Bloomberg

(Bloomberg) -- Polish President Andrzej Duda voiced confidence in the ability of the financial regulator and the central bank to resolve problems stemming from $36 billion in foreign-currency mortgages, saying he’s not considering a new legislative solution to fix the issue.

In a move applauded by stock investors, Duda tasked National Bank of Poland Governor Adam Glapinski and the watchdog with pulling banks away from foreign-currency loans by introducing stricter regulations for lenders with such portfolios. While the regulator has not announced how it intends to carry this out, the pain of having to finance the mostly Swiss-franc mortgages is rising for Poles as the zloty dropped to its lowest level against Switzerland’s currency in 22 months last week.

Polish authorities have been at odds over how to help 565,000 Poles with foreign-currency mortgages without destabilizing the banking industry. Duda’s decision in August, to give Glapinski a year to resolve the issue meant he backed off from earlier plans to force lenders to convert the loans into zloty, which would have cost the banks as much as 67 billion zloty ($16 billion), or six times the industry’s combined 2015 profit.

“Adam Glapinski assured me that this matter will be resolved by the authorities overseeing the financial market,” Duda said in an interview on Nov. 17. “I’m confident this will be resolved and I’m on top of it as this was also my election commitment.”

Motivate Banks

Duda said he’s in regular contact with his representatives in the Polish Financial Supervision Authority to ensure that the regulator will motivate banks to convert their foreign loans and repeated that he expects the issue to be resolved around the middle of 2017.

Polish legislators are working on a draft law, prepared by Duda, that would force banks to return “excessive” charges for currency transactions linked to loans without pushing them to convert the mortgages themselves. The bill is set to cost banks as much as 9.3 billion zloty, according to the regulator.

“Proposing a forced, legislative solution is not without dangers for banking system and for broader financial stability of Poland,” Duda said. “As president I’m responsible for the country, I’m aware that for some citizens this an issue but I have to care about all of us and about stability of the financial system.”

To contact the reporters on this story: Marek Strzelecki in Warsaw at mstrzelecki1@bloomberg.net, Wojciech Moskwa in Warsaw at wmoskwa@bloomberg.net. To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Piotr Bujnicki, Andrea Dudik

©2016 Bloomberg L.P.

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