Croatia makes banks pay soaring Swiss franc

“Everyone is responsible”

Croatia, Poland, Hungary, Austria, Slovenia … in the 2000s, borrowing rates in Swiss francs were much more interesting than in local currency. Many took the opportunity to finance their real estate purchase. Of the 4.2 million Croats, 100,000 have subscribed, of which more than half still pay bills. In Poland, mortgage loans in Swiss francs account for 40% of mortgage loans and 7.5% of GDP.

As early as 2004, during a trip to Austria, the SNB president stressed the ” significant risks ” incurred by ” borrowers, including many individuals, seeking lower interest rates “. For ten years, the institution has multiplied its warnings, to no avail. In 2008, the trap closed for the first time. During the financial crisis, the Swiss franc, considered a safe haven, flew away. Hungary and Austria have been hit hard. One million Hungarian borrowers have seen their mortgage boom explode.

Coincidence or providence, Hungary has anticipated, just in time, the January 2015 Swiss Big Bang in the currency market. In November 2014, at the instigation of conservative and populist Prime Minister Viktor Orban, the Hungarian Parliament passed a law providing for a fixed conversion rate protecting debtors in foreign currencies. Elsewhere, the trap has closed again.

” When something works, you have some people asking questions, but as long as it works … ” says Claudia Bernasconi, Emerging Markets Economist at Swiss Life AM. According to her, ” everyone is responsible: central banks, governments, private banks .” Because “it was a big risk also for the banking sector “: if households can no longer repay, banks are left with assets in default of payment on the arms. Moreover, in France, some unfortunate borrowers of the Swiss franc have filed a complaint against BNP Paribas, Crédit Mutuel or Credit Agricole for selling them a financial product without exposing the risks. French justice must decide by early 2016.

Electoral battle

Next on the list: Poland, where legislative elections are scheduled for the autumn. Politicians on all sides promise that they will convert the loans backed by the Swiss franc. But their point of view differs on the weight to be brought to the banks. The ruling party (PO, center right), weakened by a case of illegal eavesdropping, proposed in July that banks and individuals make half and a half. The new president Andrzej Duda, who belongs to the social-conservative opposition party (PiS), wants to pass a more radical law, according to the Polish daily Dziennik Gazeta Prawna. Borrowers may convert their loans at the exchange rate prevailing at the time of subscription. It would be ” much more difficult for banks, ” said Claudia Bernasconi. They would bear a cost estimated at more than 5 billion euros. Some also threaten to sue.