Bloomberg

(Bloomberg) -- Polish banks jumped on a newspaper report that President Andrzej Duda won’t force lenders to convert $36 billion in Swiss franc-denominated loans into zloty.

Daily Rzeczpospolita reported, citing sources it didn’t name, that legislation to be initiated by Duda will force local banks to cover the cost of excessive exchange-rate spreads they charged their customers, at a cost of “several” billion zloty to the industry.

Poland’s largest bank PKO Bank Polski SA jumped 4.5 percent, while the third- and fourth-largest lenders, Bank Zachodni WBK SA and  MBank SA, gained 2.8 percent and 4.3 percent, respectively. The WIG20 index surged 1.3 percent at 9:14 a.m. in Warsaw while the zloty gained 0.2 percent against the euro.

“If Rzeczpospolita is right, the bill would have turned out to be very pragmatic,” Kamil Stolarski, an analyst at Haitong Bank SA in Warsaw, said a note. “The CHF-involved banks could see a material rally today.”

Duda’s office will hold a news conference about their plans at 11 a.m. in Warsaw, with central bank Governor Adam Glapinski taking part. Earlier versions of the proposal, which pushed the cost of converting franc loans into zloty onto bank, has hung over the industry for more than a year, preventing consolidation and adding to their troubles as the government imposed the European Union’s highest tax on their assets. 

Surging Franc

Poland is following other eastern European countries that moved to convert foreign-currency mortgages, which accumulated before the 2008 financial crisis as borrowers flocked to secure low interest rates. The zloty lost half of its value against the franc in the past six years. That has made the value of more than half of such loans higher than that of the underlying property.

An earlier set of proposals for the loan fix, presented by Duda’s advisers in June, envisaged capping bank costs at around 1 billion zloty ($257 million) per year. Such a plan would avoid “the A-bomb” scenario that could rock the country’s lenders, Bank Zachodni analyst Dariusz Gorski said at the time.

Poland’s banking industry, where foreign investors control 60 percent of the assets, earned 11.3 billion zloty last year, central bank data show.

To contact the reporters on this story: Marta Waldoch in Warsaw at mwaldoch@bloomberg.net, Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net. To contact the editors responsible for this story: Simone Meier at smeier@bloomberg.net, James M. Gomez at jagomez@bloomberg.net, Wojciech Moskwa, Piotr Bujnicki

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