January 26, 2015 / 2:00 PM / 5 years ago

UPDATE 1-Serbian central bank says discussed CHF-denominated loan terms

(Adds details, quotes)

BELGRADE, Jan 26 (Reuters) - Serbia’s central bank said on Monday it was discussing with commercial banks measures to address a surge in the value of the Swiss franc but it had “no intention” of imposing a blanket limit on franc-denominated loan rates.

Monthly instalments of some 22,000 borrowers who took loans denominated in Swiss franc shot up 10 days ago when the Swiss National Bank decided to abandon its cap on the value of its currency.

“There was a concrete discussion about several alternative models, from rescheduling of loans, to their conversions or a possibility of adjusting interest rates on these loans under market terms,” central bank governor Jorgovanka Tabakovic told a news conference.

However, Tabakovic said the central bank does not plan to fix the exchange rate of the Serbian dinar against the franc as neighbouring Croatia has.

“According to initial calculations the cost of that would be too high,” she said.

Tabakovic said the central bank would not “reach for any coercive solution” to resolve the issue.

The central bank met with bank heads on Monday, with Serbia’s stock of loans denominated in Swiss francs worth around 1.1 billion euros. Tabakovic said they would meet again next Monday but would not take any hasty decisions.

“The banking industry needs to understand how serious the situation is because a rise of non-performing loans would not be good for anyone - it would not be good for the government nor it would be good for banks,” Tabakovic said.

Non-performing loans account for 23 percent of total Serbian lending, a worse position than its regional peers. (Reporting by Ivana Sekularac; Writing by Aleksandar Vasovic; Editing by Toby Chopra)

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