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(Bloomberg) -- Romanian lawmakers approved a bill allowing the conversion of Swiss-franc loans into local currency at below-market rates, a move that could cost banks almost $600 million and raises concerns about populism before elections in December.

Parliament voted Tuesday unanimously in favor of the law, which enables borrowers to switch loans into lei using the exchange rates under which they were issued, Speaker Florin Iordache said Tuesday in Bucharest. The legislation still requires the signature of President Klaus Iohannis before entering into force.

“This law was designed to benefit all Swiss-franc borrowers, to avoid any kind of discrimination,” Iordache said after lawmakers eliminated previously proposed conversion limits, such as a maximum loan value of 250,000 Swiss francs ($253,000).

The European Union’s second-poorest country is joining nearby Poland and Hungary in helping foreign-currency borrowers who were wrong-footed by the surge in the franc and must now make bigger monthly repayments. After months of wrangling, lawmakers softened an initial proposal so that it only applies to loans denominated in the Swiss currency. Local lenders oppose the bill, whose debate in parliament sent the leu to a three-month low. Losses could reach 2.4 billion lei ($586 million), according to the central bank.

Vote ‘Tool’

Only about 5 percent of Romanian household debt is denominated in Swiss francs, less than the total in other eastern European nations. Even so, the central bank has warned that six lenders risk difficulties with their solvency ratios if the bill takes force.

The passage of the legislation comes in the buildup to Romania’s Dec. 11 parliamentary ballot, which will end the rule of the current technocratic government. Lawmakers have yet to debate bills to expand tax cuts, raise state wages and boost pensions after two earlier rounds of fiscal easing.

“Swiss-franc lending was never a significant issue in Romania,” said Nicolaie Alexandru-Chidesciuc, a London-based economist at JPMorgan Chase & Co. “Yet, approaching parliamentary elections have transformed it into a tool to get votes, and worryingly for the banks the proposal has support from across the Romanian political spectrum.”

After a clash between the two major political parties last week over planned eligibility criteria delayed a final vote, lawmakers scrapped the loan ceiling and a proposal that conversion would only be open to borrowers whose debt-to-income ratios exceed 50 percent.

To contact the reporters on this story: Irina Vilcu in Bucharest at isavu@bloomberg.net, Andra Timu in Bucharest at atimu@bloomberg.net. To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net, Balazs Penz at bpenz@bloomberg.net, Andrew Langley, Michael Winfrey

©2016 Bloomberg L.P.

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