Converting CHF loans to RON would generate EUR 1.3 bln loss, says central bank

Newsroom 30/01/2015 | 13:40

Converting Swiss franc (CHF) denominated loans into local currency loans using historical rates would generate a RON 5.7 billion (approximately EUR 1.3 billion) loss for banks with CHF loans on their balance sheets, said Romania’s central bank governor Mugur Isarescu on Friday according to Mediafax newswire. This combined loss with would represent 0.8 percent of the country’s GDP.

Representatives of borrowers with CHF loans have asked for their loans to be converted using the historical exchange rate plus another 20 percent of its value but this would mean losses of approximately RON 4.5 billion or approximately 0.6 percent of Romania’s GDP, according to central bank data. Even if the conversion would be done using an average exchange rate (calculated for the entire period since the loans were taken out) as suggested by MP Ana Birchall, it would still mean a RON 3.2 billion loss.

Isarescu warned that although banks would suffer the immediate impact of such of a conversion, the consequences “could be dramatic for the economy”. He further explained that depending on the conversion exchange rate, “three or four banks would require substantial capital infusions in order to reach the minimum solvency ratio. Moreover, the solvency ration for the entire banking system would drop from 17 percent to 12 percent”.

It is estimated that around 75,000 Romanians have contracted CHF-denominated loans, most of which have been taken out before 2008. After the Swiss bank abandoned its currency cap against the euro on January 15 and the CHF soared against the RON, there has been increasing public pressure to ease the debt burden for borrowers.

Unlike the situation in several neighboring countries affected by the same problem, Romanian authorities have not intervened by forcing banks to absorb the loss of converting CHF-denominated loans into local currency loans. Until now, several banks have come up with individual solutions such as freezing the exchange rate at December levels or cutting interest rates.

Simona Bazavan

BR Magazine | Latest Issue

Download PDF: Business Review Magazine March (II) 2024 Issue

The March (II) 2024 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “BAT DBS Romania Hub: A Vibrant New Office For An Employee-Centric
Newsroom | 27/03/2024 | 17:32
Advertisement Advertisement
Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue