“We have seen all the expected benefits of the introduction of the euro materialising, most notably the elimination of currency risk, once the biggest risk in the financial markets in Croatia. The expected objective of lower interest was also achieved, as evidenced from a comparison of interest rates in the country with those in non-euro area countries such as Hungary, the Czech Republic and Poland where interest rates on loans to businesses and households are more than 50% higher. The interest rates on corporate loans in Croatia are equal to the euro area average and those on household loans are below euro area average. I have been in central banking for a long time and during that time one of the questions I was often asked was when the interest rates were going be equal to those in Germany. Well, now they are”, said CNB Governor Boris Vujčić at the FinTech conference Money Motion 2024”, held from 21-22 March at the Zagreb Fair.

Asked about large profits of banks in the past year, the Governor explained that they were due to a change in the direction of monetary policy of the European Central Bank and increased key interest rates aimed at reducing inflation, which coincided with the highest system surplus ever. And the reason for that lies mostly in bank yields on the vast amounts of liquidity held with the central banks.

As regards the payment service of cash withdrawals at ATMs, the Governor noted that the CNB expected the banks to ensure for consumers a free of charge channel for cash withdrawal at ATMs and for the most vulnerable groups of consumers, a free of charge cash withdrawal at banks’ counters. He stressed that in 2023 only 7% of transactions had been carried out at ATMs of other banks, instances where fees had been charged, also noting that one should understand that cash withdrawals at ATMs imply certain costs such as the cost of supplying ATMs with cash, security-related costs, ATM maintenance, lease, etc. “As the central bank we would support the establishment of a shared ATM network where banks would share the costs; this would be more convenient, efficient and cheaper” stated the Governor.

Talking about the digital euro, the Governor said that the preparations were well under way and that the time of the project’s finalisation remained to be seen. “We are currently in the second phase of the project of digital euro development that is scheduled to last until November 2025, and provided everything is in order, we will decide on testing and eventually project realisation. Central bank money, i.e. cash held in physical money is public money and the rest is private money. Our decision to create public money in a digital format is the result of a relative decrease in the use of cash and a growing importance of the use of digital money. We will have a digital wallet with digital euro, which is essentially only a digital parallel of cash and we will be able, for example, to transfer money offline from one mobile phone to another, or between two digital wallets, without anyone knowing about that transaction. Also, from the ECB’s perspective, all transactions will be anonymous and it will not be possible to connect them to individuals. The digital euro would offer a pan-European payment solution provided by the ECB rather than a non-EU entity”, the Governor said in conclusion.