- by croatiaweek
- July 20, 2026
-
in
News
ZAGREB, 20 July 2026 (Hina) – Croatia’s central bank has warned that financial stability risks remain moderately elevated, pointing to rapid growth in lending and house prices, as well as increasing exposure to interest rate risks.
The warning was issued following a meeting of the Croatian National Bank (HNB) Council, which reviewed systemic financial risks during the first half of 2026.
According to the HNB, the main sources of domestic vulnerability are the strong expansion of credit to the private non-financial sector and the continued sharp rise in residential property prices.
Although the trends are partly supported by favourable economic conditions, including rising disposable incomes and a strong labour market, the central bank said credit growth and property prices were increasing faster than incomes.
This, it warned, was contributing to a build-up of cyclical vulnerabilities.
The HNB said that if the financial and economic cycle were to slow or reverse, high levels of indebtedness could make households and banks more vulnerable to potential shocks. It also warned that the prolonged period of exceptionally strong house price growth increased the risk of a sharper correction in the property market.
Growing interest rate risks
The central bank also highlighted growing interest rate risks facing the banking sector.
In recent years, the increase in long-term fixed-rate lending and banks’ investment in long-term debt securities has increased their exposure to interest rate movements. Although banks use derivatives to hedge some of these risks, the HNB said such exposure could not be eliminated entirely.
The rising cost of protecting against interest rate risk is also influencing the types of loans offered by banks.
The HNB said banks were increasingly reintroducing loans with variable interest rates, often following an initial period of fixed rates. Depending on future movements in market interest rates, this could pose risks primarily to consumers and, under certain circumstances, to banks themselves.
External threats remain key trigger
The HNB said the main potential triggers for the materialisation of domestic financial risks continued to come from outside Croatia.
These include instability in geopolitical relations, the impact of military conflicts on the economy and elevated valuations on global equity markets.
The central bank also pointed to existing macroprudential measures designed to limit the accumulation of new risks and strengthen the resilience of the financial system.
Since July 2025, restrictions have been in place on certain consumer lending criteria. From 2027, banks will also be required to increase the countercyclical capital buffer rate to 2%.
The HNB said that, should risks to financial stability continue to increase, it would not rule out further tightening of macroprudential measures.
