Monetary Appreciation and Foreign Currency Mortgages: Lessons from the 2015 Swiss Franc Surge

Since 2007 the Swiss franc had been getting stronger, but it was a decision by the Swiss National Bank to unpeg the Swiss franc from the Euro in 2015, which resulted in its significant appreciation and shocked FX markets. Many citizens in Central and Eastern Europe were directly affected because they had taken out mortgages denominated in Swiss francs or linked to Swiss francs. In these countries, foreign currencymortgages are common because the interest rates on foreign denominated loans are lower, foreign currencies are more stable than the local currency, some citizens earn their income abroad, etc. This article analyses the impact of the Swiss franc surge on mortgages denominated in or linked to Swiss francs fromthe perspective of contract law, consumer law and financial regulation. Then, it examines the strengths and weaknesses of the responses to the Swiss franc controversy of three jurisdictions – Bulgaria, Croatia and Serbia, which addressed the issue in distinct ways despite their relative legal cultural similarities. The purpose of the comparison is to consider what lessons may be learned from the Swiss franc surge and how they may inform the recent Directive 2014/17/EU on mortgage credit.