The government seeks to settle 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, Prime Minister Jadranka Kosor said at a government session on Wednesday, noting that this was the minimum below which the government would not go.
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, Kosor said.
Such claims would be deferred for ten years, by which time it was realistic to expect changes to the Swiss franc exchange rate that would nullify the exchange rate differences.
Kosor said that the government was seeking a reduction of interest rates on Swiss franc-pegged loans to levels at which the loans were originally approved, announcing that the Income Tax Act would be amended accordingly. Since under the present law interest rates may not be under 4 per cent, the government will pass a regulation, most likely at its next session, based on which the interest rates would be reduced.
Kosor said she believed that the government would sign a memorandum with the banks regarding its request after August 15. "I believe everyone will sign, and if some won't, we have other instruments we are ready to use," she added.
"This request is the minimum, the government won't go below this. I believe that many will have other, even more favourable suggestions and that we will end this story very soon," Kosor said, adding that she also expected a change in global trends relating to the Swiss franc exchange rate.
Finance Minister Martina Dalic said that talks with the banks showed that "at least some of the banks that approved loans in Swiss francs" would accept the government's proposal. "Considering the reactions from the banks, this act will be carried through and will not remain just another government request as has been the case with some other proposals towards the banks," she added.
Dalic said that the government's proposal was not affecting the functioning of the market mechanism and the financial system, adding that trends in the Swiss franc exchange rate were having "the effect of an unexpected natural disaster".
"The basic answer to the question why the banks approved loans in Swiss francs was that it was demanded by the market and that it was part of competition. The present situation on the market and the degree of its extraordinariness is the reason why the banks should respond following the same logic. That's why we reminded them of it," Dalic said.
The Prime Minister invited the Croatian National Bank to join in the search for a solution to this problem. "Regardless of the independence of any institution, we all depend on the interests of our citizens, on the interests of Croatia, and if our citizens are in trouble, we all must address the problem at hand to make it easier for them."
"As we can see, the banks are doing well, they have no problems, and now is the time to spread the burden of the crisis as evenly as possible," Kosor said.
