Currency Risk Exposure of Banks and Enterprises in the Republic of Croatia

Currency risk exposure is an increasingly important global issue due to the development of international trade. Therefore, the objective of this paper is to study the current currency risk exposure of Croatian banks and enterprises. The paper also presents the theoretical background of the observed problem and a review of previous Croatian and world research. Historical, descriptive, comparative, and compilation methods were used. The analysis shows that currency risk exposure of banks in Croatia is low. However, the share of deposits and loans denominated in foreign currency, predominantly in Euros, is very high. In the circumstances of a stable exchange rate, loan granting with a currency clause is unnecessary. Together with deposit euroisation, it disables efficient monetary policy. Possible solutions are the implementation of a de-euroisation policy or faster adoption of the Euro. On the other hand, the situation in Croatian enterprises is not satisfactory. The vast majority of companies are exposed to other currencies, but although there are hedging instruments on the Croatian financial market, a significant part of the enterprises is not sufficiently informed. Increasing the availability of financial instruments, but even more, increasing the awareness of managers, should be a priority.