Poland to Make Banks Pay as Kopacz Floats Franc-Loan Conversion
(Bloomberg) — Poland may help borrowers convert their Swiss franc-denominated mortgages into zloty after the country’s currency slump this month boosted payments on $35 billion of such debt, Prime Minister Ewa Kopacz said.
Currency conversion will probably be among a list of government proposals to be presented by the end of this week, Kopacz said in an interview on Polish Radio’s Channel One. Banks should introduce changes “quickly” while Poland’s independent financial markets watchdog monitors lenders’ response, she said.
“If I have to choose between the interests of banks and of ordinary borrowers, I’ll side with the people, but it will be the banks that foot the bill, not the state budget,” Kopacz said. “I will make every effort to ensure these measures to take effect as soon as possible and not in three or four months, because peoples’ lives depend on them.”
Switzerland’s unexpected decision to end its currency cap on Jan. 15 sent the zloty tumbling 22 percent against the franc, swelling payments for about 575,000 families who borrowed in the currency. Their plight has become a hot political issue before this year’s general election in Poland. Finance Minister Mateusz Szczurek, central bank Governor Marek Belka and the financial markets regulator met with commercial banks last week to discuss ways to help mortgage holders.
The Warsaw Stock Exchange’s WIG-Banks index has dropped 5.2 percent since the Swiss central bank’s decision, led by a 25 percent plunge of Getin Noble Bank SA, an 11 percent decline in PKO Bank Polski SA and a 7.7 percent fall of MBank SA’s shares.
Pain-Sharing
While banks at the meeting offered to pass on Switzerland’s negative interest rates to borrowers, refrain from demanding additional collateral and extend loan maturities for clients having difficulty with debt repayments, policy makers and regulators said the response wasn’t enough.
Banks should abide by a pain-sharing agreement or face pressure for more sweeping measures resembling “Serb, Croat or Hungarian solutions,” Szczurek said last week. Hungarian Prime Minister Viktor Orban last year ordered banks to convert $14 billion of foreign-currency loans into forint. Croatia’s parliament earlier this month voted to force banks to absorb currency losses by fixing the exchange rate.
“The premier’s comment is new, surprising and disproportional compared with the agreement that had already been put in place,” Raffaella Tenconi, a London-based economist at Bank of America Corp.’s Merrill Lynch, said by e-mail. “Kopacz stated she will only accept acting on banks’ costs, which is definitely a negative signal for the sector and makes the Polish scenario closer to the Hungarian one.”
Watchdog Analyzes
Poland’s Financial Supervision Commission is already analyzing an option to convert Swiss-franc loans to zloty at the exchange rate from the day customers signed their agreements. Under this proposal, mortgage holders would still need to refund banks the difference between the cost of their Swiss-franc payments and what they would have paid on a zloty loan over the same period, Supervisor Andrzej Jakubiak said in a Jan. 20 interview on Polish Radio’s Third Channel.
Such a conversion could cost Polish banks as much as 34 billion zloty ($9.1 billion), according to Maciej Marcinowski, an analyst at Trigon Dom Maklerski SA brokerage.
The supervisor’s conversion proposal will take into account the banking industry’s “stability and safety,” spokesman Maciej Krzysztoszek said by phone on Jan. 23.
Polish lenders should themselves prepare plans for converting Swiss-franc mortgages to zloty that would be “cost- attractive” for borrowers, Ludwik Kotecki, chief economist at the Finance Ministry, was quoted Monday as saying in an interview with Puls Biznesu newspaper.
“A central plan” for converting foreign-currency loans may not fit all borrowers as their situations differ and allowing banks to adopt a tailored approach would be “more efficient,” Kotecki told Puls. The government will seek ways to “ease” or “eliminate” foreign-currency risk for borrowers, he added.
To contact the reporters on this story: Marta Waldoch in Warsaw at mwaldoch@bloomberg.net; Konrad Krasuski in Warsaw at kkrasuski@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net David McQuaid, Paul Abelsky
