Latest Headlines

Swiss Franc loan solution sought

The Cyprus Central Bank is going to investigate the impact on the banks in the event that they convert loans denominated in Swiss Francs, which amount to €1 billion, into Euro.

Swiss-Franc-500THE CENTRAL BANK is going to examine the extent of damage for banks in case they convert Swiss Franc – denominated mortgages to Euro.

Mortgage loans made in Cyprus in Swiss Franc stood at € 1bn. Since January 2015 the Franc sharply appreciated against the Euro, leaving those who have loans in Franc, but incomes in Euro, with larger debts.

Total mortgage and non-mortgage loans in Swiss Francs amount to € 2.6 bn at the end of July 2015.

A spokesperson of the Central Bank speaking before the Parliamentary Committee of Finance which examines the issue, said that it cannot regulate loans given in foreign currency with a directive, stressing that the interest rate is variable and it cannot be imposed retroactively. He also said that according to the Memorandum it cannot interfere with lending rates.

The representative of the Association of Cyprus Banks said that some financial institutions have started providing conversion plans of loans in Swiss Franc in Euro, not at the current price, but at a price to mitigate damage.

He noted that during the period of 2006, following the CB’s circular, banks informed consumers about the currency risk.

He also said that there are documents analysing the risks which bear the signatures of clients.

Affected borrowers speak of a scandal and deception from banks which, as they argued, did not inform them of the currency risks of such loans.

On behalf of the Ministry of Finance Andreas Charalambous said that in the period of 2006 – 2009 lending in foreign currency was granted, adding that there was a low interest rate, but the borrower had the currency risk which could increase the repayment of loans.

He said that these products are not suitable for ordinary citizens, noting that there was a huge appreciation of the Swiss Franc as while during the period of borrowing the EURCHF rate was 1.60 now it is 1.10.

He noted that there are a host of court rulings abroad which received favourable decisions for borrowers who did not receive proper information on currency risk.

He also stressed that in Cyprus there is a CB circular which gives direction to commercial banks as to how to treat such cases.

He said that there are laws qualifying individual handling, adding that if no solution is found to the problem through the financial commissioner, people should go to court.

“We will examine the issue,” he said, “so that consumer protection becomes stronger as regard matters of information.”

The representative of CB, said that during 2006 – 2009 there was a good rate for the Euro and Swiss Franc so many people made low interest loans, stressing that there was no legislation on foreign borrowing at the time, so CB issued a circular to banks.

He stressed that the Croatian government has decided to pay for converting loans from Franc to Euro.

He added that “the CB was watching lending in foreign currency,” adding that “banks held a high level of liquidity, when they granted loans.”

Members of the Finance Committee asked to be informed about the cost to banks in case of a conversion of loans to Euro, calling CB to solve the issue with a circular.

Editor’s comment

In Greece, a recent landmark case in the Athens court ordered the borrowers to repay Swiss Franc loans at the EURCHF exchange rate that applied when the loan was started, rather than the current rate.

Further reading at Greek court decision for foreign currency loans

Readers' comments

Comments on this article are no longer being accepted.

  • asha says:

    i have a lawyer, Louise Zambartas and the offer was made by her.

    (Editor’s comment: I’m confused? First you say “I have made an offer to pay Euro 40,000 cash and rest by instalments” and now you say the offer was made by Louise Zambartas? [If an offer was made by anyone other than yourself, it would have been made by the bank – not your lawyer].)

  • Karen McMellon says:

    We are in the process of suing the B of C. When I worked out the money sent to cover the mortgage payments it came to £130300 (over 6 years). Having paid a deposit of £60000 we now owe more than we borrowed, a disgraceful sorry state which has affected my mental health enormously to the point that everyday is a struggle I FOR ONE JUST WANT MY LIFE BACK good luck everyone start suing them, if only I could sue for mental damage too!

    (Editor’s comment: Do you know that various groups have been set up that are taking legal action against the banks?)

  • asha says:

    I have stopped paying the monthly instalments for last 2 years because simply i cannot sell without the title deeds or afford the monthly payment.

    I have a loan of CHF 209,000 since January 2007 and while things were good in Cyprus I kept up with payments until 2013, now I have made an offer to pay Euro 40,000 cash and rest by instalments provided Alpha bank converts the loan into Euro Totalling 125,000.

    They have sent me lots of form to fill in regarding my assets here in UK which I am refusing to provide.

    I am just waiting to see what happens.

    My lawyer is Louise Zambartas.

    My loan was not signed by me but by a very scrupulous lawyer.

    My question is can they come after my assets here in UK.

    (Editor’s comment: If you fail to maintain your loan repayments or come to a negotiated settlement with the bank, they could seize your property in Cyprus and pursue you in the UK if the value of the property is less than the loan.

    The bank wants to know what assets you have so it can assess your ability to repay the loan.

    Did you negotiate yourself with the bank?)

  • Gary says:

    Kieran,
    You are absolutely correct. I remember receiving a letter from the Laiki Bank (at the time) advising my interest rate was increasing to 6% plus (from the agreed 2%) but don’t worry as my monthly payments (in Swiss Francs) would be roughly the same due to the reduction in LIBOR. What they were effectively saying was “we’ll have that saving thank you very much”.

    This left me solely with the burden of dealing with the massively inflated Swiss Franc. An unfit product sold by the bank followed by an unfair response from the bank.

  • Kieran says:

    Is this not all part of the LIBOR scandal and should we not seek redress via this route?

    My loan was / is Libor + Bank Margin. The Bank ( Emporiki / Alpha ) increased their profit margin several times as things went bad, even though the Libor rate was dropping. If they didn’t increase their margin, the drop in the Libor would have more than compensated the hike in the currency exchange rate. Hence the mortgage sky rocketed when it should have decreased.

  • Andante says:

    Janice- your analogy is excellent and everyone should watch the video on your link.

    Does anyone have a link re whether it is better to file a claim in Cyprus or in the UK? I am sure I read something last week saying Cyprus is best but I can’t remember where.

  • Janice says:

    Andante is absolutely right, even if you have paid your mortgage or inexplicably still making repayments to those who cheated you, then it does not prevent you from joining in with 1000’s of others making a legal claim for compensation. For more info: Cyprus property mis-selling.

    You can then check out lawyers who are heavily involved and see who might suit best. Hope that helps. What banks and officials don’t realise is that 1000’s of lives have been devastated, much like a horrific road accident. The injuries are to the mind, rather than physical – just as bad! We are the injured pedestrians, whilst the lorry driver adds salt to our injuries, saying we should have seen him coming at 80mph through our 30mph village!

  • Andante says:

    Annette – have you checked out your situation? If you believe the loan may have been mis-sold in the first place regardless of whether it has been paid off or not it might be worth speaking to a lawyer for an opinion if you havent already. £50,000 is a lot to lose.

  • ANNETTE says:

    We paid off our mortgage when my husband inherited money from his father. We had never been informed about the risks of a Swiss franc loan and as a result overpaid by nearly £50,000.

  • Costiz a fortune says:

    The banks have to take all the blame for this fiasco. They were included in misselling multi complex mortgages that were not suitable for basic investors/joe public. They never sent out the paperwork or indeed didn’t give a cooling off period, and I’d like to ask at what point they informed us of any risks of this “super safe Swiss franc mortgage”? I would like to see the papers saying that they had told people about the risks and that they have signatures, you don’t have any such paper that I signed THAT’S for sure. Alpha bank in Paphos along with Alpha Panareti and other builders are caught up very heavily in this scandal but seems to think they can’t/wont take the blame. Shame on Cyprus !

  • Richard says:

    When we first made representation to our Cyprus-based bank to re-negotiate these loans – it was 5 years ago.
    We were told straight out: “We were not your advisors”.

    So…hang on Cyprus banks. You now (retrospectively) claim that you made us “fully aware of the risks” (which is …er, advising clients …. is it not?) Where & when EXACTLY was this advice given? Under your breath? Via the lawyers (ha ha ha ha)!? Or buried (in Greek) in the 350 pages of paperwork passed under our noses like a conveyor belt (with NO cooling off period)? Or perhaps it was carved into the bark of a tree half way up the Troodos mountains on someone’s private goat farm? Wherever it was – I think you’ll find 99% of people missed it Cyprus bankers. Hell – we weren’t even told how the loan processes worked FULL STOP. We were all mis-sold this fairy story by the brokers (as bad as the bankers) that the whole process of house buying in Cyprus was like UK practice. We now all fully know what a load of old rubbish that was.

    To me – there are two issues at play here:

    One – this is classic ‘weather vane’ Cypriot mentality. The statements issued about any situation are 100% dependent on which way the wind is blowing on that particular day.

    Two – banks all over the world have practised shamelessly underhand business for decades. Some more than others I grant you. This is a global problem – and people in banking realise the occasional wrist-tapping fines are a drop in the ocean compared to the profit bounty they can make from such underhand practices.

    It’s time people woke up and played hard-ball with such crooked behaviour. Doing anything else will mean being saddled with a lifetime of dodgy debt you were mis-sold and was architected this way behind the scenes from DAY ONE by the unscrupulous – on behalf of the greedy and corrupt.

  • Janice says:

    This debacle does not just concern the Swiss Franc, what about the price bubble it created? Or the tripling of interest rates that more than compensated the banks for the initial ‘low’ interest rate? Then there are the gifted deposits, the 15 year mortgages that only pay off half the amount borrowed. Now, 9 years after the purchase, the damage is irreversible.

    It cannot simply be fixed by compensating for Swiss Franc losses. So many bankers and officials simply have no idea! Bankers were complete crooks, complicit with other professions involved. We were lied to, cheated, and duped into this by all and sundry.

    Where else in the world are NPL’s over 50%? It is not the fault of ‘bad’ borrower’s – the banks and their dodgy ‘friends’ screwed up big time, and they should now pay the cost with the help of EU funds they now have.

  • Gary says:

    If it is shown the banks sold a product that was not fit for purpose and should not have been aimed at the consumer market, then they need to take corrective action. This should effectively mean rolling back and estimating the cost if the correct product had been sold to the customer. In the case of Swiss Franc loans this will involve compensating the customer.

    Any suggestion that the customer should “have known the risks” is irrelevant. In the majority of cases it would appear the banks were negligent in highlighting the risks but the bottom line is they sold a product they should not have.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

  • Text size

Back to top