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(Bloomberg) -- Polish policy makers will ask banks to ease the effect of the surging Swiss franc on local borrowers, stopping short of forcing measures to convert loans into zloty.
Finance Minister Mateusz Szczurek is meeting the central bank governor, the financial market watchdog and executives of some of the commercial banks at 2 p.m. in Warsaw to discuss the situation. Officials will ask lenders to pass on negative interest rates in Switzerland to borrowers, central bank Governor Marek Belka said on Monday.
The Swiss National Bank’s unexpected scrapping of its currency cap last week sent the zloty tumbling 22 percent against the franc from a day before the decision. That triggered a comparable jump in the zloty value of loan principles and monthly payments for about 575,000 Polish families owing a total $35 billion in mortgages denominated in the Swiss currency.
“Bank should offer clients solutions that would sooner or later stabilize their situation,” Belka told TOK FM broadcaster on Monday. “The currency risk that now falls squarely on borrowers has to somehow be shared by both sides.”
At the same time he ruled out forcing banks to convert loans into zloty, calling the practice “dangerous” and not “too prudent” because it would cost them more than 10 billion zloty ($2.7 billion) in losses.
Banks, for instance, should agree to renegotiate loan contracts by extending loan maturities, Jacek Bartkiewicz, a central bank management board member, said in an interview with Radio 1 on Monday. The government could help borrowers if their installments are “too high compared with their income,” he said.
The state will “step in” if banks start to demand additional collateral from people, whose Swiss franc loans have exceeded their property value, Janusz Lewandowski, a top economic adviser to Prime Minister Ewa Kopacz, told TVN24 BiS television channel on Monday.
The plight of Polish mortgage borrowers may become a key issue in the run-up to this year’s general election because it may affect 5 percent of potential voters, according to economists at PKO Bank Polski SA.
The main opposition Law and Justice party last week called on the government to allow borrowers to pay off their Swiss- franc loans at the Jan. 14 exchange rate.
Belka last year called mortgages in francs a “ticking time bomb” and urged lenders to phase them out before lawmakers decide to force a swap that may cause losses.
Banks are ready to discuss contract terms with troubled debtors, MBank SA Chief Executive Office Cezary Stypulkowski said on Jan. 15. Deutsche Bank AG’s local unit is offering clients to extend maturities on their franc loans, it said on its website.
Regulators have sought to wean eastern European banks from extending foreign-currency loans since the practice pushed some countries to the verge of default during the credit crisis.
The effort has been most pronounced in Hungary, which last year ordered that $14 billion of foreign-currency household mortgages, mostly denominated in Swiss francs, be converted into forint as part of a drive by Prime Minister Viktor Orban to reduce his country’s exposure to currency swings.
Polish and Croatian Finance Ministry officials are seeking information from Hungary about how the country cut the amount of foreign currency loans outstanding, Budapest-based Economy Ministry said on Monday.
Lenders are ready to assume costs of “short-term solution” lasting up to 3 months to ease impact on holders of Swiss-franc loans, Croatian Banking Association said on Monday.
--With assistance from Marek Strzelecki and Marta Waldoch in Warsaw.
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