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MOSTAR, 26 June (FENA) - The European Central Bank (ECB) has announced it will raise key interest rates next month to curb inflation, prompting many citizens to fear higher interest rates and higher loan installments. The FBiH Banking Agency says that changing the interest rate and changing the payment plan is possible only for previously agreed credit arrangements that include the possibility of changing the interest rate.
“In our market, we can expect changes through interbank reference interest rates that are used to determine the final rate for variable rate contracts, most often Euribor. Changing the interest rate and changing the payment plan is possible only for previously agreed credit arrangements that include the possibility of changing the interest rate,” they point out from the Agency.
Before establishing a contractual relationship, they explain, the bank is obliged to inform the client with the details of possible changes.
Also, the lender is required to provide all necessary information on changes in the level of interest rates during the duration of the arrangement.
Taking into account the available information and expectations regarding interest rates, the Agency further states, as well as the fact that the possibility of changing the interest rate is foreseen when establishing the contract, changes in the reference interest rate should not jeopardize the solvency of most clients.
According to them, the key risks for citizens and the economy are further related to inflation.
Regarding the fear of citizens about the possible growth of the loan installment, the FBiH Banking Agency notes that loans previously contracted with a 'fixed' interest rate will not be exposed to the risk of changes in reference interest rates.
“Maintaining the stability and liquidity of our banking system indicates the possibility of mitigating the effects of changes in interest rates later in the year. According to current information, the growth of reference interest rates in the EU and the euro area should be maintained at an acceptable level that will not jeopardize the growth of the Union's economies or lead to recession,” the Agency notes, adding that reliable ranges or forecasts of ECB measures are not available.
The ECB's announcements for the current year point to a change of 25 to 75 basis points, that is, rate adjustments of 0.25 to 0.75 percent.
Commenting on the ECB's decision to raise key interest rates, the FBiH Banking Agency notes that the change in the credit and monetary approach of the European Central Bank (ECB) will have effects on interest rate levels in the EU interbank market.
“The ECB is still considered to have limited room to implement measures and increase interest rates to a level that will not lead the leading EU economies into recession, or lead to the effect of fragmentation of interest rates by EU and euro area members. Apart from the fact that the ECB is currently focusing on inflation-related risks, stopping the expansionary monetary policy and encouraging low reference rates was announced in the period before the pandemic,” the Agency emphasizes.
On the other hand, except in July, the possibility of raising interest rates was announced in the fall.
(FENA) A. B.
