Nearly 30,000 citizens and 9,500 legal entities have so far applied for a moratorium on loan repayments owing to the negative impact of the coronavirus on their incomes and business activities, the Croatian Banking Association (HUB) said on Thursday.

“Banks in Croatia are actively implementing economic measures to help citizens and companies. At this moment, 29,926 citizens and 9,436 businesses have applied for a deferral on loan repayments,” the HUB said in a press release.

A majority of applications pertain to all-purpose loans and a smaller part to housing loans.

HUB Director Zdenko Adrovic said that the banks had shown readiness to help citizens and companies and had taken a proactive approach even before that was the case in most European countries.

“At this moment, almost 40,000 citizens and businesses have applied for a deferral of payments, and since the application procedures have only recently been launched, we expect the number to grow significantly. Under the existing model, banks have the option to address every application individually, and we believe that they will find satisfactory solutions for clients most affected by this crisis,” Adrovic stated.

The HUB emphasises that the model for the deferral of loan repayments for up to six months is flexible and in accordance with best EU practice. For the most affected sectors, such as tourism, it is possible to extend the moratorium until the next tourist season, which is even more generous than the proposed 12-month deferral of payments, the HUB stated.

They explained that the moratorium being implemented by the banks is not a standard one, because this option is offered to a large number of clients, and during the moratorium period clients will not be charged for the principal and interest, but only ordinary interest will be charged, without default interest or other costs that are otherwise incurred when agreeing a moratorium.

As for authenticating loan agreements, the HUB states that it is required for a reason, and the reason is explaining the meaning and the consequences of the annex to the agreement signed with the bank. “Authentication of the loan agreement is one of the instruments for notifying and legally protecting consumers, not just another expense.

The cost of authentication is not the banks’ responsibility, they do not make money out of it. In order to help citizens in this regard, HUB called for the competent institutions to consider reducing the cost of authentication, and we believe that they will do so in order to reduce the costs for the citizens,” the HUB stated.

In the press release, Adrovic recalled that the banks’ main role is managing money for citizens and businesses who invest their savings into banks, emphasising the importance of looking at the whole picture and dealing carefully with the economic sector and the banks, which are the bloodstream of every economy, making sure they remain stable.

“A destabilised financial system could not provide support for the economic recovery, nor would it have the capacity to help those who need it the most in this situation,” Adrovic said.

Several banks operating in Croatia announced today that they would either bear the costs of authentication themselves, or would not require authentication when signing an annex to the loan agreement.

The Croatian National Bank (HNB) stated that every credit institution has the responsibility to establish the rules for the moratorium authorisation procedure. However, considering the current situation, credit institutions and competent agencies, including the HNB, are intensely working on making the procedure simple and quick, and all clients will be notified of it in direct communication with their banks, the HNB emphasised.

“However, within the scope of its competence in monitoring the application of the law on credit institutions, the law on consumer credit, and the law on housing consumer credit, the HNB considers that, for the duration of measures and actions aimed at suppressing the Covid-19 pandemic, credit institutions could temporarily modify practices for the purpose of regulating the deferral of debtors’ loan repayments by agreeing terms through an exchange of notifications, applications, offers and acceptance of offers, without mandatory contact and signature and authentication of the annex to the loan agreement, that is, by using some form of a permanent medium satisfying the special conditions,” the HNB said in response to a query from Hina.

The central bank also noted that complaints made by natural persons in connection with the moratorium most frequently pertained to disparities in the banks’ requirements for authorising moratoriums and calculating interest for the duration of the moratorium, while complaints made by legal entities were primarily connected with the individual situation of a particular client and specific business and contractual relationship between the bank and the client.