Cyprus Mail

MPs warn banks over controversial Swiss franc loans

By Angelos Anastasiou

Although 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.

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