Six commercial banks have agreed not to take legal action against Croatia in a case concerning the conversion of Swiss franc loans into euros at their expense in 2015, Croatia’s Finance Minister Zdravko Maric said on February 2.

After a ruling by the Croatian Supreme Court in September 2019, banks were forced to convert 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.

Six banks - Zagrebacka Banka, Raiffeisen Bank, Erste Bank, OTP Bank, Addiko Bank and Société Générale - were suing Croatia through the International Centre for Settlement of Investment Disputes (ICSID) and Commercial Court in Zagreb. They say that the 2015 law wrongly cost them around $1bn. Croatian Prime Minister Andrej Plenkovic has said that the banks are demanding €418.5mn in damages.

“I am glad that I can confirm that an agreement has been reached with the six banks that have launched proceedings before the ICSID in Washington and before domestic courts, as well as with those that at this point have not yet launched such proceedings,” Maric said as quoted in a statement.

Based on the agreement reached, the proceedings initiated by Zagrebacka Banka, Raiffeisen, Erste and OTP would be suspended with immediate effect. The agreement also applies to Privredna Banka Zagreb and Sberbank, although they have not taken legal action against Croatia so far.

Croatia has failed to reach an agreement with Addiko and Société Générale, but the negotiations with them continue, Maric said.

Lenders in Croatia, as in many Central and Southeast European countries, provided Swiss franc-denominated loans during the 2000s to take advantage of low Swiss interest rates. However, when the Swiss central bank ended the franc's peg against the euro in January 2015, borrowers' instalments in local currencies surged, and governments stepped in to support them.