Croatia's banking system is stable and the situation concerning non-performing loans (NPL) is improving, Croatian National Bank Governor (HNB) Boris Vujcic said at a meeting of central bank governors from Croatia, Slovenia, Macedonia, Montenegro, Bosnia and Herzegovina and the Cezch Republic in the northern coastal town of Rovinj on Friday.

"As far as the dynamics of NPLs is concerned, the situation is improving even if the situation with the Swiss franc is taken into account. In 2014 banks wrote off one billion kuna in receivables whereas in 2015 they wrote off three billion kuna related to bad loans. The demand for recovering those receivables has grown and companies that provide such services in the European Union are turning increasingly to smaller markets like Croatia. In 2016 new amounts are being prepared to be written off... and the situation could be even better, depending on the legal and regulatory framework, but we are still waiting for that," Vujcic said at the event, organised by the Lider business weekly.

Vujcic presented the HNB's position that foreign currency exposures of banks in Croatia should be treated the same as kuna bonds. That means that they should not be subject to risk weights and limitations to large exposures which will apply as of 1 January 2018 to foreign currency exposures in the European Union.

Vujcic announced that he would soon conduct talks with European Commission officials with the aim of obtaining final confirmation of the HNB's interpretation.

Vujcic underscored that the system of insuring deposits in Croatia was entirely in accordance with EU requirements and announced that the State Agency for Deposit Insurance and Bank Resolution (DAB) would as of 1 June introduce the payment of insurance premiums based on the risk of an individual bank.

Vujcic warned that "sometimes it is forgotten that financial stability is not guaranteed and that it needs to be fought for with proper policies." "What is most important for our citizens is that during this years-long crisis and the recession that lasted six years, they did not have to pay for the costs of rehabilitating the banking system. Croatia is one of the few EU member states that did not experience a banking crisis," he said and added that it was important for citizens to have trust in the banking system.

Asked about the possible introduction of the euro currency in Croatia, Vujcic reiterated that the level of euroisation in Croatia was so high that in fact the risk to financial stability posed by sudden changes to the exchange rate was such that it did not allow any sudden changes to the exchange rate.

"That does not necessarily mean that we have a fixed exchange rate, however, significant changes to the exchange rate of, say, 20 percent could have a negative effect on financial stability as loans in most sectors are indexed to the euro," Vujcic underscored.

Only when Croatia proves, he added, "that it is in a position to sustainably reduce the share of public debt in the Gross Domestic Product (GDP), will it be able to launch talks about entering the currency mechanism and subsequently the euro zone."

This year's meeting of bank governors was opened by Czech central bank governor Miroslav Singer, who said that the country's stable economic growth rested on fiscal discipline, the strong absorption of EU funds and growing personal consumption.

Related stories

Cenbank governor revises upward forecast for Croatia's growth

HNB governor: Era of low interest rates ending soon

HNB cuts interest rates

Latest news

Syrian opposition rules out future role for President al-Assad

The Syrian opposition said Friday it would not accept any role for President Bashar al-Assad in the future of the war-torn country, reacting to a recent US shift saying that removing al-Assad is no longer a priority for Washington.

Russian Army integrates breakaway forces of Georgian province

Parts of the small fighting forces of the Georgian breakaway province of South Ossetia have been placed under Russian military control, Russian Defence Minister Sergei Shoigu said on Friday.

Czech Republic's Pilsner Urquell beer is now Japanese

Japanese brewing company Asahi completed its takeover of the Czech brewery Pilsner Urquell on Friday, Asahi said in a statement.

Judge approves 25-million-dollar settlement of Trump University case

A US district judge on Friday approved a 25-million-dollar settlement of lawsuits and state fraud allegations against Trump University, the US president's now-defunct business venture.

Former Thai premier Thaksin to junta on reconciliation: 'Cut me out'

Former Thai prime minister Thaksin Shinawatra on Friday announced that he is not interested in the junta-led reconciliation process, three days after the junta handed him a half-a-billion-dollar tax bill for his past business deal.

Dalic: We welcome possible deal between Agrokor and banks

The government welcomes the possibility of an agreement being concluded between the Agrokor food company and creditor banks, and the bill on vitally important companies is not a fallback plan but the result of the government's care for the overall economic and financial stability of Croatia, Deputy Prime Minister and Minister of Economy Martina Dalic told a press conference in Zagreb on Friday.

Croatia, China sign action plan for cooperation in agriculture

The Croatian and Chinese ministries of agriculture on Friday signed an action plan for cooperation in the field of agriculture for the period 2017-2018, the Croatian ministry said in a statement.

ZSE indices up, Agrokor shares in focus of investor interest

The Zagreb Stock Exchange (ZSE) indices on Friday rose by more than 1.8%, with stocks of the Agrokor food and retail concern being in the focus of investor interest again.

Berlin police defend handling of Berlin market attacker

Berlin police defended themselves on Friday against accusations that they stopped surveillance on Berlin Christmas market attacker despite knowing in June 2016 he was dangerous.

Croatia, creditors tailor emergency measures to save tottering giant

Croatia's tottering retail and food giant Agrokor reached an agreement with its creditors, putting its debts standby and allowing it to continue working during emergency restructuring, the Croatian branch of Austria's Erste Bank said Friday.

Agrokor's creditors say standstill agreement to go into force today

A standstill agreement regarding the Agrokor concern's existing financial obligations to banks will take effect on Friday, additional capital will be injected into the concern in the coming days and the concern will be actively restructured, which includes a change of its management, it was said on Friday after a meeting between Agrokor's suppliers and creditor banks.

Palestinians, UN slam Israel's new settlement plan

Palestinians, Israeli activists and the UN lambasted the government of Israeli Prime Minister Benjamin Netanyahu on Friday, a day after it gave the go-ahead for the first new West Bank settlement in a quarter of a century.

South Sudan rebels release three abducted foreign oil workers

South Sudanese rebels have released three foreign engineers they abducted in early March in the oil-rich Upper Nile region, Foreign Affairs Ministry official Mawein Makol Arik said on Friday.

Turkish opposition: Imprisoned party chief has gone on hunger strike

The head of Turkey's pro-Kurdish opposition party has launched a hunger strike from prison.

European leagues threaten Champions League schedule clashes

The European Professional Football Leagues (EPFL) on Friday threatened schedule clashes on Champions League matchdays in an ongoing dispute with the governing body UEFA.

Danish court revokes citizenship of IS volunteer

A Danish appellate court on Friday stripped a man of his Danish citizenship for volunteering to fight for the extremist Islamic State in Syria.

Banks and Agrokor agree on key elements of standstill agreement

Member banks of the coordinating committee of financial creditors and representatives of the Agrokor food company have in principle agreed on key elements of a standstill agreement, which is expected to be signed later today, announcing changes in the company's management team, Erste Bank said in a statement on Friday afternoon.

Syrian man on trial in Sweden; mosque attack labelled terrorism

A Syrian man went on trial Friday in the southern Swedish city of Malmo, charged with terrorism and arson after an attack last year on a building used as an assembly hall by Shiite Muslims.