At its session today, the CNB Council was briefed on current economic, financial and monetary developments in the euro area and Croatia and discussed systemic financial risks.

The Croatian financial system's exposure to systemic risks remained moderately elevated in the first half of 2026, which primarily reflects the pronounced growth of credit to the private non-financial sector and the marked increase in residential real estate prices. Although these developments are partly due to a favourable macroeconomic environment, in which disposable income growth and a strong labour market support demand, credit and real estate price growth outweigh income growth, increasing cyclical vulnerabilities.

In the event of a slowdown or reversal of the financial and economic cycle, the elevated level of indebtedness increases the vulnerability of households and banks to potential shocks, while the very high growth of real estate prices over a prolonged period heightens the risk of their sharp fall. The growth of long-term fixed rate loans and banks' investments in long-term debt securities have increased banks’ exposure to interest rate risk over the last few years, and despite hedging against these risks through derivatives, banks cannot eliminate it entirely. Due to the rise in hedging costs, banks are prompted to reintroduce variable interest rate loans, with an initial fixed-rate period, which, depending on movements in market interest rates, can be risky, primarily for consumers and, in certain circumstances, for banks as well.

The main potential triggers for the materialisation of domestic risks still largely relate to the impact of unstable geopolitical relations and military conflicts on the economy and the elevated stock valuations in global financial markets.

Macroprudential measures limit the build-up of new risks and strengthen the resilience of the financial system, primarily through macroprudential restrictions on consumer lending criteria, which apply from 1 July 2025, as well as through capital buffers, which will be further strengthened by the increase in the countercyclical capital buffer rate to 2% from 1 January 2027. The CNB will further tighten macroprudential measures if financial stability risks continue to increase.