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Serb Central Bank Asks Banks to Cut Swiss-Franc Mortgage Value

Serbia’s central bank asked banks to lower the value of the Swiss franc in calculating mortgage repayments over the next three years, easing a burden on borrowers as non-payments of franc-linked debts rise.

The Narodna Banka Srbije issued a set of recommendations asking banks to apply the exchange rate between the euro and the franc from 2007 and 2008, calculating a maximum 8 percent depreciation of the euro against the franc, the regulator said on its website. Banks will keep the difference between market and accounting rates in their books as deferred payment, to which no interest will be applied.

The aim is to “create minimum conditions to overcome social and life difficulties to which the users of housing loans indexed in Swiss franc are or may be exposed” and in line with “an effort to prevent any further increase” in problematic loans, the bank said.

The central bank said it acted after its data showed “the share of euro-indexed loans as of March 31, 2013, at about 3.5 percent and 11 percent for” the franc-linked ones. Banks in Serbia stopped granting loans linked to the Swiss franc in October 2008.

Swiss franc loans totaled 135 billion dinars ($1.55 billion), or 7 percent of their entire loan portfolio, according to the latest available quarterly report on the banking industry for the third quarter of 2012. Loans to households alone stood at 88.3 billion dinars at the end of November, the central bank said on Jan. 10.

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