Converting credits at mandatory exchange rate could ruin banks (central bank official)

Legally imposing the conversion of credits from Swiss francs to lei or other currencies could result in bankruptcy for several banks; such a normative act should clearly specify who takes the losses generated by the conversion of a different exchange rate than the current one, says Nicolae Cinteza, the director of the Surveillance Department of the National Bank of Romania (BNR, the central bank).

Photo credit: (c) RADU TUTA / AGERPRES ARCHIVE

During debates on Wednesday at the Chamber of Deputies on credits in Swiss francs, Cinteza said: 'The problem exists and I fully agree it should be solved, but it's not possible through a normative act. The solution [for Swiss franc debtors hit by the recent surge of this currency] is only possible based on talks between the banks and the customers. (...) Any decision taken by a normative act results in losses, so any normative act should clearly specify the entity that takes the losses. There are several banks that could be ruined if the conversion is made at the historical exchange rate. It was mentioned here that the volume of credits in [Swiss] francs does not represent a systemic risk; but the bankruptcy of a bank does.'

He underscored there are 14 banks having credits in Swiss francs in their portfolios. Not all of them, however, raise issues for BNR's Surveillance Department.

Cinteza mentioned that losses resulting from the conversion of credits at exchange rates different from the market quotations could be covered from banks' capitals, by reducing the interest rates on clients' deposits or from higher costs for the credits of those who pay.

'The banks' perception is that the solution of regulating the conversion at a different exchange rate than the market's is unconstitutional,...