Could similar problems arise with credits pegged to the Euribor as to those pegged to the Swiss franc?
The banking ombudsman of the Federation of Bosnia and Herzegovina a while ago warned of potential problems with loans that have a clause that allows for a change in the interest rate, depending on the referent value of the interbank interest rate Euribor.
Jasmin Mahmuzic, the director of the Agency for Banking of FBiH, warned of the same phenomenon, when he said that his institution is trying to predict the potential problems that can occur.
“The reason for that is that we now have offers for loans over 10 years, which in theory isn’t justified. The Agency will respond quickly to that. Euribor is at historic lows because the European Central Bank partially bases economic growth on the financial and monetary policies, that is pumping in Euros into the system, which causes deflation of the money. Most of these credits are pegged to the Euribor and banks are building in a margin of profit into Euribor. It’s hard to predict what can happen. Historically, it’s hard to predict anything. And the situation in Europe is similar – European bankers are having similar problems,” Mahmuzic stated.
Most banks in BiH have recently begun offering credits with lower interest rates than the ones that were on the market in the previous period, but with longer payment durations and higher amounts.
These loans have an initial low-interest rate, which consists of a fixed amount (margin) for the bank and a changeable amount which is most often pegged to Euribor, which hovers are zero due to the interventionism of the ECB.
Since most are expecting that Euribor, after reaching its lowest values will eventually increase, an increase in the interest rates can also increase the payments of clients.
The total amount of loans is 8,33 billion BAM, of which the larger part is made up of consumer non-purpose credits of a value of 6,26 billion BAM.
(Source: eKapija.ba)
