Introducing the euro will significantly reduce the risks of currency clauses and pension funds will have more liquid assets, it was said on Monday at a conference organised by the association of pension fund management companies and pension insurance companies (UMFO).

CEO of the Raiffeisen Pension Fund, Ivica Grbac, said that the assets in mandatory pension funds are slowly surpassing the domestic capital market, particularly with regard to limits to currency exposure.

Pension funds’ assets have since 2010 until now increased by 216% while GDP increased by 11%, Grbac said.

“By 2021 it will be above the market capitalisation of share trading on the Zagreb Stock Exchange,” said Grbac and added that pension funds had met one of their tasks in developing the domestic share market and introducing the euro is the next phase.

According to Grbac, with Croatia entering the euro area the currency risk will be reduced even further however, he believes that entry to the euro area has far greater significance than just reducing the currency risk as pension funds’ assets will become far more liquid.

As far as loan risks are concerned, Grbac explained that the majority of pension funds’ assets are invested in debt instruments by the state. Each country, he said, has its specific risks by entering the euro area.

“The timing of entering the euro area is essential and we can conclude that the timing of accession to the ERM II was in our favour. If we must assess whether loan risk will increase or decrease upon entering the euro area, I think the answer can be seen in Fitch’s last audit of ratings which notes that by entering the euro area Croatia’s credit rating could move up two levels,” Grbac underlined.