The latest stress test of Croatian commercial banks shows that their shock absorbers are sufficient even in the event of the least likely unfavourable macroeconomic shocks, according to the latest publication "Financial Stability" issued by the Croatian National Bank (HNB).
Under the baseline scenario, which is most likely to happen, the ratio of non-performing loans is to rise from 12.7 percent in March to 15.5 percent by the end of this year.
Under the shock scenario, bad loans would account for 20 percent of the lending. In that case, eight banks that have 7 percent of the banking assets in Croatia would have a capital adequacy rate of below 12 percent.
The baseline scenario forecasts a 1.6 percent decrease in the country's Gross Domestic Product against a backdrop of unfavourable international developments and negative trends of nearly all elements in the aggregate domestic demand with the maintenance of a relative stable currency rate of the kuna against the euro.
The shock scenario forecasts a contraction of GDP by 4 percent.
A stress test is conducted to evaluate whether banks would have sufficient capital in times of severe economic and financial stress to continue to lend to households and businesses.
