engleski

Interdependence of Euroization and currency clauses in the Republic of Croatia

In the Republic of Croatia, currency clauses are frequently applied in loan agreements. Foreign currency for indexation is, in most cases the euro, and to a less extent, the Swiss franc. Throughout the past period, the euro was symmetrically fluctuating against the kuna, so the loss due to its changes was evenly divided between lenders and borrowers. In contrast, the Swiss franc was, on average, appreciating against the kuna so only the borrowers suffered the loss. Therefore, the public started to request the abolition of currency clauses. Originally, the banks’ liabilities are mainly denominated in foreign currency, and claims are mainly denominated in domestic currency. Consequently, banks are exposed to exchange rate risk which they hedge by imposing currency clauses in loan agreements. The solution to this problem, argue banking stakeholders, is not the abolition of currency clauses, but decreasing euroization in Croatian economy. However, borrowers are confronted with a similar situation. They have liabilities indexed for foreign currency, so they want to save in this currency to hedge exchange rate risk. In other words, borrowers save in foreign currency because they have currency clauses imposed in their loan agreements, and lenders impose currency clauses because borrowers save in foreign currency. This is the main reason for high euroization in the Republic of Croatia. An alleviation for this problem is suggested in the paper.

euroization; currency clauses; indexation; exchange rate; exchange rate risk ;

nije evidentirano