Polish Court Delay on Swiss Loan Ruling Gives Breather to Banks

Another delay in a key Polish ruling about foreign-currency mortgages may prompt more borrowers to settle out of court -- a less costly outcome for banks.

The Supreme Court on Friday put off until May 11 its meeting to answer several questions in a row between some of Poland’s biggest lenders, including units of Commerzbank AG and Banco Comercial de Portugues SA, and holders of about $30 billion of mostly Swiss franc loans. The sitting was scheduled for April 13.

Many borrowers have hoped the ruling would give them the leverage in disputes with the industry. The second delay of the top court’s decision in less than a month is making it increasingly uncertain.

At least for now and before the Supreme Court issues a clear guidance, more mortgage holders could opt to settle with banks along the lines outlined by Poland’s financial markets regulator KNF, which estimates such deals would cost lenders at least 34.5 billion zloty ($9 billion).

That’s potentially good news for the industry which could otherwise be facing between 70.5 billion to 234 billion zloty in losses if all clients decide to sue following the top court ruling.

“The delay of the meeting or lack of a clear ruling favors the settlement scenario,” Trigon Dom Maklerski SA’s analyst Maciej Marcinowski said in a research note on Friday.

The body of about 30 judges was asked by its President Malgorzata Manowska to answer six questions that would help lower courts resolve a growing pile of lawsuits from Swiss franc mortgages holders.

They claim being tricked into taking the loans after the subsequent appreciation of the Swiss currency against the zloty left some of them under water. With ruling pending, borrowers have been reluctant to talk to banks about settling their case outside the court despite KNF prodding.

More Precise

Late last year, the watchdog presented banks with a proposal to convert foreign-currency loans to zloty at the exchange rate from the day they were granted. So far, only PKO Bank Polski SA, Poland’s largest bank, said it’s going to be ready with the settlements once its shareholders approve the plan later this month.

One of the reasons behind postponing the next week’s meeting was the planned verdict of the European Court of Justice on April 29, which is set to rule in a similar case, potentially aiding Polish justices’ decision.

It’s also unclear whether the country’s Supreme Court is still on track to hold a separate meeting on the foreign currency loans on April 15, which could settle one of Manowska’s questions -- whether banks have the right to receive remuneration for the mortgages.

At the end of the day, banks could still be hit if the postponed ruling is eventually more precise prompting more lawsuits from clients, according to Trigon’s Marcinowski.

“All points to the fact that we still are going to hear the answers to most important questions on April 15 and April 29,” he said.

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