Croatia in Talks With Banks Over $500m Swiss Franc-Loan Lawsuit
Croatia in Talks With Banks Over $500m Swiss Franc-Loan Lawsuit
(Bloomberg) -- Croatia is in talks with European banks to settle lawsuits for more than $500 million in damages tied the conversion of Swiss franc-loans, four people with knowledge of the matter said.
UniCredit SpA, Raiffeisen Bank International AG, Addiko Bank AG, and Erste Group Bank AG are suing Croatia at the International Center for Settlement of Investment Disputes in D.C. They argue that a 2015 law that forced them to convert Swiss-franc loans into euro-denominated loans wrongly cost them about an estimated 1 billion euros ($1.2 billion).
The talks are focused on the government potentially lowering the lenders’ obligatory contributions to the secured-deposit fund in exchange for the banks dropping the suit, according to the people, who asked not to be identified as the matter is private.
The four banks are demanding 418.6 million euros in damages, Prime Minister Andrej Plenkovic said last month, adding that a demand from OTP Bank Nyrt is still pending. OTP has said it estimates its loss at 224 million kuna ($35 million).
Croatian regulations oblige banks to contribute 2.5% of eligible deposits of up to 100,000 euros to the deposit-insurance fund by 2024. That level is more than three times the European Union’s minimum requirement of 0.8% and amounts to about 660 million euros.
The difference provides room for a potential deal under which the banks would still provide a satisfactory level of deposit security, according to one of the people. The government is considering changing the law to lower the deposit fee if the banks agree to drop their lawsuits, two of the people said.
UniCredit, Erste, and Raiffeisen declined to comment. The Finance Ministry and central bank also didn’t comment when contacted by Bloomberg.
Courts have largely sided with borrowers where they squabbled with lenders in Hungary, Poland, Romania, and other countries over the Swiss franc-loans saga. The Croatian lawsuits are unique in that the banks used an international arbitration panel, complaining Croatia infringed international investment-protection treaties.
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