CHF REACHES HISTORIC HIGHS AGAINST THE LEU Loan payments in Swiss Franks become unbearable

The loans in Swiss Franks, which were heavily "pushed" by the low interests they offered three years ago, are now a cause for major concern among those who used them. Within two years after making the loans, borrowers saw their installments increase significantly.

Now, the pressure has become unbearable because the Swiss Frank has become unbearable because the Swiss Frank has gained signifincantly over the leu, and customers with revenues in lei need to buy franks to pay their monthly instalments.

In January 2007, the Swiss Frank was quoted at 2.0787 lei, and in the same period of 2009 it had risen against the leu to 2.6745 lei. It has now reached a historic high - 3.2096 lei/unit in August 2010.

The evolution of the Libor index (ed. note: to which the interest rates of the Swiss Frank loans are tied) should have helped customers pay less, since it has dropped significantly starting with 2007, but banks have actually increased their margins on these loans.

In theory, the Government Ordinance 50/2010 will allow customers to retain the interest rates set by their initial loan contracts, plus the value of the Libor, says Ruxandra Andrei, deputy manager of FinZoom.ro. She explained: "It all depends on how the interest rate is determined and whether the loan agreement specifies it is variable or not. If the margin is good, the Libor rates for the Swiss franks are minimal. This will help borrowers. However, the issue of the exchange rate remains, because it is still going up".

The banks no longer offer loans in Swiss Franks, precisely because of the risk they pose to their customers and to the banks themselves.

Last week, the Swiss Frank reached a new high against the Romanian Leu, going above 3.35 lei/CHF, which means customers have seen their loan payments nearly double.

According to the Central Bank, banks have lent 102 billion lei to households, of which foreign currency loans denominated in currencies other than the Euro, amounted to 13.4 billion lei, of which Swiss Franks make up a significant chunk.