Swiss Franc-Linked Loans

The well-known policy of selling Swiss Franc-linked loans in the past decade, and in particular during the period 2006 - 2009, has lead bank borrowers, into a deeply troubled situation. The negative impact of their exposure to mortgages denominated on foreign currencies, and in particular the Swiss Franc, has created for the European state institutions and governments some major concerns as to how they could deal with strong consumer reactions throughout the European continent.

Courts in the EU and in Cyprus are now seeing the floodgates opened with regards to Swiss Franc-linked borrowers' actions who are simply now trying to find a way to hamper the soaring course of their debt-lending tranches. This connotes in parallel the fact that for the vast majority of these borrowers, essential information was concealed to their detriment at the time of entering the loan agreements.

The nature of such loans denominated in foreign currencies and in particular the Swiss Franc, can be analysed in the light of two main components. On the one hand is the exchange rate of the Swiss Franc, which in essence determines the actual subject matter of the loan itself. On the other hand, is the floating interest rate...