trending Market Intelligence /marketintelligence/en/news-insights/trending/qd126ZI7S9CiWYjPQMlHuw2 content esgSubNav
In This List

Poland to help lenders cope with impact of ECJ's Swiss franc loan ruling

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Poland to help lenders cope with impact of ECJ's Swiss franc loan ruling

The Polish government and financial regulators are ready to cooperate with local lenders to help them deal with the problem of Swiss franc mortgage loans, Parkiet reported Oct. 4.

Serious consequences

The European Court of Justice Oct. 3 ruling will have serious consequences for the banking sector, Polish Finance Minister Jerzy Kwieciński said. The government will also consider systemic solutions should the verdict result in the surge of court cases against banks by forex mortgage holders.

The ECJ ruling said that unfair clauses relating to exchange rates in foreign currency-indexed mortgage loan contracts cannot be replaced by general provisions of Polish civil law, and EU law does not preclude the annulment of such contracts. However, it did not clearly indicate whether such mortgage loans can be converted into Polish zlotys and continue to be repaid by borrowers while retaining their Swiss franc Libor interest rate, which was the option that local lenders feared most. Local courts will have to assess this question on a case-by-case basis.

Costs for banking sector

The Polish Bank Association said that banks' potential costs related to the ECJ ruling could be lower than the initially estimated 60 billion Polish zlotys, while DM City Handlowy analyst Andrzej Powierża told Parkiet they could exceed 50 billion zlotys. Poland's Monetary Policy Council member Eugeniusz Gatnar estimated the potential costs at between 20 billion zlotys and 30 billion zlotys.

He also said the ECJ ruling would not have a significant negative impact on the stability of the banking sector, as it does not introduce an obligatory mechanism for the conversion of CHF mortgages into zlotys, news service Interia reported Oct. 7, citing news agency PAP.

Austrian bank Raiffeisen Bank International AG, which has operations in Poland, said it was uncertain how the ECJ verdict will be applied on a case-by-case basis.

Impact spread over time

Millennium BCP unit Bank Millennium SA, which has a significant exposure to CHF mortgage loans, said it expects that the impact of the ruling will only be visible in the long-term.

The expected increase in court cases launched against banks by the holders of CHF-indexed mortgages and potentially other loans denominated in foreign currency could force banks to increase provisions and capital buffers, which could curb lending growth, DBRS Morningstar said Oct. 10. It added, however, that the full impact of the ECJ ruling for local banks is difficult to assess at this point, and any negative consequences will be spread over time.

As of Oct. 9, US$1 was equivalent to 3.94 Polish zlotys.