14 Oct 2019
Over the past four years, the biggest issue Polish banks have had to deal with has been the future of their foreign currency mortgages.
After joining the European Union in 2004, over half a million Polish citizens took out mortgages linked to the Swiss franc rather than the Polish zloty, lured by the possibility of lower interest rates. When the Swiss franc jumped during the financial crisis, and again in 2015, customer repayment costs surged along with it.
Poland’s central bank, financial sector supervision and finance ministry could help Polish banks resolve the issue of Swiss franc mortgages, according to Finance Minister Jerzy Kwiencinski.
On Thursday October 3rd, the top court of the European Union voted in favour of Polish consumers taking out mortgages in Swiss francs, giving them the opportunity to request courts to convert the loans into Polish zloty, or withdraw the contracts.
Amending the conditions of the loans however, which had become excessively expensive after the Swiss franc surged in value, meaning Polish banks would have to reimburse some of their customers.
“Support may concern some legislation that would allow banks to overcome this problem more smoothly,” said Kwiencinski speaking to reporters. The finance minister did not reveal any details or state whether this would involve new or existing regulation.
When immediately approached for comment, representatives of the central bank and the KNF financial watchdog were unavailable.
The finance minister added that the European Union’s court ruling will have significant repercussions on the country’s lenders. Banks have said that the costs could total to 60 billion zloty, or £12.34 billion.
Due to the rigid domestic capital requirements, banks in Poland are held in high regard due to being well capitalised. Analysts believe lenders can protect themselves against future losses by scaling back on dividends or lending.