LAWYER GHEORGHE PIPEREA: "There are banks which, in order to lend in CHF, have borrowed billions of Euros"

CHF borrowers suspect that banks have made speculations based on lending terms, as many consumers claim that, at the time they contracted their loans denominated in CHF they got their money either in lei, or in Euros.

One of the customers told us: "We either received lei or Euros. Banks have forced us to accept one of these two options.

Personally I have asked for CHF and I was told I had to wait at least 2-3 weeks, without being sure that they could give me that cash at the Branch where I had concluded the loan agreement. But I've talked to many people, who have loans denominated in Swiss Francs - none of them received Swiss francs, and the bank would unilaterally decide the currency it would pay out, depending on the destination of the loan".

In response, the representatives of Volksbank and OTP Bank, two of the banks that have exposure to loans denominated in Swiss Francs, told us that receiving the money in a different currency than the Swiss Franc was the borrowers' option.

The quoted sources told us: "Some received Swiss francs, others received lei or Euros, depending on what they asked for, but all of them have accounts in CHF, as well as in the other currency. Also, upon repayment, they can pay in lei or in Euros, as well as in Francs".

People suspect that banks did not have financing lines opened in CHF and that a conversion of the loans from CHF to lei would not mean losses for the banks, from that point of view, as they are not required, like the NBR claims, to also repay their debts in CHF.

"It is very hard to say how banks financed themselves. They may have had a financing line, but there are few of them that borrowed in CHF", says Alin Iacob, the president of the Association of Romanian Financial Services Users (AURSF).

Lawyer Gheorghe Piperea told us that there are banks that have already announced that in order to support their lending in Swiss Francs, have borrowed "billions" in Euros: "The only one that borrowed in CHF to grant these loans was Volksbank, which has borrowed 1.2 billion Swiss Francs and 2 billion Euros, having need for 4 billion CHF, which it placed in the market. In reality, refinancing in Euros and even in lei has occurred".

Last year, in an interview, Nicolae Cinteză, the head of the Oversight Division of the NBR, explained to us that, so far, banks have financed mortgages with foreign long-term financing sources (5-6 years), from their parent banks, which have been rolled over, to support the 20-year loans.

He told us: "The less strict terms that banks used to grant in the past for Swiss franc loans were caused by the lower costs paid by banks to raise the sources needed for financing these loans. Now there is a wish for these loans to be converted to lei. Where do we get the source of lei to finance the loans that were granted? There are no long-term sources of lei in Romania. We have a liquidity problem that is a threat to the stability of the banking system".

• NBR governor: "Fixing the exchange rate leu/franc exchange rate at the level we used to have prior to January 14th would drive the country into a recession"

Fixing the leu/franc exchange rate, through the intervention of the NBR, to the level it used to have prior to January 14th (when the Swiss Central Bank has lifted the ceiling it had set in 2011) could drive the country into a recession, says Governor Mugur Isărescu, who says that first and foremost, it would be the leu/Euro exchange rate that would be affected, which would reach 3.7 lei/Euro.

He said: "That would have been an unrealistic scenario. It would basically amount to taxing exporters with 20%, choking off exports, which are the engine for economic growth, and increasing imports. The impact on the economy could be dramatic. We could drive the country into a recession".

At the same time, the conversion of the loans from Swiss francs to lei at the historic exchange rate, would mean losses of 5.7 billion lei (0.8% of the GDP), he says. Converting these loans to lei at the historic exchange rate plus 10% would cause losses of 5.1 billion lei (0.7% of the GDP), at the historic exchange rate plus 20 billion lei the loss would be 4.5 billion lei (0.6% of the GDP), at the historic exchange plus 30% the losses that were calculated amount to 3.9 billion lei (0.5% of the GDP), and at an average exchange rate the losses would be 3.2 billion lei (0.4% of the GDP).

He also states that, in the case of the conversion to lei of CHF loans and of those in Euros, the losses would be as follows: at the historic exchange rate - 9.8 billion lei (1.4% of the GDP), at the historic exchange rate plus 10% - 7.3 billion lei (1% of the GDP), at the historic exchange rate plus 20% - 5.5 billion lei (0.8%), at the historic exchange rate plus 30% - 4.2 billion lei (0.6%) and at an average exchange rate - 4.5 billion lei (0.6% of the GDP)

Mugur Isărescu says that if that happens, "we will lose everything that we've gained: "We won't be able to have low inflation anymore, we won't be able to borrow cheaply".

Alin Iacob wonders how the governor calculated these losses and stresses: "Losses are far greater when banks sell non-performing loans with a 98% discount than in the case of a conversion at the historic exchange rate plus 20%, like we have requested".

The same question is asked by lawyer Gheorghe Piperea, who stresses that the amounts discussed by Mugur Isărescu would not represent a loss, but rather a decrease of the banks' profit.

"Had the NBR eliminated the abusive clauses in 2010, after the Ordinance concerning loan agreements was published, the rate of non-performing loans wouldn't have been so high. The moment a contractual clause is declared abusive, the amounts paid by the consumer when it comes to the clause in question are undue and, respectively, losses out of the customer's pocket".

The governor also said that the measures to help those that have loans denominated in Swiss Francs must not affect depositors, which are far more numerous than debtors and which must have confidence in the banking system: "If debtors are constantly saying that they are at the mercy of the banks, they have to understand that banks are at the mercy of the depositors, and depositors are far more numerous. That is where there we can have a banking panic, a banking crisis appears on the deposit side. They have to feel protected, to trust the banking system".

Mugur Isărescu said, on Friday, that he is aware that lack of trust in banks exists, and he went on to say: "We are part of this process, but we can not conduct the mediation that was requested of us, because the law won't allow us. We do not have the protection of financial services consumers among our legally established functions. But understanding the issues, empathizing with those that are in such situations, pushing the idea of sharing the burden, asking banks to get involved, including through explaining things, that, we are doing".

• Mugur Isărescu: "We are not defending banks, we are defending the banking system"

Mugur Isărescu claims that, on the issue of loans denominated in Swiss francs, it is not possible to pass a general solution, bur rather, several different solutions.

There is a multitude of specific individual solutions, he says, mentioning that the NBR is not defending the banks, instead it is defending the banking system, meaning depositors: "We are defending financial intermediation. What does financial intermediation do? It takes the money from savings and directs it towards financing. Discouraging financial intermediation means we would no longer have economic growth, and moreover, have unemployment. (...) The banking system is losing money. If a bank's shareholder sees one or two more losing years, they are going to ask themselves: «Why should I lose money over there?» And they are going to close that bank!"

Mugur Isărescu says that the National Bank of Romania supports the sharing of the burden, "but in a calculated manner".

"Any solution for CHF debtors must be well targeted and be based on a reasonable sharing of the adjustment costs", he said, and he added that banks will respond to the requests, ", because it is in their interest".

Solutions proposed by governor Isărescu are the personalized ones, negotiated between the parties, which would keep the monthly installments in lei pertaining to the loans in CHF at a level close to that of December 2014, the conversion of loans denominated in CHF in lei at the exchange rate and/or the granting of a discount on the amount of the debt service, the temporary cut of the interest rate on the loans denominated in CHF.

The NBR official says that the situations of those that have borrowed in CHF are different and should be treated as such.

"One quarter of the 75,412 debtors denominated in Swiss francs hold 1% of the loan inventory, with borrowed amounts of less than 4,000 CHF, and another 1% account for 67.5% of the total loan volume, with amounts in excess of 47,000 CHF. Another 25% are have loans ranging between 18,000 and 47,000 CHF, with a total weight of 24.5% of the loan inventory, and the remaining loans have values ranging from 4,000 to 18,000 CHF, that account for 7.1% of the total. (...) You can't treat debtors that have revenues of less than 700 lei, that have an indebtedness ratio of 184%, the same as debtors that have revenues of more than 7,000 lei, that have an indebtedness ratio of 26%".

The NBR warned commercial banks to treat the issue of individual CHF borrowers "with finesse", said Mugur Isărescu: "Banks have told us that they are institutions that have social responsibility - not welfare - and that they are ready to share the risk. We have warned banks to treat the issue of individuals with finesse".

The solutions proposed for resolving the issues on the CHF loan market can be extrapolated to loans denominated in other currencies, said Mugur Isărescu.

"According to our logic, the conversion at the historic exchange rate should be done at the historic interest rate as well. And I think many wouldn't like that. This type of talk is driving us away from the Eurozone. Entering the Eurozone unprepared from a cultural point of view is very dangerous and we do not endorse that. We are not entering the Eurozone just to eliminate the currency risk".

• Voivozeanu: "We want a general solution for a general problem"

CHF borrowers do not agree to individual solutions, said Cătălin Voivozeanu, the leader of the group of CHF borrowers, who told us: "It is a problem that can not be treated in a dissipated manner. We want a general solution for a general problem".

Alin Iacob considers that the NBR has taken the first step towards the correct solution: "It is a start, because so far I don't remember having the NBR talk about sharing the burden. The current discourse of the NBR is different from the old one. I hope that this attitude will continue, because the NBR has the levers necessary to make banks find the real solutions that benefit consumers. The NBR can do more - it needs to talk to those that represent consumers as well, go into the field and see what is really happening in banks".

The president of the AURSF considers that, if the law which stipulates the elimination of abusive clauses had been passed in 2009, we wouldn't have a banking system right now. He said that the AUSRF is against the involvement of the state in the issue of CHF loans.