Commercial banks in Croatia have submitted their proposals to the Finance Ministry through the Banking Association (HUB) and they expect that talks on easing the burden of loan repayment on users of loans pegged to the Swiss franc, caused by a drastic appreciation of the Swiss currency, will continue next week.

In a short statement for the media on Wednesday, HUB did not reveal any details regarding the banks' proposals, saying that it welcomed the "support of the Croatian National Bank (HNB) and its announcement that it would help enforce a final agreement between banks and the government."

HNB governor Zeljko Rohatinski said in an interview with Croatian Television last night that the HNB was ready to join in efforts to find a solution that would alleviate the consequences of the increase of the Swiss franc for users of loans pegged to that currency, citing as possible measures so-called balloon loans, proposed by the banks, and limiting the Swiss franc exchange rate to six kuna.

On August 3, the government proposed a model for settling the problem of high increases in instalments of housing loans pegged to the Swiss franc by having the banks reduce the instalments to the amount agreed at the time of the issue of the loan.

The minimum sought by the government is that instalments should be fixed in kunas according to a fixed exchange rate of 5.8 kuna or less for one Swiss franc, and that the difference in the annuity between the actual rate and the proposed rate is treated by the banks as a deferred, interest-free claim. Such claims would be deferred for ten years.

The following day, August 4, HUB welcomed the government's model, but noted that its implementation should be elaborated because its present form was dubious in terms of relevant laws and regulations and did not take into account the profile of loan beneficiaries or the equality of bank clients who have taken loans pegged to other currencies.

Meanwhile, the exchange rate of the Swiss franc has continued to skyrocket against the backdrop of developments on international currency markets, a deepening of the debt crisis in the euro zone, and the lowering of the US credit rating. The mean exchange rate of the Swiss franc today was 7.164 kuna.

The franc gained in value by 9.5 percent (0.62 kuna) in relation to the beginning of last week and by 37.5 percent (HRK 1.95) against August 10, 2010.

According to HNB data, more than 42 percent of housing loans and 47 percent of car loans in Croatia are tied to the Swiss franc.