Croatia's Franc Borrowers Welcome Loan Reform

After the Croatian government on Thursday presented the final draft of the law resolving the issue of Swiss franc loans, the NGO Association Franc welcomed the move.

The draft provisions that all franc loans will be converted into less expensive euro loans, using the exchange rate on the date the loan was taken out.

The law, which will be put into parliamentary procedure this month, will come into force on September 30.

Denis Smajo, from the Association Franc, which represents around 55,000 Croatian citizens with franc loans, said they were happy with the proposed change.

"The Association Franc is very satisfied by the draft ...and welcomes the persistence of the Croatian government in finally resolving our problem," he said.

Smajo added that the law will not solve the whole issue of franc loans, but added that "if they continue in this direction and this way of decision-making and protection of Croatian citizens", the problem will be solved.

According to him, monthly repayment rates for most borrowers will now fall by five to 15 per cent. Money overpaid to banks in the past will be used to offset the new monthly rates, which will mean some users' repayment rates falling by up to 50 per cent until the overpaid sum is covered.

The Croatian Banking Association, HUB, has not reacted to the final draft, noting that it expressed its strong doubts about the proposal in the past.

A consortium of international banks, involving the major part of Croatia's banking system, last week announced it would sue the government if the law was passed.

The banks said the proposal violate European Union laws and bilateral investment treaties. The change could cost the banks as much as about 6 billion kuna ($892 million), although...