Borrowers in CHF Face 10 Percent Higher Installments

The fixed exchange rate of the Swiss franc against the kuna will cease on January 27 of next year. According to government decisions and amendments to the Consumer Credit Act, the fixed exchange rate is valid for one year.

The Act on Amendments to the Consumer Credit Act came into force on the first day of publication in the Official Gazette, namely January 27. Why is this important? Namely, clients of Raiffeisen Bank, as stated in the bank’s announcement, will receive new calculations for the conversion of their loans in francs.

– Given the different interpretations of the law, the complaints from clients directed to RBA, and the orientation towards long-term relationships with clients, the Management of RBA has decided to make new calculations for the conversion of loans with a currency clause in CHF to loans with a currency clause in EUR. A notice to clients about the new conversion calculation was sent to clients on December 11, 2015 – the announcement states. In the new conversion calculations, RBA will apply lower interest rates – interest rates applicable to those clients who direct their regular income to an account at RBA (primary clients), and will recognize the adjustments of interest rates that were made for loans to primary clients during the loan repayment period, i.e., from the date of disbursement of the loan until September 30, 2015.

– RBA will send the new conversion calculations, along with the annexes to the contracts, to clients by registered mail to the registered home addresses in the first half of January 2016. According to Article 19.e of the ZID ZPK, clients – consumers have 30 days to accept the new conversion calculation, and the deadline begins from the day of receipt of the registered mail. All costs of the new conversion calculation will be borne by RBA – it concludes in the announcement.

Thus, clients who receive new conversion calculations and annexes to the contracts, for example on January 10, and decide to use the legal deadline of 30 days to accept the new calculation, which is until February 8, and their loan maturity is after January 27, their installment could increase by 10 percent. Namely, the current market exchange rate of the franc against the kuna is 7.04 kuna. What it will be in January is impossible to predict. Therefore, we took the current situation into account. Thus, those clients who have an installment of 500 francs currently pay 3,195 kuna, and when we consider the market situation of the exchange rate, the installment is 3,520 kuna, thus 325 kuna higher.

Therefore, borrowers in francs will very likely have to hurry with the conversion in January so that they are not “caught” by the market exchange rate. Who knows, maybe in a little over a month, the exchange rate will be lower than it is now, given that the current exchange rate of the franc is extremely overvalued. Namely, the Swiss National Bank (SNB) on Thursday maintained its negative key interest rates and reiterated that, although the franc has weakened somewhat in recent months, it is still overvalued and that it will continue to be active in the foreign exchange market and alleviate pressures on their currency.