Croatia banks want dialogue with govt on franc loans

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ZAGREB, Sept 11 Eight Croatian banks urged the government on Friday to open a dialogue on a solution for loans denominated in Swiss francs, just one day after the government proposed conversion into euros with the costs entirely falling on the banks."We are ready to propose an improved solution in which the burden will be balanced and fairly distributed among the different stakeholders and where any legislative intervention may only be granted as relief for vulnerable borrowers," the banks said in a joint statement. The banks involved are Austria's Erste, Hypo Group Alpe Adria and Raiffeisenbank, Zagrebacka Banka owned by Italy's UniCredit, PBZ owned by Italy's Intesa Sanpaolo, Russia's Sberbank, Splitska Banka owned by France's Societe Generale and Hungary's OTP. The Croatian government proposed on Thursday to change consumer credit laws to enforce conversion where the banks would have to recalculate initial principal into euros and offer new repayment plans.

The costs for the banks are tentatively assessed at around one billion euros ($1.13 billion)."We have been constantly expressing readiness to collaborate with the government in finding a proper and sustainable solution," the banks said.

The banks earlier said that a legally sustainable solution would be voluntary and based on clear social criteria and sharing of the costs. A banking source told Reuters that legal steps were very likely to be considered if the solution proposed by the government takes force.

The parliament is likely to adopt the law in the next two weeks and the implementation would start from Sept. 30. Croatia's centre-left government is facing general election, most likely in November, and the decision on the Swiss franc loans is widely seen as a pre-election move. In most opinion polls the conservative opposition is ahead of the ruling Social Democrats. There are 55,000 holders of loans denominated in Swiss francs worth roughly 25 billion kuna ($3.73 billion). A majority of those loans were taken out in the 2000s for mortgages or buying property for commercial purposes. ($1 = 0.8880 euros) ($1 = 6.6994 kuna)