New Move to Convert Swiss Franc Mortgage Loans to Euros

By , 17 May 2019, 12:30 PM Business
New Move to Convert Swiss Franc Mortgage Loans to Euros Wikimedia CC-by-0

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STA, 15 May 2019 - The National Council, the upper chamber of parliament, is spearheading a new attempt to help several thousand people who took out mortgages in Swiss francs and ran into trouble when the Swiss central bank stopped protecting the value of the currency in 2015.

 It adopted on Wednesday a bill that would make it obligatory for banks to convert all Swiss franc loans to euro at the exchange rate valid at the time the loan agreement was signed.

The new loan agreement would bear interest applicable to euro loans at the time of the original loan agreement, and borrowers would be entitled to get back any excess payments they have already made.

The bill would apply to all Swiss franc loans made between 28 June 2004 and 31 December 2010, including those that have already been fully paid up.

The legislation, which will now have to be examined by the lower chamber of parliament, is substantively the same as a bill proposed by Franc Association, a group lobbying for Swiss franc borrowers, in December 2017.

That bill automatically expired when the new parliament was inaugurated in 2018, with franc borrowers counting on the new parliament being more susceptible to their proposal and enlisting the National Council to help get the legislation into parliamentary procedure.

The new government indicated in late-2018 it was willing to tackle the issue, with the caveat that it would try to seek a different solution than the one proposed by franc borrowers.

The original bill had been strongly criticised by banks, which want the issue resolved on a case-by-case basis rather than with a sweeping systemic law.

It has also come under fire from the European Central Bank, which expressed serious concerns about its retroactive character and effects on the banking sector.

Slovenian courts have so far delivered mixed verdicts in claims brought by borrowers, substantively revolving around whether consumers had the necessary information about risks when they took out loans.

But the Supreme Court appeared to have set a general course for future lower-court rulings with two verdicts in late-2018 that respectively determined that consumer protection rules at that time were more lax, and that banks had sufficiently explained the risks.

At least one case has already made it to the Constitutional Court, which is yet to deliver its verdict.

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