The European Central Bank (ECB) wants to purchase government bonds on a large scale. One consequence of this could be another collapse in the euro exchange rate. This might lead to problems for financial investments with foreign currency loans.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: Investors and borrowers of loans denominated in Swiss francs have already felt the negative impact of the Swiss franc being decoupled from the euro at the beginning of the year. This resulted in the euro depreciating significantly against the Swiss franc, which led loan debt denominated in Swiss francs to dramatically increase. The Süddeutsche Zeitung reports that the resulting loss for private borrowers could amount to up to one billion euros. In the case of capital investments, e.g. closed funds, loans denominated in Swiss francs might also jeopardise the economic viability of investment companies.
The European Central Bank (ECB) has now begun purchasing government bonds with the aim of preventing deflation and stimulating the European economy. The euro might, however, continue to fall in value because of this – not only against the Swiss franc but also the US dollar and other currencies. Foreign currency loans may thus become an even greater burden as debts increase due to the collapse in the euro exchange rate.
It is nonetheless possible for borrowers and investors who have been affected by this to defend themselves, as they ought to have been comprehensively informed about the risk pertaining to foreign currency loans that can lead to the loans becoming more expensive. If the bank granting the loan concealed this risk then damages claims can be asserted, with the result that the bank must provide compensation for the loss incurred due to foreign exchange losses. Similarly, if stakes in closed funds with foreign currency loans were brokered and the risk pertaining to foreign exchange losses not explained, it is possible to assert damages claims on account of flawed investment advice.
In the case of consumer loans, e.g. for real estate financing, it may also be possible to play the so-called withdrawal card (Widerrufs-Joker). This becomes a possibility if the borrower has not been properly advised concerning the possibilities of withdrawal. In that case, the loan would be completely rescinded. The foreign exchange losses would be borne by the bank and the consumer could benefit from the current low rates of interest in the course of debt restructuring.
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