Poland Rules Out Sweeteners to Push Banks Toward Franc-Loan Fix

Poland’s finance minister told banks they can forget any financial help for taking part in a government-backed plan to help homeowners be freed of crippling foreign-currency mortgages.

The dispute, a flashpoint between banks and governments across central Europe for much of the last decade, is a result of borrowers betting loan payments would shrink as their national currencies appreciated in the 2000s. But, after the 2008 economic crisis, the zloty, forint and similar currencies plunged, causing mortgages borrowed in euros and Swiss francs to balloon and leaving lenders and authorities to wrangle over the bill.

In Poland’s case, Finance Minister Tadeusz Koscinski said the financial regulator’s plan for out-of-court settlements between banks and the holders of about $31 billion of mostly Swiss franc loans was “one of the best solutions” to end the saga. Lenders that remain skeptical can’t expect more after the state dug deep to prop up companies affected by pandemic restrictions last year.

Poland Rules Out Sweeteners to Push Banks Toward Franc-Loan Fix

“We’ve done a lot for banks in this environment -- last year we actually ploughed in 312 billion zloty ($83 billion) into the economy and we rescued their customers,” Koscinski said in an interview. “And I don’t think we need to actually start rescuing them any more at this stage. It’s time for banks to rescue themselves.”

His comments signal authorities are losing patience after a push to reach out-of-court settlements largely fizzled out, while at the same time they’re cautious about changing the “voluntary” nature of its proposal.

Court Costs

Other countries have put the onus on banks to solve the issue, arguing that lenders also bear responsibility for making the loans.

In 2014, Hungary ordered banks to convert the equivalent of $14 billion in foreign-currency loans to the forint and to offer some refunds to borrowers. A year later, Croatia forced banks to absorb 6 billion kuna ($951 million) in losses.

The Polish proposal gained traction this year when the central bank pledged to help convert the loans into zloty, under specific conditions and if enough lenders take part. Commercial banks are split over whether to offer the “voluntary” settlements or to try their luck in the nation’s notoriously slow courts.

Government-controlled PKO Bank Polski SA, the country’s biggest lender, is doing a pilot program for the settlements to end the legacy of its Swiss-franc mortgage lending this year. Its foreign-controlled peers are more reluctant, while Raiffeisen Bank International AG abandoned work on settlements last month.

The out-of-court deals would cost the industry 34.5 billion zloty ($9.1 billion), equivalent to four times last year’s combined profit. On the other hand, court rulings could wipe out at least twice as much, the financial regulator said.

The legal struggles have pummeled bank stocks with the WIGBank Index losing 9% in the last 12 months compared to an 8% gain for WIG20 blue-chip gauge.

The “ideal” situation would combine self-regulation by the banks and out-of-court settlements to ensure financial stability is maintained, Koscinski said. There’s also a question of “social fairness” to prevent franc borrowers from gaining more beneficial terms than those who opted for less risky local-currency loans.

“I keep my fingers crossed that very quickly, the banks will move from pilot transactions they’re doing at the moment into full-blown self-regulation, and out-of-court settlements,” the minister said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.