Recent data from the Central Bank of Cyprus reveals a marked decline in Swiss franc loans, indicating a significant shift in the borrowing landscape of the island’s banking system.
As of the end of March 2024, existing Swiss franc loans are being actively serviced, with some being converted to euros or sold by banks. The euro now dominates the borrowing market, with a total borrowing volume of €25.11 billion, including €22.59 billion in euro-denominated loans.
In contrast, Swiss franc loans have dwindled to €99 million, a stark drop from the €2 billion recorded in 2005, which had previously posed significant challenges for borrowers and sparked discussions in the Parliamentary Committee on Economic Affairs.
The surge in Swiss franc loans in Cyprus began in 2006, heavily promoted by banks in 2007 and 2008 due to the attractive low interest rates and favourable exchange rate against the euro, sometimes differing by up to 1%. However, problems emerged in 2015 when the Swiss franc appreciated against the euro, increasing repayment burdens for borrowers.
This trend was not unique to Cyprus, affecting Eastern European countries such as Hungary, Serbia, Poland, Romania, and Croatia.
In 2022, a judge at the Paphos district court ruled in favour of borrowers whose Swiss franc loans were granted by the National Bank of Greece (Cyprus) Ltd; the borrowers were represented by the Zambartas law firm.
The judge hearing the case ordered the bank to convert their Swiss franc loans into Euros at the exchange rate that applied at the time the loan was granted.
The judge also ruled that bank was not entitled to charge interest on the late payments and rejected the bank’s claim to impose interest at 14% on the loan closure amount.
The judgement followed similar court rulings in favour of Swiss currency borrowers in Poland, Hungary and Croatia.
The banking system also includes deposits in various currencies. At the end of March 2024, total deposits amounted to €52.23 billion, with €45.85 billion in euros. Other deposits included €5.33 billion in US dollars, €32.2 million in Swiss francs, €9.4 million in Japanese yen, and €730.6 million in Sterling.
