With the decision of the Council of the European Union on the euro acceptance in Croatia from January 1, 2023, information and education of citizens about numerous changes began. Confida joined in with a series of articles on the euro introduction.

In the fourth article from the series of articles on the euro, we will look more closely on the funds conversion during the euro introduction. You can learn more about the continuity of legal instruments, funds recalculation in the account and payment orders, continuity in the financial sector, credit recalculation and leasing contracts, interest rate adjustments, client notification, and salary recalculation, etc.

Continuity of legal instruments

At the beginning, it is important to emphasize that the euro introduction will not affect the validity of existing legal instruments in which the kuna is mentioned. This means that any party does not have the right to a valid unilateral termination or cancellation of a legal instrument and modification of its provisions, unless otherwise agreed/regulated by a decree, the Law or a special regulation.

If there is an action contrary to the above, the provisions of the regulations governing mandatory relations will be applied, to the parties’ responsibility.

Another important item refers to a legal instrument that is contracted in kuna with a currency clause in a currency other than the euro. In that case, a legal instrument is considered one that is contracted in the euro with a currency clause in a currency other than the euro.

The most important thing is, after the euro introduction, consumers must not be placed in a less favorable position compared to the time before the euro introduction.

How will the funds on the account and in the payment order be recalculated?

Amounts on deposit, savings and transaction accounts and other payment accounts, payment instruments, and other records that are expressed in kuna will be converted into amounts in euros without charge. For the conversion, a fixed conversion rate will be applied according to the conversion and rounding rules. It is important to note that there will be no change to the unique account number.

In the case order payment denominated in kuna, the payment service provider executes payment transactions exclusively in euros from the date of introduction of the euro. Payment orders specified in kuna that the payee prepared and delivered to the payer, and which the payer submitted to the bank for execution after the date of euro introduction, must be executed by the bank in euros within six months of the date of euro introduction.

The continuity principle in the financial sector

Regarding the financial sector, we note that the Law also contains rules for recalculation in credit agreements and leasing contracts, as well as provisions on the adjustment of interest rates, with the obligation to inform clients about the performed recalculation.

All credit agreements that have been agreed upon with a variable interest rate will also continue to be valid. However, instead of the kuna parameter, the interest rates will be linked to the corresponding euro parameter.

Recalculation of credit agreements and leasing agreements in kuna

The mentioned fixed conversion rate and the rules for conversion and rounding from the Law for loan contracts in kuna and leasing contracts in kuna will be applied to the following:

  • overdue principal amount in kuna,
  • due to be calculated and unpaid principal amount in kuna,
  • other overdue amounts in kuna resulting from the contractual relationship and
  • other accrued and unpaid amounts in kuna resulting from the contractual relationship.

Amounts resulting from the contractual relationship, and expressed in euros after the date of euro introduction, remain in euros in the manner agreed before the date of euro introduction with:

  • loan agreement in kuna with currency clause in euro,
  • leasing contract in kuna with currency clause in euro and
  • insurance contract in kuna with currency clause in euro.

How will variable interest rates be adjusted?

For a contract in which a variable interest rate is agreed upon, the rule applies that the parameter with which the variable interest rate is agreed after the date of euro introduction remains the same as it was before the euro introduction. Exceptions are cases in which the parameter NRS (National Reference Rate) was used for kuna, the yield on the treasury bill of the ministry responsible for finance, and the average interest rate on citizens’ deposits in kuna.

Client notification

All credit institutions and unions, as well as payment and electronic money institutions and other creditors, are obliged to inform clients through at least one communication channel, either in writing or electronically. The notice must contain all essential recalculation elements. Also, credit institutions, unions and other creditors must send clients an individual notice with all the necessary information.

Salary recalculation, pension benefits, and other benefits

When recalculating salary and other benefits amount, nothing changes. The employer must convert the salary amount and other compensation determined by the employment contracts and other acts in kuna into euros with the application of a fixed conversion rate and following the rules for conversion and rounding from the Act.

Pensions and other benefits from pension insurance and social benefits and other benefits that are paid are also converted into euros with the application of a fixed conversion rate and following the rules for conversion and rounding.