Greece is moving ahead with a legislative intervention aimed at resolving long-standing problems linked to loans denominated in Swiss francs. According to officials at the Ministry of National Economy and Finance, the initiative addresses a persistent social and economic issue that courts and piecemeal bank-led solutions have failed to resolve on their own.
The proposed framework seeks to offer structured and predictable options for borrowers affected by sharp currency movements, while safeguarding financial stability and avoiding any burden on public finances.
How the problem with the Swiss franc loans emerged
Banks in Greece issued most Swiss franc loans between 2005 and 2009, during a period of low global interest rates and relative currency stability. At the time, no credible forecasts anticipated a sharp appreciation of the Swiss franc, while interest rates on the currency remained consistently lower than those on euro-denominated loans.
However, the global financial crisis fundamentally altered these conditions. The Swiss franc strengthened sharply against the euro, prompting the Swiss National Bank to introduce a temporary exchange-rate cap. When authorities abruptly lifted that cap, the exchange rate deteriorated further and has remained unfavorable ever since.
As a result, many borrowers now owe more in euro terms than they originally borrowed, despite years of regular repayments. Crucially, this outcome stemmed from a currency risk that borrowers could not reasonably foresee at the time of loan origination.
No mandatory measures for Greece’s swiss franc loans
The government emphasizes that the proposed legislation does not impose a single, compulsory solution. Borrowers who expect future exchange-rate movements to turn favorable may retain their loans in Swiss francs and continue benefiting from lower interest rates, while consciously accepting the associated currency risk.
At the same time, the framework guarantees two binding alternatives for those seeking certainty, which banks will be required to accept.
Option One: Mandatory settlement through the out of court mechanism
Non-performing borrowers may enter a tailored version of Greece’s out-of-court debt settlement mechanism. In this case, the restructuring solution generated by the automated system becomes binding on creditors, marking a departure from the flexibility banks retain in comparable euro-denominated cases.
The process operates fully online and requires only a borrower application. Upon approval, outstanding debt converts into euros at the prevailing European Central Bank reference rate. Existing collateral and guarantees remain intact, while borrowers avoid physical presence requirements or mortgage re-registration procedures.
Option Two: Direct conversion with preferential terms
Borrowers who remain current on their obligations, or who continue to service an existing restructuring, may opt for direct conversion outside the out-of-court mechanism. This route allows loans to convert into euros at an improved exchange rate, delivering an immediate reduction in outstanding principal.
Relief follows a tiered structure, ranging from 15 percent to as much as 50 percent, based on income and asset criteria. Converted loans carry a fixed interest rate between 2.3 percent and 2.9 percent for the remaining loan term, well below rates on new mortgage lending. In addition, borrowers may extend repayment by up to five years, further reducing monthly installments.
Legal certainty and social balance
The government stresses that the initiative does not question the legality of existing loan contracts. Greek courts, the Court of Justice of the European Union, and the European Court of Human Rights have repeatedly upheld the validity of Swiss franc loan agreements.
Instead, the legislation acknowledges that while the matter may be legally settled, it remains socially unresolved. Accordingly, the framework avoids blanket measures, applies relief proportionally based on financial capacity, and provides borrowers with clarity on repayment obligations through loan maturity.
No fiscal cost for Greece’s new swiss franc loan framework
Banks will absorb the full cost of the intervention. Authorities have designed the framework to remain fiscally neutral and to preserve state guarantees linked to securitized loan portfolios under the Hercules asset protection scheme.
Officials estimate that around 40,000 Swiss franc loans remain outstanding in Greece, with a combined balance of approximately CHF 5.5 billion across banks and loan servicers. Even under broad participation, the measure is not expected to weaken bank capital positions or disrupt securitization business plans.
Learning From international experience
Greek officials point out that other European countries addressed similar challenges under different legal and institutional conditions, often following court rulings against banks or cases involving insufficient borrower disclosure. In contrast, Greek courts consistently ruled that borrowers received adequate information at the time of contract signing.
Against this backdrop, the proposed solution aims to strike a balance: offering targeted relief and legal certainty while preserving financial stability and avoiding retroactive intervention or taxpayer exposure.