OTP is suing Croatia for the forced conversion of Swiss francs loans

OTP Bank announced on Monday that it has sued the Croatian government to recover losses of about 224 million kuna ($ 34.60 million).

The bank recorded this losses after the introduction of a law that denominated Swiss francs loans in euro loans in 2015, Reuters reports.

OTP is one of the largest banks in Croatia and the largest independent banking group in Central Europe.

According to the Hungarian banking group, Croatia has violated the Investment Protection Treaty between Hungary and Croatia and has decided to initiate arbitration proceedings at the International Center for the Settlement of Investment Disputes (ICSID) at the World Bank.

About 55.000 Croats have loans denominated in Swiss francs worth about 25 billion kuna ($ 3.73 billion). Most of these loans were contracted in the 2000s, when many people in Central and Eastern Europe were attracted to low interest rates on franc loans.

In the meantime, however, the significant appreciation of the franc has led to rising costs of repaying loans in francs, and governments in the region have begun to look for solutions to the problem.

In September 2015, the Croatian Parliament approved a law which allows the conversion of loans denominated in Swiss francs into euros, ignoring threats from banks, which warned that they would challenge the law at ICSID.

The law allowed the conversion into euros of loans worth $ 3.4 billion to help citizens cope with repayment. The costs of the conversion were to be borne by the banks.

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