Mortgages denominated in Swiss francs were a hit in central and south-eastern Europe in the first decade of the new century.

Low Swiss franc interest and fixed repayment installments in local currency seemed guaranteed with a stable exchange rate.

But then the franc appreciated after the financial crisis, and millions of borrowers had to pay back much more for their franc loans than planned.

This caused political uproar.

Legislators arranged for retrospective conversions to euros or local currency and compensation.

Arbitration courts were called upon, the European Court of Justice ruled several times.

Andreas Mihm

Business correspondent for Austria, Central and Eastern Europe and Turkey based in Vienna.

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After Croatia reached an agreement with the banks last year, the problem seemed to be solved everywhere, except for Poland.

Tens of thousands of court cases are pending there, and 430,000 foreign exchange loans worth the equivalent of 25 billion euros are hanging in the air because the constitutional court is reluctant to set a line.

As a precaution, banks like Commerzbank have to increase their reserves by millions every year.

Suddenly the subject reappears in an unexpected place: in Slovenia. Three months before the elections, MPs are debating a bill that would provide retrospective compensation to borrowers. It is about all Swiss franc loans concluded between mid-2004 and the end of 2010, regardless of whether they have been repaid or have been converted to euros in the meantime. According to the central bank, franc loans totaling 1.5 billion euros were granted in Slovenia at the time, of which almost 300 million euros are still on the books today. The main companies affected are Unicredit and Intesa Sanpaolo from Italy, the Russian Sberbank, Slovenia's largest bank Nova Ljubljanska Banka as well as the Viennese Addiko Bank and the Kärntner Sparkasse.

The problem in the country of 2 million people affects around 32,000 households, writes the finance committee of the parliament in Laibach (Ljubljana). The banks had not informed their customers well enough about the currency risk when they signed the contract, which is why the consequences had to be shared “fairly” between them and the borrowers. It also says how this is supposed to work: "The cost of solving this problem is estimated at around 300 million euros, which (. . .) will be borne by the banks because they achieve very good business results."

Specifically, the exchange rate risk is to be limited retrospectively from the date the contract was concluded, i.e. up to 17 years.

The banks would have to bear exchange rate changes of more than 10 percent – ​​and reimburse them if the loans were paid off.

According to the Slovenian Banking Association, 6,000 contracts with a volume of almost 300 million euros are still open.

Its chair, Stanka Zadravec Caprirolo, has many objections to the project.

Above all, she sees no reason for the special treatment of franc borrowers.

Default rates are no higher than for consumer loans.

Such legislative projects have failed twice so far, says Zadravec Caprirolo of the FAZ: "Now that the finance committee has approved it for the first time, this third draft could be approved next week and come into force on February 19." She is not alone in her criticism.

In parliament, representatives of the central bank, the government and other institutions have warned of violations of national and EU law.

The Kärntner Sparkasse is not the only one to warn of a tangle of bureaucracy and is examining "the extent to which the law is in line with Slovenian constitutional law as well as with investment protection provisions and EU regulations".

"Rules of monetary union must also be applied in Slovenia"

The Board of Management and the Supervisory Board of Addiko Bank wrote to ECB President Christine Lagarde asking them to "do everything in their power to avoid further damage to the stability of the Slovenian financial market, international trust in European law and the monetary union “.

If passed, one expects "negative effects on the currently applicable dividend policy" and the financial result.

"As a euro member, the rules of monetary union must also be applied in Slovenia," said Kurt Pribil, Chairman of the Addiko Supervisory Board.

He is confident that national and European courts would follow his arguments "as they have done in the past".

The Slovenian Chamber of Commerce warns that the draft law will damage trust in the law and the rule of law and will retroactively interfere with legal relations.

That harms the country's reputation and could deter investors.

Gabriele Semmelrock-Werzer argues similarly.

The spokeswoman for the board of the Kärntner Sparkasse refers to the 4.5 billion euros in Austria's investments and warns: "We are particularly concerned about the negative effects on trust in legal security in the Republic of Slovenia."