The Franak association of loan-takers said on Thursday the banks suffered no damage in the conversion of loans pegged to Swiss francs into euro loans and suggested to the government how to respond to criticism by the European Commission which is asking Croatia to explain the conversion legislation.
The government is passive in the protection of national interests and is not handling attacks from the European Commission well, Franak association chief coordinator Goran Aleksic told a news conference.
The association advises that the government should explain to the European Commission that there was a satisfactory proportionality in the process of converting loans denominated in Swiss francs, namely that banks suffered no damage from the conversion.
The association primarily claims that the impact of the conversion is not a billion euros but that real cost amounts to approximately 850 million euros. The association also claims that the banks would receive 20% of that amount back through tax relief, namely EUR 170 million, after which the cost of the conversion is reduced to EUR 580 million.
The banks will not lose additional 400 million euros because some of the debtors have not sued and most probably will not sue banks over their illegal actions.
Having that in mind, the cost of the conversion is reduced to EUR 180 million.
"The share of non-performing loans will be reduced thus helping the banks to increase the recoverability of loans. The statistics show that the share of bad loans between 30 September 2015 and 31 March 2016 was reduced by 10%, namely by 630 million euros. This brings the cost of the conversion for banks to zero euros because by charging an average interest rate of five percent over the next ten years, the banks will cash in EUR 173 million from interest rate on those former bad loans," Aleksic said adding that those explanations should be enough for the European Commission to end the proceedings and not sue Croatia over the violation of the EU law.
Aleksic also provided figures according to which. after last year's losses caused by the conversion, the banks in Q1 generated a gross profit in the amount of EUR 200 million, which is 150% more than in Q1 2015.
The Association said it would send a detailed explanation to the European Commission about the loan conversion in the near future.
Aleksic also said the European Commission has no right to interfere in Croatia's legal order during ongoing legal proceedings. He also said he was confident that banks were strongly lobbying in the European Commission for their interests.