At least 75.000 Romanians currently holding mortgages referenced to the Swiss franc are facing unknown but potentially huge increases in their monthly payments. That is why BETTER FINANCE's Romanian member, AURSF - Asociata Utilizatorilor Romani de Servicii Financiare, asked last Thursday the Romanian Government and Parliament to promptly regulate the conversion of the CHF-based mortgaged into Romanian RON.
AURSF advocates for the consideration of the conversion rate as the historical exchange rate (the exchange rate available at the moment of the signing of the contract) plus maximum 20%, without any further changes in the interest rate. According to AURSF, Directive 2014/17/EU adopted last February (MCD) is mentioning that if the exchange rate varies with maximum 20%, the consumer should have the automatic right to convert the loan in national currency. Unfortunately, the Directive cannot be applied to the existing contracts, but the philosophy should still remain. And because the term for implementing the Directive is March 2016, AURSF demands for a local regulation to apply the philosophy of the Directive also to the existing contracts (with retroactive effects).
Furthermore, the Croat government has announced that as a response to the end of the CHF cap they shall draft a regulation that will fix the CHF/EUR rate at 1,20 for a year, since over 100.000 households in Croatia own Swiss franc-denominated mortgage loans.
In relation to this, we should refer to the last ruling of the European Court of Justice from last 30th of April declaring the nullity of a Hungarian mortgage denominated in Swiss francs, which creates jurisprudence valid throughout the whole European Union.
The broader issue that is becoming to be laid bare with last week's Swiss national Bank decision to float the CHF versus the Euro is the opacity and abuses of the huge and unregulated forex spot market. Forex retail brokers allow - and sometimes push - retail clients to leverage their forex bets up to 500 times.
Currently no EU level authorities are responsible for supervising this huge financial market (much bigger is size than for instance the equity market), which is opaque and uncompetitive - to say the least - at the retail side. Better finance has been flashing the red flag for years on a catastrophe to happen. EU authorities must take action asap to avoid repeating the Libor scandal (which was another unregulated financial market).
According to Financial Times, "the failure to impose a leverage cap in London or elsewhere in Europe is down to one glaring regulatory gap: spot forex trading does not come under the European markets rule book. The Financial Conduct Authority in the UK only takes action in this area if there is a blatant fraud or boiler room in operation. Other than that, forex operators are free to treat their customers however they see fit. This was an outrageous state of affairs even before this week’s Swiss debacle. As the mess from Alpari and others is cleaned up, policy makers in Europe and Asia need to realise that they have some serious catching up to do."