The conversion of loans denominated in Swiss francs - speaking of rope in the house of the man who has been hanged

The ambiguity of the legislative initiative of PSD deputy PSD Ana Birchall, of having the loans be converted from foreign currency to lei, of the loans granted by banks, allows her, to agree or to argue with anybody who raises objections, so much so, that she sometimes ends up contradicting herself, even though this issue is the equivalent of mentioning rope in the house of the man that hanged himself, because the Romanian banking system has just suffered a severe correction, this summer, when the National Bank of Romania has forced the banks to take the non-performing loans of their balance sheets, to avoid having them pay true dividends out of false profits.

The ambiguity of Anna Birchall manifests itself in an unclear context, as her legislative initiative is running in parallel with two others in the Parliament (which are experiencing longer delays in the legislative process) - one of them initiated by the UDMR, which would allow loans denominated in Swiss Francs to be refinanced in lei, at the exchange rate in effect at the time the loan agreement was concluded (or could be repaid in advance) and another that concerns postponing by three years the foreclosure of individuals that have outstanding loans denominated in Swiss Francs; however, on the same issue, there exists a European Directive which stipulates the option of converting forex loans to the national currency, at the exchange rate in effect on the day of the conversion.

At the same time, a court of Galaţi issued a ruling in the beginning of September by which Volksbank was require to convert in lei, a loan it granted in Swiss Francs, at the exchange rate of 2007 - when the loan was granted - (plus 10%), when the exchange rate (back then the exchange rate was half what it was now); and lawyer Gheorghe Piperea tells us that Raiffeisen Bank has accepted converting Swiss loans from CHF to lei, at the exchange rate valid at the time they were taken out, in 250 cases which are on trial.

The issue is of great importance to bankers as well as borrowers (and the latter are quite many, an estimated 50,000, individuals and companies alike), but because both parties involved in the loan agreements are gasping for air amid the crisis, which isn't auspicious to banks or companies at all, the procedure of the loan conversion has become a cause for concern for the NBR as well, even though the PSD government, focused on its nearing campaign for the presidential elections, only seems to have noticed the electoral side of the issue, but not its potential to be the bomb set to blow up the pillars that support our economy (as weak as it is).

Besides, the Government has validated the project of Anna Birchall, in its ambiguous form, which stipulates that forex loans can be converted to another currency, upon request, "without additional costs", at the exchange rate valid on the date of the conversion, which has naturally caused the reaction of the banks, which have asked her to clarify the expression "without additional costs", because it could be taken to mean that, in the case of loans converted in lei, the banks would be required to charge the interest based on the interest rate of the foreign currency (which means that in some cases, the difference between the amounts to be repaid in lei versus those to be repaid in the foreign currency would drop by half), which would put our banking system at risk of collapse, raising the level of non-performing loans by law.

Even though banks and the deputy are threatening each other with the beginning of the infringement procedure, it is, however, possible that the draft of Ana Birchall is in fact an action of the bankers (it resembles a proposal made by the Professional Association of Banks), in two steps: first of all, giving some satisfaction to the borrowers, who have been burned, until now, by the doubling of the exchange rate of the Swiss Franc against the leu, and then, once the meaning of the expression "without additional costs" has been established, to scam them, by doubling their interest rate, Romanian style.

Ana Birchall is in trouble, and she concedes that the project could stand to be improved, (even though it is at an advanced stage in the legislative process), but she also mentions that it should take into account the existing case law, alluding to the ruling of the Court of Galaţi (in other words, the possibility of the loan being converted to lei, at the exchange rate valid on the date the loan was granted, not on the date of the conversion - from double to simple).

Surprisingly, the operation to convert the loans in lei, at the initial exchange rate of the lending agreement, may bankrupt four banks, according to the claim of Nicolae Cinteză, the head of oversight of the NBR, which would make it necessary to add to the Bank Deposit Guarantee Fund from the state budget - the equivalent of a bail-out of approximately 3 billion lei, an operation which hasn't yet crossed the mind of the Minister of Finance Ioana Petrescu, who is concerned with keeping the secret of how she is going to come up with 5 billion lei needed to offset the cut of the Social Security Contributions.

According to the rumors, there are banks that have a ratio of non-performing loans that exceeds 35% of their total loan portfolio, even though the average of 22% (across the whole banking system) fell in summer, following the actions of the NBR, to 17% (which is still about three times higher than that of Poland and the Czech Republic).

The risks posed by our banking system is increasingly higher, as parent-banks, of the ones that operate here are gradually taking out their money - 9 billion Euros over six years; from an exposure to Romania over 22 billion in 2008, to 13 billion currently, and they are making up for those - with deposits raised locally, making oversight harder.

It is perhaps the undisclosed reason that Mugur Isărescu has, to claim that it would be a good thing to delegate the role of supervisor claim to the European Banking Union; because in doing so, he is making the step from a bail-out, which has been brought up, on this occasion, to the bail-in, which has not yet been discussed, but for which, the European Directive will come into effect on January 1st, 2015.

In other words, not only do you give foreign banks money from the state budget, but you also seize the money of Romanian depositors for the benefit of foreign banks.

Why would we care who is going to be elected as president in Cotroceni?

Does that look like an issue of interest?!