Polish Central Bank Questions Lenders’ Will to Resolve FX Loans

Poland’s central bank governor questioned the determination of commercial lenders to resolve their foreign-currency loans, saying there’s almost a zero percent chance of the industry working together to finalize out-of-court settlements.

The central bank withdrew its observer from negotiations to iron out the deal, proposed by the financial regulator, and doesn’t have any ownership over the process, Governor Adam Glapinski said on Friday. His comments come after PKO Bank Polski SA said a group of nine financial institutions were in “very advanced” talks to reach a common position on the settlements.

Polish Central Bank Questions Lenders’ Will to Resolve FX Loans

“I don’t think banks in such different situations would reach some sort of an agreement,” Glapipnski said. Only state-controlled PKO is interested in the deal, while most of its peers aren’t seriously preparing for such a scenario, he said.

Glapinski repeated that the central bank could provide assistance in converting the mainly Swiss franc loans to zloty, but only if the solution includes “most” of the mortgages and lenders meet other criteria. It won’t be able to do it for a single bank as this could breach the European Union’s public aid rules.

The comments are yet another signal that banks can’t expect any additional state support to bring the saga to an end. Poland’s finance minister this week ruled out any incentives for lenders.

PKO’s Deputy Chief Executive Officer Rafal Kozlowski said earlier on Friday that “the industry has amassed sufficiently large financial buffers that it can afford it, given also the strength of the Polish economy.”

The state-controlled lender has spearheaded efforts to work out a joint solution to around $31 billion in mostly Swiss franc loans. Some of its peers, especially those with foreign owners, have been more skeptical toward the plan.

The regulator warned this week that leaving the matter to courts could end up costing the industry as much as 234 billion zloty ($61 billion) if all clients decide to sue, compared with about 34.5 billion zloty for the out-of-court deals. The Supreme Court is due to give its guidance on the Swiss mortgage lawsuits on March 25, which some banks said has slowed work on ironing out details of the out-of-court deals.

Momentum to push through with the settlements has fizzled after Raiffeisen Bank International AG abandoned such talks last month, saying the proposal doesn’t go far enough to prevent future lawsuits. Banco Commercial Portugues SA, the owner of Poland’s Bank Millennium SA, sees the regulator’s proposal as only “a starting point” for further negotiations.

“The systemic solution has to come up with a price tag that is bearable for us,” Miguel Braganca, BCP’s chief financial officer, said in an earnings call on Feb. 26.

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