April 16, 2019 / 9:32 AM / 2 months ago

Serbia's government drafts law to convert Swiss-franc loans

BELGRADE, April 15 (Reuters) - Serbs who hold loans denominated in Swiss francs will have their debt converted to euros, then reduced by 38 percent and their interest rates limited, Serbia's government said on Tuesday.

In 2015, some 22,000 Serbs holding franc-indexed loans, worth around 1.1 billion euros ($1.24 billion), saw their monthly payments soar after the Swiss National Bank scrapped its cap on the value of the franc, making the loans more expensive.

Serbia's central bank responded by telling banks to offer more favourable terms for loans in francs, including conversion, lower interest rates or monthly repayments. But only a few borrowers restructured their loans; most remained mired in debt, and many face eviction.

The draft law on conversion of loans in Swiss francs, a product of talks between government and borrowers, will now be sent to the parliament for adoption by the end of the week.

"Under the proposed law, around 16,800 citizens who borrowed in Swiss francs will have an opportunity to resolve their problem," the government said in statement.

The draft also stipulates that the "interest rate should not exceed 3.4 percent plus three-month or six-month Euribor , or a fixed rate should not be higher than 4 percent."

The Serbian coalition government loyal to President Aleksandar Vucic has a majority of 160 deputies in the 250-seat parliament, so adoption of the law virtually certain.

Earlier this month, Serbia's Supreme Court of Cassation ruled that banks should convert Swiss franc loans to euros and halt evictions of borrowers who could not make mortgage payments. (Reporting by Aleksandar Vasovic; editing by Larry King)

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