Croatia’s Euro Switch May Cost Banks a Billion Kuna a Year

(Bloomberg) -- Croatia’s expected euro adoption will cost local banks about 1 billion kuna ($150 million) annually in lost conversion fees, but the switch will reduce currency risks and improve stability, the national association of banks said.

The heavily euroized economy of 4 million expects to join the common currency area in January, 2023. The final decision by euro-area member states on Croatia’s entry date may be known in July. 

Euro adoption is also expected to cost banks between 80 million euros ($90.5 million) and 100 million euros in one-time expenditures aimed at adapting their IT services and ATM networks, the association said in response to Bloomberg questions by email on Wednesday.

“Euro adoption will improve investment and financing terms, and boost the long-term growth of the Croatian economy,” it said. 

The currency switch is also expected to boost tourism, which accounts for about a fifth of the economy in the Adriatic nation, which joined the European Union in 2013. 

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