Romania Won’t Force Banks to Take Hit on Swiss-Franc Loan Switch

(Bloomberg) — Romania won’t force banks to absorb losses from converting Swiss-franc loans to the domestic currency like some of its neighbors did when they sought to ease the debt burden for borrowers, Finance Minister Darius Valcov said.

The government in Bucharest plans to amend legislation to let people ask banks for a two-year loan extension and request a tax credit from the state after the Swiss franc’s jump boosted their monthly payments, Valcov said. Parliament may also pass a personal insolvency law to help citizens avoid foreclosure on property financed by franc mortgages, he said.

“We’re not like Hungary or Croatia,” Valcov said in an interview in Brussels on Tuesday. “We have a certain law and maybe we’ll improve it, but that’s all.”

Central European nations are devising strategies to help borrowers cope with a surging Swiss franc after the limit on its gains was scrapped Jan. 15. Hungarian Prime Minister Viktor Orban forced banks to convert their franc mortgages into forint last year and Polish premier Ewa Kopacz said she expects banks to pick up the tab. Croatia capped the franc’s exchange rate at 6.39 kuna, triggering complaints from lenders who said they may seek damages for the move.

With Romania’s banking industry posting losses because of bad-loan provisions in the past five years, policy makers are debating ways to help the 75,000 franc borrowers withstand the shock from the stronger franc without pushing some lenders to the verge of insolvency.

Balance Sheets

Eleven out of 40 lenders in Romania that have franc loans on their balance sheets may lose a combined 4.3 billion lei ($1.1 billion) should all these loans be converted into lei at the exchange rate when the credit was taken, the Ziarul Financiar newspaper reported, citing a central bank document.

Eurobank Ergasias SA’s Bancpost unit has the biggest share of franc loans in Romania, at about 32 percent, followed by Volksbank Romania SA with 24 percent and Piraeus Bank Romania SA with 20 percent.

Some lenders, including Volksbank and Raiffeisen Bank Romania SA, have frozen the franc’s exchange rate for repayments at the Dec. 31 level or cut interest rates on franc loans.

Volksbank’s Romanian unit may also convert all its franc loans into lei at a 20 percent discount once its sale to Banca Transilvania SA is completed this year, according to Nicolae Cinteza, the head of the central bank’s supervision department.

To contact the reporters on this story: Andra Timu in Bucharest at [e-mail]; Radoslav Tomek in Bratislava, Slovakia at [e-mail] To contact the editors responsible for this story: Balazs Penz at [e-mail]; James M. Gomez at [e-mail] Peter Laca, Andrew Langley