October 20 (SeeNews) - Hungary's OTP Bank said it launched an international arbitration procedure against Croatia over the loss the lender's local unit has incurred as a result of a mandatory conversion of Swiss franc loans into euro loans.
The procedure was initialled on October 16 at the International Centre for Settlement of Investment Disputes (ICSID), OTP Bank said in a statement on Monday.
"The aim of the arbitration procedure is to reimburse the loss (the esteemed amount of such loss is at present 224 million kuna [$35 million/30 million euro]) that OTP Bank Plc’s Croatian subsidiary bank has suffered. This loss has been caused by a Croatian legal regulation, that prescribed in 2015 in a mandatory manner, that upon request of the debtors of Swiss franc loans or Swiss franc denominated consumer loans, the Croatian banks shall convert the consumer loans to euro loans or to euro denominated ones based on the exchange rate and the interests upon disbursement," the statement read.
According to the lender, with the mandatory regulation Croatia has infringed the investment protection treaty signed between Hungary and Croatia by prescribing the mandatory exchange of FX loans and FX based consumer loans.
OTP Group noted that the loss resulting from the legislation has already been recorded in its books. However, the group has kept its right to settle its claims via negotiations, or via legal means.
Since OTP Bank considers Croatia an important investment target market, it is committed to the efficient operation of its local subsidiary, and intends to reach a peaceful settlement of the evolved dispute with the Croatian government, the statement read.
"The intention of OTP Bank Plc. is still to settle its claims by way of negotiation," it added, noting that the arbitration procedure was initialled in order to protect the interests of its shareholders, investors and other affected parties.
Split-based OTP Banka d.d. was the fourth largest lender in terms of assets among 20 banks active in Croatia at the end of June, latest central bank data showed.
(1 euro = 7.57481 kuna)
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