Foreign currency loan conversions and currency mismatches

Andreas Fischer () and Pinar Yesin

Journal of International Money and Finance, 2022, vol. 122, issue C

Abstract: This paper examines the effect of currency conversion programs from Swiss franc-denominated loans to other currency loans on currency risk for banks in Central and Eastern Europe (CEE). Swiss franc mortgage loans proliferated in CEE countries prior to the financial crisis and contributed to the volume of non-performing loans as the Swiss franc strongly appreciated during the post-crisis period. Empirical findings suggest that Swiss franc loan conversion programs reduced currency mismatches in Swiss francs but increased currency mismatches in other foreign currencies in individual countries. This asymmetric effect of conversion programs arises from the loan restructuring from Swiss francs to a non-local currency and the existing high level of euro mismatches in the CEE banking system.

Keywords: Loan conversion programs; Emerging markets; Currency mismatch (search for similar items in EconPapers)
JEL-codes: F15 F21 F32 F36 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Foreign currency loan conversions and currency mismatches (2019)
Working Paper: Foreign currency loan conversions and currency mismatches (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:122:y:2022:i:c:s0261560621001509

DOI: 10.1016/j.jimonfin.2021.102499

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