A controversial case over Swiss franc-denominated loans will be heard again. Croatia’s Constitutional Court ordered a retrial on December 20, saying the Supreme Court’s ruling in the case was not sufficiently explained.
As reported by the Reuters news agency, households and firms across Croatia and eastern Europe took out Swiss franc mortgages in the 2000s to benefit from low Swiss interest rates, only to be caught out by a surge in the franc, particularly after Switzerland scrapped its cap on the currency in January 2015.
In an earlier verdict the Supreme Court ruled that Croatia’s banks, some 90% of which are owned by parent institutions elsewhere in the European Union, failed to sufficiently explain to clients how variable interest rates work but did not fail to explain the currency risks entailed in taking foreign currency loans.
But the Constitutional Court said the Supreme Court’s ruling did not properly explain its own assessment of these two aspects of the loans.
In late 2015, Croatia decided to enforce conversion of all Swiss franc loans to euros at the rate that was in force when the loans were granted, with the banks bearing the cost of exchange rate fluctuations. The costs have been estimated at about €1bn.
After that several banks filed separately for an assessment of whether the legal changes regulating the enforced conversions were in line with the constitution. The conversion law acted retroactively and did not fairly share the costs, they said. The court’s decision is still pending in that case, reported The Local.