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MPs warn banks over Swiss franc loans

MPs in Cyprus have warned the banks that they might pass punitive legislation if they fail to offer households with Swiss franc loans better terms; many borrowers claim they were misled to the real risk involved.

Cypriot MPs warn banks over Swiss franc loansALTHOUGH a decline has been recorded in controversial Swiss franc loans in the first half of the year, deputies on the House finance committee on Monday warned they might pass punitive legislation if banks failed to produce more drastic results.

Borrowers in Swiss francs from Cypriot lenders Alpha Bank, Bank of Cyprus, and, to a lesser extent, Hellenic Bank, found themselves in serious trouble when what they thought were loans under favourable terms turned sour, after the Swiss central bank in 2014 abandoned the peg it had imposed on the Swiss currency against the euro.

Affected borrowers claimed they had been misled as to the real risk of the transaction they entered.

Following pressure from the Central Bank of Cyprus (CBC), local banks pledged to engage with hit borrowers in order to ease their burden.

CBC official Yiangos Demetriou told the committee that in the first half of 2016 loans in Swiss francs declined by €274 million, from a total of €2.05 to €1.78 billion, but the larger chunk of the drop, almost 80 per cent, comprised business loans – as opposed to household borrowing – prompting protest by lawmakers.

“From the data available to us, it seems that the schemes offered by the banks work better for legal entities than households,” Demetriou told the committee.

“We will talk to the banks and exert more pressure, so that their offers and their behaviour improves.”

Of the remaining €1.78 billion over €1.1 billion were household loans, almost 80 per cent of them mortgages.

According to Demetriou, the recorded drop in loan balances is mainly due to repayment, but also to turning Swiss franc loans into euros or pound sterling.

To repeated suggestions by committee members that the matter should be regulated via legislation, the CBC official said that, if banks were forced to take on a disproportional burden of the loans, prompting capital needs, these could “end up being funded by the taxpayer”.

“Yes, the banks should face the cost, to the extent that no additional capital needs are created,” he said.

“If it is proven that they broke the law, they should face some consequences.”

Committee chairman Averof Neophytou said the House could help borrowers who found themselves in trouble, “without hurting those who took the biggest hit from this crisis”.

“The banks have a margin of 25-30 per cent to come up with some solutions. More than this and all we would be doing is shooting the legs of haircut depositors – again.”

DIKO MP Angelos Votsis said there was some improvement in the numbers, but not as much as the committee had hoped for.

“If the banks are saying they have done all they can do, then maybe we should go ahead and legislate,” he said.

Readers' comments

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  • brainwash says:

    All the CHF loan lawsuits are settled outside the courts. There is no way that a bank will risk a verdict.. If they see you determined to go all the way, the will come up with a deal, say 50% of what you claim..

    My loan was 120,000 euro (CHF 185,000) in 2008 and 1.85% interest. I have paid 80,000 euros so far without missing an instalment. The balance of my loan now is 130,000 euros (CHF 140,000) and the interest is 4.65%..

    Bank of Cyprus is giving me 10% discount if i turn it to Euros, and the 12th instalment every year will be done by the bank if I pay on time the previous 11 instalments. Oh, and they will reduce the interest rate back to 1.85%.

    10% discount is 13,000 and 12 instalment until the loan repayment is another 12,000. A total of 25,000.

    What I’m claiming through my lawsuit is 85,000. Is not even close to 50%. I suggest for them to consider giving me 20% in order to withdraw the lawsuit but there was no way they said.

    What they do not tell you with the above discounts is the fact that their discount is actually a refund of the money they received from you by illegally increasing their interest rate.

    There has been a lawsuit that was won for the illegal increase of interest and you can sue them from the beginning of the loan period and ask them to credit the amount back.

    So basically they do not give you anything back because you have a CHF loan which they wrongly provided to you but only give you back the increase of the interest rate.

    If they want to settle outside the court I will agree with 50,000 Euro which is approximately 60% of what I claim.

    Good luck to everyone. Hopefully they House of Representatives will put some sort of legislation in place that would help everyone but I doubt this will take place in next year or two..

    So

  • Tojo says:

    And yes hindsight is a wonderful thing, we were very naive in expecting a bank, a developer, a UK regulated IFA and “our” lawyer to all be honest and truthful!

  • Tojo says:

    Sky – interesting point though in mine and others cases we were told beforehand that the borrowing rates were fixed only to discover later when it was too late that in fact the rate was variable. This is another scam along with others that I could highlight and as I said court is the only route but even that seems to be blocked. Why would anyone ever buy in Cyprus?????

  • Tearing my hair out.. says:

    Agree with a great many of the postings on this thread, and recognise the paltry offerings from Alpha Bank – as we’ve been offered the same. The more responsible you act – the more the banks seem to want to fleece you!

    Without wanting to stray into repeating points, the overall (and over-arching) reason for all of this is de-regulation of banking processes.

    De-regulation allowed banks to apply practices of investment (or what used to be called merchant) banking to ordinary people, and it crept up on all of us like a dark black enveloping storm. No-one I’ve spoken to over the last 7-8 years understood the risks, the processes of what they were getting into and what the ramifications were – until it was all too late. Jeez – it took us OVER TWO YEARS to even get a copy of the basic terms of the loan in writing – whereupon we discovered anomalies and errors galore!

    Cyprus property in the mid 2000’s is one of many worldwide banking scams – the likes of which go back to Ponzi & Charles Keating in terms of execution – and the only way to clear it up now is make the banks and bankers who architected such usury – do one of two things. One – confess up – and cough up – what they took from people by deceit. Two – face trial and lengthy imprisonment.

    It is not Cyprus as an island that has been shamed – but bankers and those who aided them. We must all NEVER – EVER lose sight of this.

  • Aggis Demetriou says:

    Dear Editor;

    The advice to stop monthly payments of CHF loans came from various soliciors on the Island and from a UK barrister.

  • scruffy says:

    @Sky – If the banks had thought there was any risk (however low) to themselves, they would never have sold any CHF loans. They knew the risks were all loaded against the buyers and did not explain that to them.

    So sad that, despite all the information out there regarding the shabby treatment of their customers, there are still those who try to defend the banks.

  • sky says:

    I still wonder if the borrowers of swiss franc loans would have given money back to their bank had the swiss franc value decreased instead of increasing…

  • aj says:

    I notice that the illegal PoA has died a death.

    My PoA was not signed in front of an official and was stamped Feb 2007. I didnt even go to Cyprus till April 2007.

    A piece by top Cypriot lawyer George Coucounis stated that unless a PoA was signed in front of an official and had 2 witness signatures it was illegal and therefore would make any dealings done including mortgages null and void.

  • Tojo says:

    You are correct Pils, the only route is court however I am sorry to say that after at least three years of trying my legal group have been unable to get the bank into court in Cyprus which makes me conclude that we are being blocked by persons unknown. My question is can anyone get a bank in court in Cyprus?

  • pils says:

    A lot as been commented before and said from 2008, but no action as taken place to date. In UK the banks would have been taken to task and Swiss franc victims, would have been compensated fully.

    The Cyprus banks are dis-repectful to their clients and pursuing the return of outstanding mortgage amounts owing less a sweetener % amount as previously stated before.

    Greed is their only Banks objective and solutions is not in their thinking, only money.

    We have stopped our mortgage payments and going down the route the banks do not want COURT.

  • Gary says:

    Dear Editor, legislation is the only way forward. Banks have shown they will avoid dealing with this issue and will drag it out as long as they can.

    How can we make our views known to the “House Finance Committee”?

    Ed: You will be surprised who subscribes to my newsletter ;-)

  • Gary says:

    Completely agree Nick. If it was mis-sold then any compensation should be based on the full amount of the loan and not the balance.

    It would be another wrong on the part of the banks to further victimise customers on the basis that they have continued to pay as per the loan agreement

  • Aggis Demetriou says:

    Anybody with a CHF loan should stop paying immediately. This is a scam loan and the sooner you stop the better for all CHF loan holders.

    Ed: I would advise against this unless the borrower had taken legal advice on the matter.

  • Janice says:

    What we know is that some bank managers were fully aware the CHF loans were inappropriate or too risky for the borrower, but nevertheless I heard some were tempted by bribes from certain developers to push them through, apart from any commissions. They ‘safeguarded’ their position by writing into the small print, that the Bank’s margin could be as much as 14% to offset the apparently low and very ‘attractive’ CHF interest rate that made properties ‘affordable’ – but at inflated prices. It seemed like a win-win for developers and bankers alike! Of course, both Banks and POAs/lawyers failed to advise the borrower about the risks and the variable margins. To do so may have lost the deal. Not to mention the mortgages were only for 10-15 years covering half the loan, requiring a second mortgage in the future.

    From what I gather, there were plenty of ‘illegal’ practices going on to favour the banks. To date, I have heard nothing from any bank admitting any wrong doing whatsoever, and they are seemingly unable to see why there is a problem – must be down to all those irresponsible and underhand borrowers trying to cheat the banks! I say legislate to force the banks to compensate those affected by their bad and/or illegal practices.

    Once this whole debacle is resolved, some kind of normality may return to the property market, and the economy can move on!

  • Gavin says:

    We have been battling with Alpha Bank for 3 years now, we paid every month but now have started to delay payments to force their hand.

    Then gave in and have offered us a disgusting 13% discount, and this will only apply if we pay the 1st 5 years on time without any issues.

    They are also taking into account my parents wages that are now retired and also stretching the loan out to 30 years! They will be 6ft under ground or at least 97 years old! How can they do this?

    All I want is for them to offer the same to everyone that was mis-sold the CHF loan, we didn’t even ask for a 5 year interest only period but somehow they say we did.

    Anyone else waiting for the AB to reply regarding helping them out??

  • Nick says:

    The Cyprus legal board should follow the decisions of the Greek courts in that the Swiss franc loan reverts back to Euro from the date the loan began. I have been offered a settlement for my loan ranging from 12% 10 months ago to 25% last week on my outstanding balance but the bank required me to sign a legal waiver to stop any present or future legal challenge against the bank. They did refuse to provide this offer in writing.

    The banks should be pressured to offer their customers with Swiss franc loans to convert to Euro loans a universal discount made public to all and base this on the initial start of the loan amount and not just on the balance so that customers who have maintained their repayments to date are not penalised over the customers who have not kept up with their repayments and are offered more of a discount over a greater balance.

  • Bob says:

    At last obvious mis_selling and if UK banks paid dearly for the loan protection saga why should Cypriot banks be let off. Make them admit to and pay back the commission earned.

  • Costas a fortune says:

    It has been proven time and time again that banks such as Alpha Bank repeatedly sold these complicated Swiss frank mortgages/loans to small time investors /borrowers knowing that they were not right for the normal man on the street. These banks sat in with developers and lawyers well before building had started and all knew what was going to be offered etc.

    Yet so called independent local Cypriot lawyers told unsuspecting clients that contracts etc were all OK and to go ahead and sign papers. The banks didn’t do even basic rules of banking like giving the client a cooling off period or even fully explain the complexity of a Swiss Frank mortgage. The banks were repeatedly told that investors were not happy at the build progress but were insisting that they had there own independent surveyors that were happy with the progress and therefore monies were released.

    They changed the interest rates whenever they wanted , the whole thing is a complete and utter mess and yet again they’ve ” bit the hand that feeds them”! Investors have been put off by these underhand tactics many of which were highlighted in a BBC programme ” inside Out”. Just google Cyprus property scam BBC inside out.

    They have tarnished the good name of this once loved island.

  • Gary says:

    Please do go ahead and legislate. You threatened that last December when the banks snubbed your request to come up with a solution. Put it in black and white. If a customer was mis-sold a Swiss Franc loan then state what the recompense should be. And ensure it is on the full value of the loan and not the value outstanding.

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