In a series of classic cases of misseling of loans, banks in cyprus made loans to the public denominated in swiss francs. It can be argued that in doing so they convinced masses of people to borrow money whereas they woudn’t have if they borrowed in
their national currency. The reason was that borrowing in swiss francs bore a a reduced interest rate that would be easier to pay off.
Also according to these kind of loans the interest was going to be paid first and the capital after which of course made the loan repayment cheaper.
That was another factor that induced the public into agreeing to these loans making them more attractive.
However what they most famously had not been told was that if the euro took a dive against the franc the their loan would be more expensive to pay off as they would need more euros to pay off the loan which was denominated in swiss francs, making the loan
nonviable, unfolding a miserable state of events when the banks started suing the borrowers for the remaining balance in swiss francs and later foreclosing on their homes.
Simmilarly it is reported that in their desperation to lance these loans to the public, the banks disobeyed certain mandates issued by the Central Bank warning against the indiscriminate making of such loans and this could be a factor working in favor of the borrowers. Something which they failed to complied by. As borrowers struggle to
pull up a defense in misrepresentation at Court, the banks start selling off their houses and the all too bright and ever promising investment plan has turned into another speculation scandal, plaguing our little island.
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