Croatia top court says Swiss franc conversion law necessary

ZAGREB, April 7 (Reuters) - Croatia’s Constitutional Court on Friday rejected a request from local banks to consider whether a law on the conversion of Swiss franc loans into euros, aimed at protecting borrowers and implemented in late 2015, was against the constitution.

“Such a measure was necessary at the time to achieve a legitimate goal,” head of the court Miroslav Separovic said.

Households and firms across Croatia and eastern Europe took out Swiss franc mortgages to benefit from low interest rates, but were then caught out by a surge in the franc, particularly after Switzerland scrapped its cap on the currency in January 2015.

Eight local banks asked for a constitutional assessment of the conversion law, passed by the centre-left government at the time, saying it did not share fairly the costs and acted retroactively.

The ylaw forced the banks to convert the loans denominated in Swiss francs into those denominated in euros and thus protect borrowers from rising payments due to exchange rate movements. The vast majority of loans in Croatia are denominated in euros. (Reporting by Igor Ilic; Editing by Andrew Bolton)