Vujčić: The banking system would not ‘collapse’ even if all claims against Agrokor were written off

The Governor of the Croatian National Bank (HNB) Boris Vujčić stated on Thursday that the central bank has done an excellent job in the case of banks’ exposure to the Agrokor group, which is why the stability of the Croatian financial system is not in question. He also mentioned that HNB representatives would appear before the parliamentary committee for Agrokor if invited, and he thinks “it will be very interesting, especially if it is broadcast live.”

– The Croatian National Bank has done its job excellently; we managed to reduce banks’ exposure to Agrokor within legal limits, and due to good regulations and their proper implementation, the financial risk to stability for Croatia is not in question, Vujčić stated before his lecture at the Zagreb Stock Exchange conference and the Association of Pension Fund Management Companies and Pension Insurance Companies ‘The Challenge of Change.’

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In response to a journalist’s question about whether representatives of the central bank would respond if called to testify by the parliamentary committee for Agrokor, the governor said they would and that it could be very interesting.

– Of course, we will appear, and I think it will be very interesting, especially if it is broadcast live. We do have supervisory secrecy, but if we are released from that secrecy, it would be even more interesting. However, I am not sure if that is even possible; you would have to ask the lawyers, Vujčić replied.

The banking system remains stable

He also commented on the potential risk of the ‘collapse’ of the Agrokor system on the banking system, emphasizing that even if banks were to write off all their claims against the group, which will not happen, the system remains capitalized above the level of most European countries, thus completely stable.

– Assuming that (banks) must fully write off their claims not only against Agrokor but also against the group of companies that HNB has consolidated under the risk of Agrokor, the capital adequacy of the banking system would remain above the required level, over 20 percent, meaning the banking system would remain completely stable, Vujčić emphasized, adding that he would not like to discuss the absolute amounts involved.

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He reiterated that at HNB they expect the entire restructuring process of Agrokor to have a slight negative impact on economic growth, estimated at 0.3 percentage points, and “as we can see, this is indeed happening.”

He also commented on the possibility of Croatia adopting the euro in 2022 or 2023, stating that now is not the time to discuss dates but rather the rationale for introducing the euro.

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– I think that regarding the introduction of the euro, we should not be discussing dates at this time, but rather the sense of introducing the euro, whether it is beneficial for Croatia. The public discussion that will be initiated will primarily aim to explain why we believe it would be good to introduce the euro. If a consensus is reached that it is good, then we should enter into discussions with our European partners regarding the actual timeline for introducing the euro that will lead to a date, but at this moment I would not want to talk at all about a possible date, the governor said.

At the end of the month, the Croatian Government and HNB will organize a conference to present the Strategy for introducing the euro as the official currency in Croatia.