The outstanding volume of foreign currency loans (FX lending) to private households fell by € 450 million or -3.4% adjusted for exchange rate effects in the second quarter of 2020. It has therefore fallen by € 2 bn or -14.1% in the last year. As of 30 June 2020 there were still loans denominated in foreign currencies of € 12.47 bn outstanding. Since the imposing of the ban on granting of new foreign currency loans in Autumn 2008, the outstanding volume has fallen by € 35.91 billion or -76.5%. The share of foreign currency loans at the end of the 2nd quarter 2020 as a proportion of all outstanding household loans fell to a mere 7.7% during Q2 2019, a decrease of 1.21 percentage points year-on-year. At the height of the foreign currency loan boom this share stood at 31.8%. These were the findings from the FMA’s Survey for the second quarter of 2020.
The long-term trend continues
“Foreign currency loans are a highly speculative financial product, exposed to a multitude of cumulatively occurring risks, especially in the case of bullet loans with a repayment vehicle. Times of economic uncertainty, as we are currently experiencing at the moment, as a rule are accompanied by high market volatility and strong fluctuations in exchange rates,” the FMA’s Executive Directors, Helmut Ettl and Eduard Müller remarked: “We will therefore continue to advocate a consistent and sustainable reduction of the volume of foreign currency loans, in order to further restrict the associated risks for Austrian households.”
96.2% of the outstanding foreign currency loans during the 2nd quarter were denominated in Swiss francs (the remainder is almost entirely denominated in Japanese yen), with the exchange rate during this period fluctuating between CHF 1.0511 and 1.0866 to the Euro. Since the height of the boom in foreign currency loans in 2008, the Swiss franc has appreciated by 55.4%.