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Three banks ready to ease Swiss franc loan burden

Three banks are ready to ease the burden on Swiss franc borrowers by writing off between 10 and 40 per cent of the loan in certain circumstances providing the borrower can show that they cannot repay.

Swiss-Franc-500THREE banks have devised voluntary schemes for distressed borrowers who took out loans in Swiss francs, which include loan write-offs from 10 to 40 per cent, the central bank told the House finance committee on Tuesday.

According to the Central Bank’s acting Oversight Director Yiangos Demetriou, six in ten Swiss franc borrowers receive their income in sterling, and are thus essentially unaffected by change in exchange rates between the euro and the franc.

However, following a series of meetings between the central bank and three banks, there has been progress on certain schemes that banks are ready to offer. These, he noted, will be available to borrowers who can document their inability to repay their loans.

According to Demetriou, one bank has agreed to write off 10 per cent of the original loan if the borrower agrees to switching the loan currency to euros or pounds sterling, at interest of six-month Euribor plus a margin to be agreed, and extend the repayment period to 30 years, or until the borrower reaches 70 years of age.

The currency switch will be done for free, and the borrower will enjoy an optional one-year grace period, during which only interest will be payable. No early-repayment penalty fee will be imposed.

A second bank will offer discounts on the loan from 20 to 40 per cent, in case of a currency switch or full repayment, and the bank will waive all expenses. The offer will be made to all borrowers, irrespective of the type of loan made. The interest rate will be similar to the one agreed originally, with a lower margin.

A third lender, which holds very few loans in Swiss franc, told the central bank that it is prepared to offer a discount of up to 25 per cent on loans that are switched to euros or pounds sterling.

The level of the discount will depend on the value of any collateral offered, as well as the borrower’s behaviour – i.e. cooperation, or lack thereof – and ability to make repayments.

According to this scheme, the existing loan will be split into two separate loans, one for repayment and the other – interest-free – to be fully discounted over five years, provided the borrower can demonstrate that repayment is not possible.

The value of the second loan will diminish by 20 per cent each year, until it is written off completely in year five.

Readers' comments

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  • hugh barrow says:

    You do not stipulate which banks are participating in this scheme – is the National Bank of Greece ( Cyprus) Ld one of the three?

    (Editor’s comment: As I replied in my earlier comment to John, the banks have not been named.)

  • Dunn Good says:

    Alpha Bank have taken us to Court in CY for non payment and have now enforced through UK court giving just ten days to defend in CY, no chance, so they have now taken all equity in our U.K. home.

    However they have not repossessed and we are still being hounded by Management co. For site fees, so we have it rented out for just 250 euros per month. The Bank have agreed to accept the net rent to settle the loan, it will take around 80 years at current rental figures after taxes, management and maintenance. We have had to repair damp damage in two rooms every two years and repaint, plus replacement pumps and a/c units. If they repossessed they would have to sort all that out until they managed to sell the apt. So we are now acting as rental agents for the Bank.

    (Editor’s comment: I’m very sorry to hear whet has happened, but why didn’t you instruct your lawyer in Cyprus to defend the writ – Do not ignore Cypriot bank writs for loan non-payment?

    If you do not defend the writ the judgement will be deemed uncontested – and the bank can then get an EU Enforcement Order enabling it to have the Cypriot court judgement enforced by the courts in the UK.)

  • John says:

    Anybody care to name the 3 Banks?
    Thanks in anticipation of a reply.
    John

    (Editor’s comment: Unfortunately the banks have not been named – but I think most people will have a good idea of the names of two of them based on various articles I have published.)

  • Makis says:

    I was very disappointed to see the new judgement made by the European court of Justice on 03/12/2015.

    Apparently, foreign exchange transactions which form part of certain types of foreign currency denominated loans do not constitute an investment service and they are not, consequently, subject to the rules of EU law relating to investor protection.

    So one of the strong weapons we had (people who have suit the banks), is being washed away..

    One of the strong arguments was the fact that authorized personnel from the banks, should have explained the risks, offer advise on how to handle the risks etc. If the foreign currency loan is not considered to be an investment service, then the banks have the upper hand in regards to this.

    I still cannot believe that the European court of justice has taken such a decision. For me, the judges have been clearly and undoubtedly influenced and/or forced to this decision by the invisible hand of the banks worldwide.

    so sad..

    (Editor’s comment: I have copies of the press release and the actual judgement and will publish an article later today or tomorrow – workload permitting.)

  • Janice says:

    There are various opinions about making loan repayments. Some victims stopped paying in 2010, I stopped in 2011, but I am no better off than those who stopped paying earlier. So all those earlier painful repayments were wasted. Unless I can afford all future repayments in full, and stand a chance of ever owning the property with title deeds, there seems little point. In my case the monthly repayments were only sufficient to repay 50% of the loan back. (Only discovered 3 years after the loan was signed!)

    Those like me who have been unable to pay, are now subject to the risks of non payment. Non-payers have collectively encouraged the banks to make offers, and with the help of law firms.

    Others who have privately negotiated a reduced repayment deal with the bank could be at risk too, as such arrangements may not be legally binding, and the bank could subsequently insist on full repayments as from 1.1.16 – which if not paid, may allow the bank to sue without any fear of legal counter-claims for mis-selling etc (that occurred over 6 years ago) in the same way as if none of the loan had been repaid. Sounds cynical – but the banks have shown no remorse for the misery they continue to cause.

  • Steve R says:

    I have been offered a discount by Alpha Bank (Still yet to be determined) if I change the loan to sterling and extend the loan period to 32 years. Early repayment would carry massive penalties. I will then be 92 years old. Even a 40% discount would not be enough as I owe 55% more now,than the original mortgage figure. My mortgage should have been paid off next year as I took out a ten year loan.

    To take out court action against the bank would cost around £10,000 and with any court action there is no guarantee of a favourable outcome.

    I have taken the opinion that I will never own the property and if I go down the route of the bank’s offer I will be signing up to a 32 year rental lease. Only the bank’s are going to win in these deals.

  • Aggis Demetriou says:

    @editor

    Yes stop all payments if legal advise was obtained.

    All of a sudden the banks got together to agree on media announcement, this is a well organized smoke screen.

    My advise is to anybody in this mess is to file a claim in the courts.

  • Aggis Demetriou says:

    @Pils
    Fully agree with you, €1400 is a drop in the ocean for court action, so let it take years. At the end the banks will loose and in the meantime stop all monthly payments.

    We all know the court rulings in other EU courts.

    Banks have themselves to blame.

    (Editor’s comments: It would be extremely unwise to stop monthly payments unless you’ve done so on legal advice. You could end up with even more problems.)

  • Gary says:

    Yet again a cop out… acknowledge that ALL customers have been mis-sold a Swiss Franc mortgage and deal with it. The focus here is clearly on trying to recover as much debt as possible. Not on resolving the actual issue.

  • pils says:

    Banks are worried and concerned to the fact that many miss-sold Swiss franc mortgagors will go to court. We will have our day in court and the banks have much to answer.

    Outstanding Swiss franc mortgagors have increased in debt and a max 40% mortgage reduction is not good enough for many, a walk away deal is the only option.

    Banks should have dealt with Swiss franc mortgage concerns many years ago and the only response by banks was a hard line reply. Communication skills by banks to their customers was poor and evasive.

    Banks do not want to go down the litigation route as it will take years for a courtroom showdown and now it is up to banks to give us a walk away deal with compensation or substantial discount.

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

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