THREE 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.