Friday, 13 May 2022

Croatian Loan Interest Payments to Increase According to CNB

May the 13th, 2022 - Croatian loan interest repayments are set to grow, and the Croatian National Bank (CNB) has worked to highlight some of the main risks.

As Poslovni Dnevnik/Tina Lakic writes, the Croatian National Bank has stated that statistical indicators show that current economic growth strengthened earlier this year. But at the same time there was a visible weakening of consumer confidence, which remained relatively low in April, despite a slight recovery. As such, employment growth stopped in March, although nominal wages are growing more rapidly.

They also referred to the ongoing price hikes when it comes to both food and energy prices.

"Rising prices for oil, food and raw materials on global markets, partly affected by the war in Ukraine, are spilling over into Croatian prices of petroleum products and food, so inflation accelerated significantly during March. Due to the expected change in the monetary policy direction of the central banks of the largest economic areas, the increase in short-term and long-term government financing costs continued, and interest rates on corporate loans also rose slightly. In such conditions, the growth of placements to non-financial corporations accelerated sharply, while placements to households continued to increase at stable rates, reflecting mainly strong housing loans.

Increased systemic risks

The overall exposure of the Croatian financial system to systemic risks has increased due to the war in Ukraine and sanctions placed against Russia, and when it comes to the Croatian economy in particular, these effects are largely seen in movements in raw material and other commodity prices on both global and regional markets. Pandemic-related uncertainties, as well as recent geopolitical tensions, have so far not threatened the stability of Croatia's financial sector. An important role was played by the overall good liquidity and capitalisation of the banking sector, which is also supported by the protective layers of capital built so far,'' they stated from the CNB's Council.

Challenges and risks for the Croatian financial system in the coming period are related to the development of geopolitical instabilities and inflationary pressures, as well as the effects of the expected normalisation of monetary policy and the continued rise in housing prices. The duration of the ongoing war in Ukraine and the intensity of its consequences will determine the strength of the impact on macroeconomic, fiscal and financial developments. Disruptions in supply chains, which further encourage price increases, can place a major burden on both businesses and households.

Tightening monetary policy and rising Croatian loan interest rates

"In the context of rising inflation, monetary policies are expected to tighten with the raising of key interest rates of central banks in the largest economic areas. This will gradually increase the cost of new borrowing as well as the debt repayment burden for existing debtors with variable interest rates. The possible adverse effects of Croatian loan interest rates and their increasing on the financial system are being mitigated by the tendency to reduce total household and corporate indebtedness with a relatively low level of household debt and a small number of loans with which repayments could increase significantly. In addition to that, the expected introduction of the euro in 2023 could further mitigate the growth of the price of new borrowing for the state, as well as for other sectors.

Tightening up financing conditions in international financial markets, and then raising Croatian loan interest rates, could mitigate some of the risks to financial stability that have intensified over a long period of low interest rates, such as strong private sector borrowing, low bank profitability and the search for risky alternatives which still do offer higher rates of return. Such is the risk associated with the strong rise in residential property prices, which is supported, among other things, by a large volume of housing loans,'' they said from the CNB.

The property market is under a magnifying glass

The CNB continuously monitors and analyses the development of systemic vulnerabilities in order to be able to act on them if necessary with measures within its competence.

Thus, at the beginning of 2022, it was announced that they'd raise the countercyclical buffer rate, which will further strengthen the resilience of credit institutions to possible losses associated with exposure to cyclical systemic risks in the downward phase of the financial cycle or in the event of a sudden crisis. The CNB continues to closely monitor lending conditions at the level of individual debtors, so that potential sources of systemic risks can be diagnosed in a timely manner and measures can be taken to mitigate them, including prescribing stricter consumer lending conditions.

For more, make sure to check out our lifestyle section.

Friday, 29 April 2022

Croatian National Bank: Corporate Loans Pick Up in March

ZAGREB, 29 April (2022) - Total lending by monetary institutions to domestic sectors, except the central government, increased by HRK 4 billion in March, with the annual growth rate accelerating from 4% to 5%, the Croatian National Bank (HNB) said on Friday.

This was the result of the increase in loans. Corporate loans increased by HRK 3.7 billion or 6.7% and household loans by HRK 900 million, while loans to other domestic sectors decreased by HRK 400 million.

In the structure of household loans, housing loans and general-purpose cash loans continued to increase, both by HRK 300 million.

The annual growth rates of both housing and general-purpose loans remained at previous month’s level, at 8.0% and 3.4% respectively, so household loans accelerated only slightly, from 4.4% in February to 4.5% in March. On the other hand, corporate loans accelerated considerably, from 2.4% in February to 6.7% in March.

For more, check out our business section.

Wednesday, 27 April 2022

Could Tomislav Coric Become Most Powerful Name in Banking Sector?

April the 27th, 2022 - Could Economy Minister Tomislav Coric become the most powerful name in the domestic banking sector?

As Poslovni Dnevnik/Ana Blaskovic writes, while Prime Minister Andrej Plenkovic is busy calculating with the government reshuffle, which has (once again) been eroded by varying scandals, there is speculation on the sidelines that Economy and Sustainable Development Minister Tomislav Coric could continue his career as the vice governor at the Croatian National Bank (CNB).

Since the return of Martina Drvar to the European Central Bank, the position of Vice Governor for Supervision has been open since the middle of last year. It's a proverbial "hot seat" in which a key person sits in order to supervise the legal operations of banks. In her hands lies the power to prescribe millions in fines to the most powerful players on the Croatian market, which is why, both directly and indirectly, she is often open to the barrage of pressures from the banking sector, especially when their profits are touched.

Damir Odak doesn't have adequate support

Although it has been mentioned that Damir Odak could return to the post, he allegedly lacks the support of those in power who resent him for being close to Governor Boris Vujcic. Unofficially, it can be heard in the parliamentary corridors that the seat is "reserved for Tomislav Coric" and that (for now) there are no other candidates being looked at. It's unclear at this moment in time whether it is possible to have a kind of rotation of vice-governor positions and in that case, Tomislav Coric might take over another department, and one of the current vice-governors would take over that role in supervision.

"At the moment, only Tomislav Coric is being mentioned, but there will probably be no official proposal before the prime minister announces the details of the reconstruction," it has been said among circles close to the parliamentary Committee on Finance and the Budget.

Regarding his possible departure to the CNB, Tomislav Coric briefly said that he is "without comment on all non-departmental topics". Therefore, Coric, a doctor of science and former assistant professor at the Department of Finance at the Faculty of Economics in Zagreb, doesn't seem as if he's rejecting this option.

Dissatisfaction within the CNB

The CNB is allegedly resisting all notions of Tomislav Coric, believing that this is a key function that requires exceptional knowledge of the banking system and the way in which it functions.

There has as yet been no official comment from the CNB on the alleged idea. Governor Boris Vujcic is a member of a Croatian delegation led by Finance Minister Zdravko Maric, who travelled to the International Monetary Fund's annual assembly in Washington last week. Unofficially, however, the choice didn't really please them much, especially since the return of Odak was expected.

"Within the CNB, the entrance of Tomislav Coric is being resisted. This is a key function that requires exceptional technical knowledge of the banking system, as well as of many domestic and European Union regulations. This is one of the most responsible technical positions in the entire country. It's problematic to recruit from the political sphere to an extremely demanding professional position,'' claimed a well-informed source.

The collapse of integrity

On the condition of anonymity, those who spoke about the matter commented that regardless of Tomislav Coric's indisputable educational qualifications, his appointment would be a firm step in undermining the integrity of an institution that should be totally independent of politics.

The last two rounds of appointments at the very top of the CNB's structure were politically coloured, with the key exception that Martina Drvar, as the undisputed expert, was the governor's choice back in 2018. To briefly recall, before the amendments to the law on the central bank, the governor chose his own closest associates.

"We're practically facing a situation in which the CNB Council is the majority politicised body, and that's the defeat of the independence of yet another of this country's institutions. In that sense, it's probably good that we do go ahead and introduce the euro (join the Eurozone) and that the ECB takes control of systemically important Croatian banks,'' concluded one of the aforementioned well-informed sources.

For more, make sure to check out our dedicated politics section.

Friday, 4 March 2022

Foreign Exchange Intervention: Croatian National Bank Sells €171 Million

March the 4th, 2022 - The Croatian National Bank (CNB/HNB) has sold a massive 171 million euros to various banks in a recent exchange rate intervention, the first which has taken place since back in June last year.

As Jadranka Dozan/Poslovni Dnevnik writes, on the 2nd of March, the Croatian National Bank intervened in regard to the exchange rate by selling off foreign exchange to banks in order to preserve the stability of the exchange rate, while 171 million euros were sold to banks at an average exchange rate of 7.562505, the central bank announced.

As a result of this foreign exchange intervention, which has obviously been primarily driven by increased demand for foreign exchange, about 1.3 billion kuna is being withdrawn from the system.

After the opening of that day's trading, the market exchange rate of the euro/kuna stood at 7.58, which is slightly higher than it had been. In the daily reviews of leading banks on the Croatian foreign exchange market, it could be read that on Tuesday this week, there was a slightly higher demand for euros by corporate clients for foreign currency payments, but in the past few days, a slightly higher demand was attributed primarily to the retail sector.

As briefly touched on, the Croatian National Bank last intervened in the foreign exchange market back in mid-June of last year, but then it was by buying foreign exchange from banks as a result of increasing appreciation pressures, while the last time it intervened by specifically selling off euros was in the first half of April 2021.

For more, make sure to check out our dedicated business section.

Saturday, 22 January 2022

Boris Vujcic Reveals All Locations for Kuna-Euro Cash Exhange

January the 22nd, 2022 - Boris Vujcic has revealed all of the locations at which the Croatian kuna can be exchanged for the euro as the country edges closer to Eurozone entry.

As Poslovni Dnevnik writes, Prime Minister Andrej Plenkovic and CNB Governor Boris Vujcic addressed the public at a recent session of the Council for the Introduction of the Euro as the Official Currency, held at the National and University Library.

Plenkovic: There are many advantages for citizens

"Why is the introduction of the euro good? There are benefits for our citizens. Currency risks will disappear. The euro will bring with it a great impetus to the international exchange of goods and services,'' explained Plenkovic.

“Euro deposits account for more than 76 percent of total time and savings deposits with banks, and 50.3 percent of total bank placements are euro placements. We intend to highlight several fundamental principles of this process which are included in the bill. The first and most important thing is consumer protection, we must prevent any situations that would take advantage of the introduction of the euro to the detriment of consumers,'' added the Prime Minister.

"The intention is that in the beginning the prices will be expressed twice, both in kuna and in euros. Throughout the whole of 2023, after the introduction of the euro, prices will also remain highlighted in kuna. So, first we'll pay in kuna and see the prices in euros, and then we'll pay in euros, but we will also have the prices visible in kuna,'' he said.

After Plenkovic, CNB Governor Boris Vujcic spoke, HRT writes:

"The most important thing in the law is that it contains the principle according to which the existing contracts stating the reference to the kuna are still valid. We're removing any possibility of legal uncertainty during Croatia's changeover to the euro,'' he said.

"When it comes to the process of exchanging the kuna for the euro, consumer protection is important. Converting kuna into euros will be done by and in banks automatically and without any incurred costs,'' assured Boris Vujcic.

"As for deposits and loans, people don't need to worry, the conversion into euros will be done automatically on the day of the introduction of the euro in Croatia at a fixed conversion rate and without any cost. Agreements on all loans and deposits will continue to be valid,'' he added.

"As for interest rates, the rule is that fixed interest rates will remain fixed, and when it comes variable interest rates, if the variable parameter needs to be adjusted when introducing the euro due to rounding, this law stipulates how this adjustment will be made," Boris Vujcic said.

"The consumer must not be put in a worse position than they were in before"

"Again, the important principle is that the consumer cannot be in a worse position than they were in before. If there are any differences in the second decimal, it will be at the expense of the bank, not at the expense of people. When exchanging kuna cash, about 36 billion kuna is in circulation at the moment, it would be good to deposit as much of that money in banks as possible this year in order to logistically facilitate the conversion itself,'' noted the governor.

"Those who fail to do so will have a chance after that, for one year at Fina, in banks and at Croatian Post (Hrvatska posta) offices, and banknotes will be able to be exchanged forever at the CNB, and the same will be made possible for kuna coins for the next three years," concluded Boris Vujcic.

For more, check out our dedicated lifestyle and politics sections.

Thursday, 29 July 2021

Bank Warns of Potential Jeopardy Despite Good Croatian Economic Outlook

July the 29th, 2021 - The Croatian National Bank (CNB/HNB) has warned of potential issues that the domestic economy might yet face despite the currently favourable Croatian economic outlook.

As Poslovni Dnevnik writes, due to the possibility of a new wave of the coronavirus pandemic and potential lockdowns, there is room for the further growth of property prices above their real value with the risk of a sudden and sharp decline, as well as the growth of bad loans after the abolition of measures and grants. These are just a couple of potential issues which could arise and directly threaten Croatia's still fragile recovery and growth throughout the rest of 2021.

The current Croatian economic outlook is good, and that growth is expected to be between 5 and 7 percent, as most analysts see it, while the most optimistic of all is the CNB itself, which in its baseline scenario expects as much as 6.8 percent of GDP growth this year. Personal consumption, investment, as well as exports are growing, and a massive stimulus from the National Recovery and Resilience Plan is expected.

Of course, all of this mostly depends on the summer season for which tourism workers are now trying to make last for as long as possible and bring at least 70 percent of revenue from pre-pandemic 2019. The success of the 2021 tourist season depends mostly on the (non)materialisation of this first risk, reports Novi list.

CNB Governor Boris Vujcic recently explained that the aforementioned growth is higher than 6 percent (6.8 percent) of the CNB's basic scenario: this is what the CNB expects as the most probable course of events, and it implies that the worst of the crisis is behind us, but dangers remain.

In short, the national bank doesn't expect that the aforementioned risks will materialise, however, there is a danger which remains and the central bank is aware of it. Therefore, if there was a significant deterioration of the epidemiological situation and the fourth wave did arrive, Vujcic said that the Croatian economy would survive another lockdown, but growth, he said, would be slower due to the situation in the most affected sectors.

There are also sectors that work independently and aren't really influenced by the pandemic, and they would still pull in some growth in such a dire scenario. The CNB has now, in a new issue of its publication Macroprudential Diagnostics, enumerated these potential triggers for the creation of a risk and analysed them in detail.

“The great uncertainty and unpredictability of the course of the pandemic poses risks in the coming period, despite the growing proportion of the population being vaccinated. The possibility of a new wave after the summer months is an important risk to take into consideration for the continued recovery of Croatian economic activity.

The possible worsening of the epidemiological situation and the strengthening of epidemiological measures, including localised measures, would adversely affect the speed of recovery and the Croatian economic outlook, as well as the sustainability of public finances,'' the CNB said.

Delaying Croatian economic recovery and premature withdrawal of measures introduced during the pandemic could lead to a deterioration in the debt service capacity of part of the private sector, especially those in which debt levels are high and support measures contribute significantly to maintaining relatively stable incomes. Total exposure to systemic risks during the second quarter of 2021 remain high, according to the CNB.

Further progress in terms of the vaccination of the population, together with the mitigation and eventual abolition of epidemiological measures, should support the continuation of the economic recovery during 2021 and secure a decent Croatian economic outlook going forward.

For more, follow our lifestyle section.

Monday, 26 July 2021

Croatian National Bank Answers Important Question About Eurozone Entry

July the 26th, 2021 - The Croatian National Bank has revealed just how long we'll be able to make payments in both Croatian kuna and in euros as the country prepares to join the Eurozone at the beginning of 2023, as is currently planned.

As Poslovni Dnevnik writes, according to previous announcements, Croatia should enter the Eurozone and as such finally adopt the on January the 1st, 2023, and before the euro officially becomes the country's official currency in replacement of the kuna, many preparations will have to be made.

When it comes to just who will be in charge of the technical realisation of some important things about the introduction of the euro and how the euro will work at the very beginning, the Croatian National Bank confirmed for Net.hr that the new euro coins of the Republic of Croatia will be made at the Croatian Monetary Institute.

"The production of euro circulation coins with the Croatian national symbols will begin at the earliest six months before the day of the introduction of the euro, ie after the EU Council Decision that Croatia will introduce the euro," the Croatian National Bank explained.

With the day of the introduction of the euro as the national currency of the Republic of Croatia approaching, a sufficient amount of euro coins will be prepared for circulation to meet the needs of all people and business entities, the national bank added. What everyone is interested in at the moment, however, is just how long it will be possible to use both kuna and euro in parallel before the kuna is phased out and placed in this history books entirely.

"During the first two weeks from the day of the introduction of the euro, kuna and euros will remain in circulation at the same time, and traders should return the rest of the money to customers which have paid in kuna exclusively in euros," the Croatian National Bank explainsed After that period, the euro will be the only legal tender allowed in the country, they added.

"In order to ensure a smooth transition to the new currency, in a short transition period, the kuna and the euro will have the status of legal tender at the same time. In other words, people will be able to pay in both currencies in the first two weeks starting from the day the euro is introduced in stores. After two weeks from the day of the introduction of the euro, the euro will be the only legal tender in the Republic of Croatia,'' they stated from the Croatian National Bank.

Money, meaning Croatian kuna, can be exchanged for euros free of charge for the first six months of the euro being in use in the country. However, if someone does forget to exchange any kuna cash they have into euros after that deadline, it will still be possible. Namely, in the first six months from the day of the introduction of the euro by the bank, Fina and Hrvatska posta d.d. will allow kuna cash to be exchanged for euros in all branches free of charge, and in the next six months they will be entitled to charge a fee for this service.

For more, follow our dedicated lifestyle section.

Sunday, 20 June 2021

Croatian National Bank Pumps 900 Million Kuna into System

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.

For more, follow our business section.

Saturday, 10 April 2021

Croatian National Bank Makes First Foreign Exchange Intervention of 2021

April the 10th, 2021 - The Croatian National Bank (HNB/CNB) has made the very first foreign currency exchange market intervention of the year to stabilise the Croatian kuna.

The ongoing coronavirus pandemic has made life very difficult for banks, not in terms of revenue so much but in terms of attempting to stabilise domestic currencies as economic blows keep on being dealt by the spread of the virus and the subsequent introductions of lockdown measures to try to mitigate the escalating public health crisis.

The Croatian National Bank, with Boris Vujcic as its governor, hasn't been immune to the proverbial storm clouds caused by this unprecedented and seemingly unrelenting global situation, and numerous interventions involving the euro and the kuna have taken place over the last pandemic-dominated year.

On Thursday last week, the Croatian National Bank stepped in to make its first foreign currency exchange intervention of 2021.

As Ana Blaskovic/Poslovni Dnevnik writes, to be more precise about what the intervention entailed, the central bank sold 190 million euros to the banks at an average exchange rate of 7.570405 Croatian kuna per euro, as such withdrawing a massive 1.438 billion kuna in total from the system.

This was, as previously stated, the very first foreign exchange intention of 2021, which was done to stabilise the Croatian national currency. The previous intervention by the national bank took place back at the end of March 2020, as the pandemic began to errupt across Europe.

Back then, 618.5 million euros were sold to the banks, and the exchange rate stabilised at 7.608529. In the meantime, four interventions were held in which the Croatian National Bank was the one to purchase the euros.

For all you need to know about Croatian banks and financial institutions operating within the Republic of Croatia, whether you're a local or a foreigner, make sure to bookmark this page.

 

Friday, 29 January 2021

Boris Vujcic Awarded for Croatian Monetary Reform Policy

January the 29th, 2021 - Boris Vujcic, the Croatian National Bank's Governor, has been awarded for the Croatian monetary reform policy which enabled the stability of the Croatian kuna against the euro.

As Poslovni Dnevnik/Ana Blaskovic writes, CNB Governor Boris Vujcic has received the Lamfalussy Award for 2021, named after the "father of the euro" Baron Alexandre Lamfalussy, of the Hungarian National Bank.

Vujcic was awarded for the Croatian monetary reform policy, which enabled the stability of the kuna against the euro, which subsequently enabled Croatia to join the European Exchange Rate Mechanism back during the summer, and they also state his key role as deputy chief negotiator with the European Union (EU).

In his thanks for this recognition, Vujcic focused his speech on the issue of monetary policy in emerging markets when the largest central banks resort to unconventional instruments.

With humorous associations to the novel A Hitchhiker’s Guide to the Galaxy and Monty Python, he emphasised the extremely low real interest rates that are likely to become permanent features of economies.

"The main reason why emerging market countries started implementing APP from today's perspective is obvious - these programmes were successful," said Vujcic, recalling that the CNB made one of the largest buyouts in emerging markets last year, about 5.5% of the country's GDP, which is only about half the amount of the ECB programme in that year”.

He added that Croatia's conclusion of a currency swap agreement with the ECB and its entry into ERM II also helped stabilise the market. He pointed out that the recent development of the monetary policy regime in emerging markets “cannot be taken for granted” because they do not issue reserve currencies and heavily depend on foreign borrowing.

The Belgian economist and central banker Lamfalussy was born in Hungary in 1929. He participated in the work of the Delors Commission, which laid down the foundations of the European Economic and Monetary Union, with a prominent role in founding the ECB and creating regulation of the European financial system. He died in 2015, the Lamfalussy Prize was established back in 2014 and is awarded for outstanding professional achievements and life achievements of individuals that affect the work of central banks and the functioning of the international financial system.

For the latest travel info, bookmark our main travel info article, which is updated daily

Read the Croatian Travel Update in your language - now available in 24 languages.

Join the Total Croatia Travel INFO Viber community.

Page 1 of 2

Search