Govt Eyeing Solution for Swiss Franc-pegged Mortgages, Loans

The Greek government is reportedly in the “final stretch” of negotiations with systemic banks in the country to resolve a pressing issue involving tens of thousands of mortgages and loans in the country pegged to the Swiss franc.

The practice of Greek banks issuing – amid a then vigorous ad campaign – mortgages pegged to the Swiss franc before an international credit crisis in 2009 initially appeared as attractive for borrowers in the country.

Most of these types of loans were granted between 2006 to 2009 and took advantage of a lower interest rate offered at the time, as compared with euro-pegged interest rates.

However, the euro’s subsequent depreciation against the Swiss franc, which was compounded by what was essentially a Greek economic depression – punctuated by three institutional bailouts (2010-2018) – caused tens of thousands of mortgagors and guarantors to despair. The latter saw mortgage and loan balances and monthly payments balloon when francs tallies were converted into euros – the currency in which borrowers were paid or conducted business. The economic downtown had also sliced away at jobs, salaries and turnover.

According to the latest reports, some 70,000 mortgages and business loans issued by Greek banks are pegged to the Swiss franc, with the number of actual borrowers and guarantors of loans exceeding 200,000.

Speaking on Wednesday on various relief measures for borrowers, National Economy Minister Kostis Hatzidakis referred to the “government’s volition to find a realistic and fair solution.” His deputy minister, Christos Dimas, was even more specific, referring to a solution for Swiss franc loans.

“”It will be a favorable arrangement, tabled in the next quarter, which will not disrupt the economy’s or the banking system’s operation. It’s a fair measure to provide relief for borrowers,” Dimas said on Wednesday, speaking to an Athens broadcaster.

According to reports, bank managements are determined to avoid a solution that will turn the specific batch of loans into NPLs.

One solution being floated is to use an out-of-court settlement process implemented over the past few months, while another would ostensibly offer borrowers the opportunity to transform their loans into euro based – using the current exchange rate – and with a fixed interest rate for three years.

Borrowers of such products in Swiss francs have filed numerous legal challenges with Greek courts, with all decisions ruling in favor of the credit institutions.

At the same time, similar settlements have been achieved in other countries.