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Tag: Swiss franc crisis

  • The Swiss franc crisis in Romania

    The Swiss franc crisis in Romania

    The Swiss franc crisis is still a major concern for the Romanian authorities, who are trying to find a way to solve it. The decision of the Swiss Bank on the 15th of January to eliminate a cap on the value of the Swiss franc against the euro has affected more than 75,000 Romanian nationals with loans in Swiss francs.



    Credits in Swiss francs were available on the domestic market between 2005 and 2008. Attracted by the stability of the Swiss franc and the low interest rates, many Romanians contracted loans in this currency. Following the sharp rise in the Swiss franc, they now have to pay higher rates.



    Parliament is still looking for solutions to solve the situation, with its budget and finance committee resuming talks on the issue of foreign currency loans. Earlier, 131 members of Parliament initiated a bill meant to protect consumers faced with a rise in their repayment rates for loans in foreign currency as a result of exchange rate fluctuations. The initiator of the bill, the Social Democratic MP Ana Birchall proposed that the fiscal burden should be shared between the client and the bank in the case of all foreign currency loans, not only the Swiss franc. She says an amendment to the provisions in force should be harmonised with the relevant European directive by March next year.



    The representatives of the finance ministry, the consumer protection body and banks have proposed different measures to tackle the issue. Ion Dragulin, the director for financial stability with the National Bank of Romania, for example, is in favour of facilitating the repayment of loans through the available means with the exception of the administrative regulation of the exchange rate:



    “The National Bank believes the two parties, namely the banks and the clients, should arrive at a solution depending on each individual case to find a way to reduce the cost of debt services.”



    The consumer protection body complains, however, that no bank has been eager to solve the problem. Talks will continue next week with the representatives of the International Monetary Fund and the National Bank of Romania before Parliament’s budget and finance committee votes on whether to forward the bill to Parliament.



    Swiss franc credits became available in Austria and Germany in 1990 and were very popular because of their low interest rates. According to a Swiss National Bank report from 2009, credits in Swiss francs were also available in Poland, Hungary, Denmark, Croatia, Sweden, Norway, Slovenia, the Czech Republic, Lithuania, Estonia, Latvia, Britain and Bulgaria.

  • Implications of the Soaring Swiss Franc

    Implications of the Soaring Swiss Franc

    Banks, business people and politicians alike are looking for ways to overcome the difficult situation created by the sharp rise in the Swiss Franc, following the decision of the Swiss National Bank to lift the cap on its currency. Over 75 thousand Romanians have contracted loans in this currency and will have to pay considerably higher monthly instalments. Deputies with the Budget Committee are planning to discuss the issue with representatives of the banks and of the debtors in order to find solutions to the problem. Several proposals have been tabled, such as allowing the people who have contracted loans in this currency to swap them for national currency loans, at a currency exchange rate close to the one at the time when the loan was contracted, or rescheduling the repayment of loans.



    Bankers, however, argue that passing an emergency ordinance to enforce these proposals is unfair and likely to bring financial institutions on the verge of bankruptcy. The crisis generated by the Swiss franc increase has gripped the whole Europe, with each sate trying to handle it in a different manner. In Hungary for instance, which has quickly converted Swiss Franc loans into domestic currency, there is a different policy for the Swiss Franc mortgages and for the loans for cars and other personal needs. However, Romania’s Prime Minister Victor Ponta says this method cannot be applied in Romania. Victor Ponta:



    “I don’t believe in the solution applied in Hungary, where the Swiss currency was converted into domestic currency in just one day. I believe that banks have the duty to better inform their clients and to bear some of the losses. I also believe that at a certain point we should come up with a system allowing bank customers to read their loan agreements several times before signing them, because it’s very difficult to help them afterwards.”



    Romanian Senate Speaker Calin Popescu Tariceanu does not think that an intervention from the Government or Parliament would be a good idea in this situation. A former businessman himself, Tariceanu says that in a market economy Parliament does not have the necessary tools to control prices, interest rates and exchange rates. The European Central Bank decided on Thursday to launch a government bond-buying program worth over 1 trillion euros to boost economic growth. The flood of money impressed markets as the euro went down to its minimum level against the US dollar in the past 11 years. Nevertheless, this decision brings more hope in the future of the European economies, at least for the time being.