Poland Seeks to Break Franc-Loan Deadlock With Incentives
(Bloomberg) -- Poland’s financial regulator wants to offer incentives to banks for starting settlements with borrowers in the latest attempt to resolve the country’s $32 billion foreign-currency mortgage debacle.
The plan would allow banks to tie up less capital against Swiss franc loans once they decide to initiate deals with mortgage holders and set aside money for agreements, according to a proposal by the industry regulator floated in newspaper Dziennik Gazeta Prawna on Tuesday. The WIGBank Index declined 0.5% by 4:24 p.m. in Warsaw, compared with the benchmark WIG20 gauge’s 0.7% slide.
The proposal comes as industry talks about out-of-court deals have stalled, leading PKO Bank Polski SA, the country’s largest lender, to go it alone with a plan to sacrifice as much as two years of profits to close the chapter on its legacy lending. The more provisions lenders set aside for settlements, the lower the risk weights which will be applied, according to the offer.
“Transitional rules for calculating capital requirements to the settlement process seemed necessary from the beginning,” said Maciej Marcinowski, an analyst at Trigon brokerage in Warsaw. “Banks took this for granted” as risk weightings after settlements will be equal to those on zloty loans anyway, he said.
Multiple lawsuits from clients have depressed bank earnings and hammered stocks. The Polish unit of Banco Santander SA on Tuesday warned that mounting reserves for legal risk of Swiss franc loans will cut its first quarter pre-tax profit by 195 million zloty ($49 million).
Banks currently have to keep 150% of capital against foreign-currency loans compared to just 35% in the case of zloty mortgages.
“Our suggestion is that such a sliding scale will apply for a period of up to one-and-half years,” Michal Kruszka, a director at the financial watchdog KNF, told the newspaper.
The regulator has for months sought to coax banks into converting franc mortgages into zloty at the exchange rate they were initially granted and break the spiral of lawsuits that are currently awaiting guidance from the Supreme Court, whose opinion is expected to be published on April 13.
Separately, shareholders of small, state-controlled BOS Bank SA delayed their decision to allow for settlements to go ahead until next month. PKO owners are set to vote on April 23.
©2021 Bloomberg L.P.