The bet on Swiss franc-denominated loans is proving painful both for customers and for bankers, with the shock depreciation of the RON against the Swiss currency, by 50%, prompting a major increase in overdue payments. Retail clients had accumulated overdue payments for loans in currencies other than RON, euros or dollars – a category dominated by the franc – equivalent to 193 million euros.
Swiss banks are seen as a place of refuge in turbulent times for the international market, with the franc strengthening significantly against the euro since the start of the financial crisis. One euro is currently worth 1.3 francs, compared with an average of 1.5 francs per euro since the launch of the European currency. In parallel, the RON has weakened against the euro, so the RON/franc exchange rate has cumulated the two moves, climbing by 50% at present against the end of 2008, to 3.3-3.4 RON per franc. The exchange rate risk has therefore proven extremely painful, and could overcome the benefits of the low interest rates charged on franc-denominated loans. The value of overdue payments on franc-denominated loans rose six-fold over the course of last year.