January 29, 2018 / 2:59 PM / a year ago

Slovenian Bank Association says Swiss franc loans should not be annulled

LJUBLJANA, Jan 29 (Reuters) - The Slovenian Bank Association said Swiss bank loans should not be cancelled, after a local court nullified one such loan because its risks were not spelt out.

That decision, handed down earlier in January, puts as much as 461 million euros ($570.40 million) of loans held by Slovenian banks at risk and might have implications elsewhere in Europe.

Households and companies in Slovenia and elsewhere in Europe took out loans denominated in Swiss francs, mostly from 2004 and 2008, to benefit from low interest rates. But their payments soared when the franc rose, particularly after Switzerland scrapped its cap on the currency’s value in January 2015.

Cancelling those loans now would be “unjust” to people who took loans in euros and whose risks are not being eliminated, said the head of the bank association, Stanislava Zadravec Caprirolo.

Some 6,000 borrowers have outstanding real-estate loans in Swiss francs worth 430 million euros, and only 3 percent of those loans are not being repaid, Zadravec said. Outstanding real estate loans total roughly 6 billion euros, and about 3 percent of those are not being repaid as well.

The Slovenian unit of the Austrian bank Sparkasse, whose loan was nullified, told Reuters it disagreed with the ruling and would “use all legal means” to fight against it. It gave no further details.

The Bank Association pointed out the same court - the appellate High Court in Ljubljana - ruled differently in two cases, so “the latest ruling does not represent a precedent”.

It said a January 2017 ruling rejected all borrowers’ demands and confirmed that the loans in Swiss francs were legitimate. A September 2017 ruling returned the case to a lower court.

The association also rejected a draft law that was proposed by opposition members of parliament and would convert all Swiss franc loans into euro loans, using the exchange rate on the day the law was taken. The association said each loan case has to be considered separately. ($1 = 0.8082 euros) (Reporting By Marja Novak, editing by Larry King)

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