Swiss Franc Loans: Aim to Find a Solution by End of June

Intense negotiations are underway at the Ministry of Finance to find a solution for Swiss franc loans, despite significant challenges. The goal is to announce a resolution by the end of the month. The proposed solution takes into account the potential impact on state guarantees under the Hercules plan. It seeks a horizontal approach that would provide relief to borrowers of Swiss franc loans, though there is a risk this could further reduce recoveries, especially in some securitizations like Cairo II, where values have already significantly dropped. A key concern is ensuring that the solution through the out-of-court mechanism does not affect performing loans. This is because only loans in arrears should be directed to the out-of-court mechanism. If performing loans also become non-performing, it would mean additional high provisions for banks, which is controlled by the SSM. While Swiss franc loans are currently managed through an out-of-court mechanism, the problem lies with the platform’s algorithm, which results in excessive debt relief based on the loan amount (increased due to exchange rates), which cannot be justified by the property value (Loan to Value ratio). Initially, these loans involved approximately 70,000 borrowers and 200,000 families, totaling around €10 billion borrowed between 2006-2009. Today, these loans amount to €6 billion, with €2.3 billion held by banks, and €1 billion in arrears. Most of these loans have been securitized and purchased by funds, which have outsourced their management to servicers. Legal claims from these loans, including overdue interest, exceed €4.6 billion and involve around 20,000 borrowers. Greek borrowers of Swiss franc loans have repeatedly sought judicial recourse and government intervention since 2015 to address the sharp increase in the Swiss franc’s exchange rate. The Supreme Court ruled that banks did not act abusively and provided the required information to borrowers. Consequently, the request by the Association of Swiss Franc Loan Borrowers to cap loan repayment amounts at the original loan value was not implemented. Recently, the Association filed a lawsuit against the Greek State for moral damages on behalf of its 1,100 members, seeking €110 million in compensation (€100,000 per person). In a statement, the Association stated they had no other option but to sue the Greek State as the Supreme Court refused to forward questions to the European Court of Justice, thereby violating relevant EU laws.