of three years. The first year will see all banks take responsibility for that, and then the following two will be dealt with solely by the CNB,'' Mavricek explained, adding that the returned kuna cash will be stored on an area of ​​about 2,000 m2.

He believes that minting euros in Croatia will be cheaper than having them done for the country elsewhere and by someone else.

For more, check out our dedicated lifestyle section.

June the 20th, 2021 - The Croatian National Bank (CNB/HNB) has pumped a huge amount into the system for the second time since this year began as the economic situation globally continues to be rocky.

As Poslovni Dnevnik/Ana Blaskovic writes, for the second time this year, the Croatian National Bank has needed to intervene in the foreign exchange market to correct the exchange rate of the domestic currency (kuna) against the euro.

The central bank bought 120 million euros from commercial banks on Wednesday at an average exchange rate of 7.497346, pumping 900 million kuna back into the Croatian financial system.

Although there were no significant slips to speak of in the market before, the supply of the banking sector slightly pulled the exchange rate from 7,488 down to 7,485, but after a continuous appreciation in the previous month, the Croatian National Bank, as the regulator, decided to intervene and make the move.

While the second intervention this year resulted in the ''printing'' of Croatian kuna, when the previous such intervention took place back in April, the Croatian National Bank made a withdrawal from the system. With the sale of 190 million euros to banks, around 1.44 billion kuna in total was withdrawn, which stabilised the exchange rate back then at the level of 7.570405 kuna.

On Thursday, the middle exchange rate of the euro on the exchange rate list of the Croatian National Bank (which has been applied since Friday) reached 7.484807 kuna. When we last saw these levels, it was mid-August last year at the very peak of the tourist season, which ended very abruptly shortly after when Croatia unfortunately ende up being placed on the red lists of most countries from which the tourists were typically arriving here from.

This year, a better yet still wobbly summer season is expected than last year, and with it the inflow of euros, which will, as every year at that time, push the kuna exchange rate down. It should be noted that by joining the exchange rate mechanism, Croatia undertook to keep the exchange rate in the range of +/- 15 percent around the central parity of 7.53450.

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ZAGREB, 8 April, 2021 - The Zagreb Stock Exchange (ZSE) indices on Thursday continued rising and the stock market saw a turnover of HRK 12.5 million, of which HRK 6.2 million was generated by a block transaction with Atlantic Group shares.

The Crobex rose by 0.35% to 1,887.88 points and the Crobex10 by 0.21% to 1,185.88 points.

The main indices rose for the second consecutive day, reaching their new highest levels since the end of February 2020.

Regular trading amounted to HRK 6.3 million, 2.8 million more than on Wednesday.

Another 6.2 million was generated in a block transaction with Atlantic Group shares.

Only the HT telecom operator turned over more than one million kuna in regular trading, around 1.02 million, with the price of its shares falling by 0.26% to HRK 193.

(€1 = HRK 7.567065)

For more about business in Croatia, follow TCN's dedicated page.

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