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Bucharest - Romania is looking at ways to help tens of thousands of homeowners who took out mortgages in Swiss francs and are facing crippling exchange rate losses after the franc surged last week, though its financial stability was not at risk, officials said.
Homebuyers across central and eastern Europe took out Swiss franc-denominated mortgage loans at attractively low interest rates in the 2000s, despite warnings from economists.
In Romania, the practice was not as widespread as elsewhere in the region, but the country has around 75 000 Swiss franc borrowers on the books, said Adrian Vasilescu, who advises Central Bank Governor Mugur Isarescu.
In Poland for example, more than half a million homeowners hold Swiss franc mortgages. The government there has ordered an investigation into these loan offerings while the central bank called for "extraordinary measures".
In Croatia, the government has proposed to protect affected homeowners by fixing the exchange rate for one year.
Vasilescu said the Swiss franc loan stock in Romania at the end of November was 10.1 billion lei ($2.6bn), a fraction of Poland's $36bn.
The Swiss franc is up 16% against the leu since last week, when the Swiss central bank removed its cap on the franc, shocking financial markets.
"I want to point out that Romania's financial stability is not affected," Deputy Central Bank Governor Liviu Voinea said at a conference in Vienna.
But like Poland and Croatia, Romania's Swiss franc borrowers now face massive hikes in their mortgage payments, and some have taken to local television to demand help from the government.
The opposition has already called on Prime Minister Victor Ponta to offer those affected an emergency bailout.
A government official told Reuters that a "wide range informal talks between the government, commercial banks and the central bank are underway," but ruled out measures to convert the mortgages into local currency, such as those the Hungarian government took last year.
"Conversion into local currency is out of the question," the official said. "A mix comprising a new personal bankruptcy law and a current loan rescheduling scheme for the needy could work."
Romania does not have personal bankruptcy legislation and analysts say such a bill is needed to protect borrowers struggling to repay their debt.
Vasilescu told Reuters: "...Solutions must be found in the banking market, by political parties and authorities."
Volksbank Romania decided earlier this week to freeze the leu/franc rate at 3.8 for three months for its Swiss franc loan clients, while OTP Bank Romania will apply a temporary cut of up to 1.5 percentage points in its franc interest rate margin.
Claudiu Manda, vice-president of parliament's budget committee, told Reuters: "A middle-ground solution is envisaged ... We can't come up with something that will scare banks, nor bury our head in the sand like ostriches and pretend we don't care."
