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02.03.2010

Bank Austria continues advisory focus in its branches:
Individual support in withdrawal from private foreign currency loans, still no forced conversion!

  • Risk in case of final-maturity housing loans in foreign currencies increased considerably most recently
  • Reasons: weakness of the euro, repayment vehicle problem and decline in interest advantages
  • In addition to personal advice, Bank Austria also provides four packages of loan conversion into euro
  • Forthcoming FMA minimum standards are met far beyond the required extent!

"Foreign currency loans had their advantages because interests in Switzerland were 1.5 to 2 per cent lower on average between 2000 and 2008, leading to an interest advantage of EUR1,500 to EUR2,000 a year with a euro loan worth EUR100,000", explains Rainer Hauser, Bank Austria board member responsible for the Retail Division. "The financial crisis, however, has made such assumptions invalid. Conditions for final-maturity foreign currency loans for private housing have become significantly worse most recently. The Swiss franc's interest advantage over the euro dwindled to 0.5 per cent. Many repayment vehicles no longer provide the predicted performance and fluctuations in the exchange rate have increased considerably as well." Since the fourth quarter of 2007, the Swiss franc has been fluctuating by up to 16 per cent, the Japanese yen by up to 35 per cent. "At the same time, we have to see that an increasing number of people are getting into financial difficulty as a result of the economic crisis", Mr Hauser says.
 
FMA seal of quality: Bank Austria has pioneering role in foreign currency discussion!
For these reasons, Bank Austria recommends customers with a foreign currency loan to limit the risk of such financial vehicles. Since the beginning of the foreign currency discussion in autumn 2008, Bank Austria has had a pioneering role. "We then readjusted our business policy regarding the granting of foreign currency loans and voluntarily took measures which clearly were beyond the FMA's minimum requirements", explains Wolfgang Schilk, head private financing of Bank Austria. "We are taking the leading role again and already meet the forthcoming FMA minimum standards far beyond the required extent." In the course of the month, the FMA will expand its minimum standards for granting foreign currency loans with repayment vehicles. Instead of relying on banks' self-regulation, the FMA minimum standards will be legally binding. Accordingly, foreign currency loans for private financing of housing must not be marketed as standardised mass product any longer. The FMA has made a favourable assessment of the measures taken by Bank Austria and referred to those measures as absolutely appropriate in the current situation.

Bank Austria makes it easier for private borrowers to convert their loans into euro!
Bank Austria is thus intensifying its advisory focus in its branches and is the first bank in Austria which has prepared four support packages for individual settlement of various requirements. The basic package aims at persons who intend to reduce their financing risk; the second phase of the support packages aims at unemployed people; the third at borrowers at risk who had to face a heavy blow and who will see settlement by a top committee in a separated arbitration process.

 "Bank Austria is thus making very far-reaching concessions to its customers when it comes to debt conversion into euro. We no longer charge any conversion fees and, depending on the individual case, even prolong the repayment period without additional cost", Mr Hauser explains. "We will neither increase margins if the credit has meanwhile become worse nor will we demand a liquidity surcharge due to increased refinancing cost. And in difficult situations, when the inability to pay is acute, we will renounce payment of interest for a full financial year if the customer converts fully into euro and the chance of loan repayment is realistic."
Bank Austria expects demands for the advisory services to be high and has also prepared for that in personnel terms. "We have an extensive network across Austria and in the course of this initiative, additional 80 financing experts will be available in the branches as of March."

Foreign currency loans attractive in Austria for a long period of time
Final-maturity foreign currency loans for private housing have been attractive to consumers in Austria for a long period of time. The share of those loans constantly had increased from  EUR19.6bn in 2000 to EUR38.3bn in 2008 before the economic crisis put a sudden end to that development. According to the Austrian central bank OeNB, around 250,000 borrowers with foreign currency loans exist at the moment, corresponding to a total market of around EUR35bn. In international comparison, Austria is right at the forefront: the share of foreign currency loans in total lending (including companies) is around 17 per cent in Austria while the common share in the rest of the world is below 5 per cent. Foreign currency loans are particularly strong in private households: almost one third of outstanding loans are foreign currency loans. Bank Austria itself still has 60,000 foreign currency borrowers at the moment.

For further inquiries: Bank Austria Press Office Austria
Martin Halama, Tel. +43 (0) 50505 - 52371
E-Mail: martin.halama@unicreditgroup.at

 

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