Saturday, 16 February 2019

Croatian National Bank to Curb All-Purpose Loans

ZAGREB, February 16, 2019 - The Croatian National Bank (HNB) has been warning since late 2018 about a strong increase in all-purpose personal loans, and in an interview with the Novi List daily of Saturday, Governor Boris Vujčić said the central bank would introduce measures to curb their excessive growth.

HNB statistics show that total household lending in late 2018 was 124.4 billion kuna, 5.5 billion kuna or 4.6% more than at the end of 2017.

With a 38.3% share in total household loans, all-purpose personal loans were 11% up in December 2018 to 47.7 billion kuna. December 2018 was the seventh consecutive month to see a two-digit increase in all-purpose loans.

The HNB said in late 2018 that the high growth of unsecured cash loans with relatively long repayment periods was worrying and that it would have to analyse the situation to see if it required action on its part.

The central bank also warned that all-purpose loans could be obtained very quickly and that clients should therefore be careful not to take loans on impulse.

In the interview with Novi List, Governor Vujčić said that all-purpose personal loans were mostly granted in the national currency kuna, with fixed interest rates, and that therefore risks were much smaller than had been the case with loans pegged to the Swiss franc.

Nonetheless, some parallels can be drawn, he said. "For example, due to the less strict criteria for the assessment of creditworthiness, in some cases banks approve a more expensive all-purpose loan that is less favourable for the client even if they estimate that the client's creditworthiness for a housing loan of the same value and with the same repayment period is poor," said the governor.

He said that this called for harmonising criteria for the assessment of creditworthiness for different types of loans.

"Also, we want banks to include potential losses related to this type of loans in their internal estimates of capital requirements as well as secure clear mechanisms for the return of a part of banker bonuses in case of excessive losses related to all-purpose loans," said Vujčić.

More news on the Croatian National Bank can be found in the Business section.

Friday, 15 February 2019

Cheaper Cross-Border Money Transfers for Croatian Citizens within EU

ZAGREB, February 15, 2019 - The European Parliament on Thursday adopted new rules that reduce charges for cross-border money transfers in euro within the EU, eliminating discrimination against member states that are not in the eurozone, which means that fees will be reduced for Croatian consumers too.

"On Thursday, the plenary adopted by 532 votes in favour, 22 against and 55 abstentions, new rules to end discrimination against payment service users in the EU outside the Eurozone," the EP reports on its website.

"Whereas consumers in the Eurozone benefit from the single euro payments area ('SEPA'), those living outside continue to pay high costs for cross-border payments in euro."

Consumers in Croatia on average pay 8.23 euro in transaction fees for every 100 euro in cross-border transactions while Bulgarian consumers on average pay 20 euro for these transactions, a study conducted by the European Commission in 2017 shows. The lowest cross-border transaction fees were paid by Polish consumers (2 euro).

The adopted rules will be the same throughout the EU and will be payable in local currency. An additional advantage of this approach is to boost cross-border shopping, reducing costs for companies and will result in savings of almost 1 billion euro a year.

"Before the end of the year, charges for cross-border payments in euro within the EU must be in line with charges for national payments made in the official local currency (the ‘same charge’ rule). Additionally, member states are free to impose rules on banks to apply the same charges to cross-border and domestic non-euro payments," the EP states on its website.

The new measures will also protect consumers from being charged arbitrary costs for currency conversions. At each transaction, they will be informed about the amount to be paid in the local currency and the currency of their account.

More news on Croatia and the European Union can be found in the Politics section.

Thursday, 14 February 2019

EU Rules against Croatian Law on Retroactive Invalidation of Loans

ZAGREB, February 14, 2019 - The Court of Justice of the European Union on Thursday ruled that Croatia's legislation on retroactive invalidation of loans concluded with foreign lenders not authorised to provide credit services in that Member State is against the EU acquis if the legislation is not applied also on Croatian lenders.

The Luxembourg-based court concludes "that EU law precludes legislation of a Member State under which credit agreements and other legal acts based on those agreements concluded with a lender which is established in a Member State other than that of the recipient of the service and which does not hold all the necessary authorisations, issued by the competent authorities of the first Member State, are invalid, retroactively, from the date on which they were concluded."

This ruling was made regarding the case of a Croatian national, Anica Milivojević, who in 2007 concluded a credit contract with the Reiffeisenbank, based in Austria, on a non-renewable credit agreement in the sum of 47,000 euro.

"The loan was taken out using an intermediary resident in Croatia and the agreement contains an alternative jurisdiction clause in favour of either the Austrian or the Croatian courts. As security for the repayment of the loan, Ms Milivojević also signed a notarised deed relating to the creation of a mortgage based on that agreement which was subsequently entered in the Croatian land register," the EU court says in its press release.

In 2015, the Croatian national brought an action before the Rijeka-based Municipal Court against Raffeisenbank for a declaration of invalidity of the credit agreement and of the notarised deed and for the removal of the mortgage from the land register. While Raiffeisenbank argues that that agreement was concluded in Austria, Ms Milivojević asserts that it was concluded in Croatia.

On 14 July 2017, a national law entered into force which provides for the retroactive invalidity of credit agreements concluded in Croatia with a foreign lender which does not hold the authorisations or approvals required by the Croatian authorities and which could be applicable to the dispute in the main proceedings. "By today’s judgment, the Court states that it has jurisdiction to examine the compatibility of the Law of 14 July 2017 with the freedom to provide services.

"In that regard, although Croatia argues that EU law does not apply to the agreement at issue because that agreement was concluded prior to the date of Croatia’s accession to the European Union, that argument cannot be accepted, since the effects of that agreement continue to make themselves felt after that date.

"Moreover, as is clear from the Act of Accession of Croatia, the provisions of the original Treaties are binding on the Republic of Croatia from the date of its accession, with the result that they apply to the future effects of situations arising prior to that date," the EU court says.

With regard to the freedom to provide services, "the Court points out that that principle requires the elimination of all discrimination on grounds of nationality against providers of services established in other Member States and the abolition of any restriction which is liable to prohibit, impede or render less attractive the activities of a provider of services established in another Member State."

"Noting that, for the period between 1 July 2013, the date of the accession of Croatia to the EU, and 30 September 2015, only credit agreements concluded with non-authorised lenders which have their registered office outside Croatia are invalid, the Court considers that, for that period, the Croatian law directly discriminates against lenders established outside Croatia.

"From that date, since the invalidity regime applied without distinction to all non-authorised lenders, the Law of 14 July 2017 constitutes a restriction on the exercise of the freedom to provide services," the EU courts warns.

More news on Croatia and the European Union can be found in the Politics section.

Friday, 1 February 2019

Serbia’s Jugobanka Loses Suit against Croatia

ZAGREB, February 1, 2019 - Zagreb's Commercial Court has turned down a motion by Belgrade's Jugobanka, which is in official receivership and which asked for nearly 21 million euro and 2.6 million Swiss francs from Croatia, arguing that it was a debt stemming from loans which were used between 1985 and 1989 by the Croatian companies 3. Maj, Varteks and Duhan, and that the loans were being repaid to the Paris Club by Serbia, instead of Croatia.

The lawsuit, filed in 2009, says that Jugobanka bases is claim on Annex 6 from the succession treaty to the former Yugoslavia, i.e. provisions on the servicing of loans and other liabilities from agreements with the governments of the Paris Club member states.

Responding to the lawsuit, the Croatian State Prosecutor's Office said Croatia had not undertaken the obligation to repay loans contracted by Jugobanka Udružena Banka Beograd branches nor the obligation to repay debts contracted by Jugobanka d.d Beograd as the Croatian branch.

Croatia said it had not undertaken those obligations either in bilateral agreements with the German and Swiss governments.

The fact that the end users of loans for which Jugobanka Udružena Banka Beograd borrowed abroad were based in Croatia does not mean that Croatia was obliged to pay to Paris Club member states the amounts which said bank had borrowed, Zagreb's Commercial Court says in the explanation of its ruling, which can be appealed.

Croatia's obligation to those states stems only from the international agreements Croatia signed with Germany and Switzerland, the explanation says.

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

Saturday, 19 January 2019

Slovenia Protests Croatia’s Ruling in Ljubljanska Banka Case

ZAGREB, January 19, 2019 - Slovenia on Friday protested against a Croatian court's ruling in Zagrebačka Banka's and Privredna Banka Zagreb's suit against Ljubljanska Banka over transferred Croatian savings in Ljubljanska Banka's former Zagreb branch.

The Zagreb County Court recently dismissed an appeal lodged by Ljubljanska Banka and Nova Ljubljanska Banka, upholding a ruling against Ljubljanska Banka, which is a breach of international and European Union law, according to a protest note which the Slovenian government handed over to the Croatian Embassy in Ljubljana today.

In the note, Slovenia says it expects Croatia to refrain from all proceedings that are in contravention with the Mokrice memorandum on succession to the former Yugoslavia whereby, according to Slovenia, the two countries agreed to stop all legal proceedings against Ljubljanska Banka in Croatian courts, Slovenian news agency STA said.

Ljubljana says Slovenia complied with the Mokrice agreement because it enabled Croatia to join the European Union, yet the legal proceedings against the bank have not been stopped.

The two countries interpret the 2013 memorandum differently. Slovenia says it was agreed that Croatia would fully and unconditionally stop the legal proceedings.

Croatia says it was agreed to put the proceedings on hold and that Slovenia has breached the memorandum because, as the then owner of its biggest bank, it has not secured the bank management's consent to the terms of the adjournment until an alternative and mutually acceptable solution has been found.

Slovenia has reimbursed Ljubljanska Banka's Yugoslav-era clients in Croatia after the European Court of Human Rights ruled that they should be reimbursed under the same model clients in Slovenia were after Slovenia gained independence.

However, Slovenia insists it is not accountable for the payments to Ljubljanska Banka's Yugoslav-era clients in Croatia that came from Croatia's public funds through Zagrebačka Banka and Privredna Banka Zagreb. It says this matter should be resolved as part of negotiations on succession to the former Yugoslavia.

More news on the Ljubaljanska Banka case can be found in the Business section.

Monday, 7 January 2019

Croatians Still Preferring Cash over Bank and Credit Cards

Germans could be left without cash if a threat of a general strike of 12,000 employees who transport money to ATMs is fulfilled. Although they could quickly pay with their bank and credit cards, the lack of cash would anger the Germans, since they, just like Croatians, like to pay with cash. On the other hand, some countries in northern Europe are even thinking about the abandonment of cash money altogether. Advocates say this approach would eradicate the grey economy and tax evasion, while the opponents warn about a loss of privacy, reports Večernji List on January 7, 2019.

The popularity of cash, despite the simplicity and security of bank card payments, is even growing in some countries. Germans, like Croats, make as much as 80 per cent of transactions with cash. According to the data of the Croatian National Bank, of the 179 million recorded receipts in 2017, as much as 87 per cent was paid in cash. However, the value of card transactions has grown to 37 per cent of the total turnover.

It should be noted that the largest card turnover is recorded during the summer and that 12 per cent of the amount of all card transactions is made with foreign cards, so it is likely that tourists mostly use them. If we take this into account, we can conclude that Croats pay with cards for just a quarter of their purchases. And they use much more their bank debit cards than credit cards.

Nevertheless, the popularity of bank cards is growing year after year, as well as the value of card transactions. Every consumer has 2.5 cards on average, and 79 per cent of citizens have at least one card. This shows that the problem is not the access to bank cards, but the will of the citizens to use them.

Local craftsmen and caterers mostly insist on cash payments, and the unwritten rule is that discounts are more substantial if you pay with banknotes. The reason is the high payment fees that card companies contract with the sellers of services and goods. Since these fees are often, especially in the case of a new company that has no financial history, higher than five per cent, entrepreneurs must increase their prices for that amount. As a rule, fees range from two to five per cent, and this cost is transferred to the consumers. That is why customers usually pay more with bank cards, especially in the case of larger purchases, which typically bring five per cent extra discount if you are ready to pay with cash.

On the other hand, Americans pay for almost half of all transactions with bank cards. Sweden and Norway are moving towards full cash elimination. In Sweden, for example, in five years the share of cash transactions fell from 50 per cent to just 20 per cent. Swedes trust banks and institutions and research has shown that they are not worried by either the 'Big Brother' issue or internet fraud. They recently abolished the largest banknotes, claiming that only criminals use them, and they consider the abandonment of cash an excellent way to fight the grey economy.

More news on the Croatian economy can be found in our Business section.

Translated from Večernji List (reported by Marina Šunjerga).

Tuesday, 13 November 2018

UnionPay, World’s Largest Card Payment Organisation, Coming to Croatia?

American Express cardholders will be able to use them until the end of 2019. Which replacement service will they opt for will depend on what the card companies will offer them. Therefore, some banks, as well as marketing agencies, have already begun preparations, including advertising campaigns, trying to win over some of about half a million American Express users in Croatia. PBZ is the licensed American Express partner in Croatia and earlier this year the bank announced activities that will allow card users to “continue with the uninterrupted use of all services and related benefits.” Unofficial sources say that PBZ will offer its customers UnionPay cards, owned by the world's largest card issuer, China UnionPay, reports Jutarnji List on November 13, 2018.

The Chinese card organisation has issued about five billion credits cards, and in 2015 it has overtaken the former leading card issuer Visa. PBZ said it could neither confirm nor deny its possible cooperation with UnionPay. “Our users have a high level of confidence in PBZ Group, which is confirmed by our research which shows that they fully believe that PBZ Card will offer high-quality replacement cards,” the bank said.

The latest events are also a chance for Diners to expand in the Croatian market. Its cards in Croatia are issued by Erste Card Club, which currently has 380,000 credit cards (Diners, Visa and MasterCard). At the moment, they see “high-quality opportunities for further growth and development of card business in the Croatian market.” Therefore, they are intensively working on "introducing new services, with an emphasis on improving the digital user experience.”

Recently, a fully digitized application process for issuing Diners Club credit cards has been introduced. New members can request a card without delivering paperwork or coming to a branch office, and the process is available to all citizens, irrespective of whether they are Erste Bank customers or not.

Given that American Express credit cards will be managed by the issuer itself in the future, it is expected they will no longer be in widespread use in Croatia, except at the corporate level. Amex has abandoned its licensing business model due to EU payment legislation, which limits multilateral fees charged by credit card issuers.

For more on banks in Croatia, click here.

Translated from Jutarnji List (reported by Marina Klepo).

Thursday, 25 October 2018

HBOR (Croatian Reconstruction and Development Bank) to Focus on EU Funds

ZAGREB, October 25, 2018 - The Croatian Reconstruction and Development Bank's (HBOR) strategy focuses on EU funds, introduction of new market products and stimulation of exports, HBOR Management Board chair Tamara Perko said at an international conference on export stimulation organised in Dubrovnik on Thursday by HBOR.

Friday, 14 September 2018

36 Billion Kuna Spent on Bailouts of Croatian Banks

ZAGREB, September 14, 2018 - The Croatian Banking Association (HUB) said on Friday bank bailout expenses over the past 25 years were estimated at 36.3 billion kuna, about three times less than recently mentioned in public.

Sunday, 22 July 2018

Banks Profit from Croatia’s World Cup Success

While the tourism industry is still hoping for positive effects, Croatia’s banks are already pocketing profits.

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