3 Min Read
* Loans to be converted at rate they were taken out
* All political parties backed, against central bank advice
* Parliamentary election due on Dec. 11 (Adds central bank, leu, detail)
By Radu-Sorin Marinas
BUCHAREST, Oct 18 (Reuters) - Romania's lower house of parliament unanimously endorsed a bill on Tuesday to convert Swiss franc loans into local currency at historical rates, going against central bank recommendations and economists' pleas for prudence in an election year.
The bill, which cleared parliament in a 248-0 vote backed by all political groupings, applies to all Swiss franc loans irrespective their value, scraping a proposal last week to allow the conversion of loans below 250,000 Swiss francs.
Before the world financial crisis, thousands of central and east Europeans took out low interest rate loans in currencies such as the Swiss franc, only to find these loans hard to service after their own national currencies dived in value.
A drive by all political parties to offer legislative support to Swiss franc borrowers has intensified this year and as groupings position for a parliamentary election on Dec. 11.
"This is not a law against the banking system. It's a reparatory piece of legislation for borrowers," Liviu Dragnea, head of the country's biggest party, the leftist Social Democrats told deputies.
A central bank spokesman said the bank would not comment following the vote.
The bank had previously estimated that such conversions, under which the loans will be changed into local currency at a rate corresponding to when the loan was taken out, would have an impact of about 2.4 billion lei ($600 million) on local banks because of the exchange rate difference.
The leu was flat after the vote, trading at about 4.5085 versus the euro.
Out of a total number of about 70,000 Swiss franc-denominated loans, there have been so far about 57,000 conversion and restructuring requests submitted by borrowers of which about 34,000 have been resolved through direct negotiation between the parties.
In contrast to its ex-communist peers, Swiss franc credits in Romania accounted for about 5 percent of the total, with the low level due to the central bank's communication at the time that highlighted the dangers of currency exchange risk.
December's election will produce a new parliament that will propose a prime minister to replace incumbent Dacian Ciolos who came to power last November with a caretaker team of technocrats for a limited, one-year mandate.
Opinion polls predict the leftist Social Democrats likely to garner most votes, around 38-40 percent, followed by the centrist Liberals with about 30-32 percent, and a political structure in parliament virtually unchanged from present. (Editing by Alison Williams)