By Leos Rousek
Croatian lawmakers Friday approved the government bill to fix
the exchange rate of the country's currency kuna against the Swiss
franc to help local borrowers in the Alpine currency.
Some 83 out of 151 legislators in the Sabor, the single-chamber
Croatian parliament, voted to set the Swiss franc at 6.39 for a
year, the level it was trading at before the franc's 20% surge in
value last week. The kuna is now trading at 7.79 to the franc.
By imposing the temporary fixed franc-kuna exchange rate the
government wants to get time to consider conversion of all
Swiss-denominated loans into the local currency.
The fixing "will settle a part of the problem for a year,"
Croatian Prime Minister Zoran Milanovic said ahead of the vote.
About 60,000 Croats have mortgages denominated in Swiss francs,
which they took in the run-up to the 2008 financial crisis because
of low interest rates as opposed to those levied on local currency
credits.
Croatian lenders, including UniCredit SpA's (UCG.MI) Zagrebacka
Banka d.d. (ZABA.ZG) and Intesa Sanpaolo SpA's (ISP.MI) Privredna
Banka Zagreb d.d. (PBSB.BLU), will have to swallow losses amounting
to millions of euros on their outstanding loans in Swiss francs due
to the rate fixing, the country's central bank estimates.
The conversion of all Swiss loans into the local currency is
also likely to force the central bank to use about 30% of its
foreign currency reserves, the bank said this week.
Croatia, a country of 4.4 million people, is one several states
in Eastern Europe that has been forced to adapt to the Swiss
National Bank's surprise abandonment of the exchange-rate cap for
the franc against the euro.
Authorities in Poland, Romania and Serbia are considering
similar measures to cushion the impact on borrowers in Swiss
francs.
The are only a handful of countries in the region, including
eurozone members Slovakia and Slovenia, as well as the Czech
Republic, which still has its own currency, there are no or
negligible franc credit holders.
Write to Leos Rousek at leos.rousek@wsj.com