Poland Won’t Go Orban’s Way in Search of Swiss-Franc Loan Fix
(Bloomberg) — Poland won’t emulate Hungary by making banks convert Swiss-franc mortgages to local currency at a lower rate and will seek other ways to help borrowers.
“We want not just to stabilize the banking industry but to find the best way to cope with a peaking franc, at the lowest possible cost to everyone involved,” Deputy Prime Minister Janusz Piechocinski said Wednesday at a news conference in Warsaw. While some believe Hungarian Prime Minister Viktor Orban “came up with an easy, quick fix for the problem, we don’t think that’s the case and we won’t be considering such solutions.”
Last year, Hungary 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. 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.
Piechocinski, who also heads the Economy Ministry, said banks should consider giving customers the option to convert their loans to zloty on demand at the central bank’s rate on the day of the request, with no additional cost. Among the ministry’s other recommendations is that lenders take into account Switzerland’s negative interest rates in calculating monthly mortgage payments, while demanding no additional collateral for loans whose value rose with the franc.
Bank Shares
The declaration buoyed shares of banks with the biggest exposure to the Swiss-franc mortgages. Getin Noble Bank SA surged 10 percent after Piechocinski’s comments. PKO Bank Polski SA, Poland’s largest bank, rose as much 6.3 percent, the most in more than three years, and traded 5.9 percent higher at 3:54 p.m. in Warsaw. Bank Millennium SA advanced as much as 5.7 percent before paring its gain to 3.5 percent.
Last week, Poland’s Financial Supervision Commission said it was analyzing whether to give borrowers the right to convert Swiss-franc loans to zloty at the exchange rate from the day customers signed their agreements. 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, the watchdog’s spokesman Maciej Krzysztoszek said by phone Wednesday.
Any attempt to restructure or convert Swiss-franc denominated home loans into zloty by force would be dangerous to borrowers and “should be avoided because it could threaten the stability of the banking industry,” Finance Minister Mateusz Szczurek told reporters in Warsaw Wednesday. The government can’t “remove currency risk” or “prefer a single group of borrowers” at taxpayers’ expense, he added.
Risk ‘Mechanisms’
The government also wants to introduce “mechanisms” to distribute currency risks evenly between borrowers and lenders, according to Piechocinski and Szczurek. The measures would apply to existing loans, they said. Piechocinski also urged banks to let borrowers suspend mortgage payments for as many as three years and cap monthly payments at their level in December.
“Lenders should assume risk if the Swiss franc appreciates to a new peak, while borrowers should give back benefits when the franc is at record lows. We want both sides to bear currency risk symmetrically,” Piechocinski said.
The Economy Ministry will propose legal changes to limit exchange-rate risk as well as reduce loan costs for borrowers. Piechocinski said, without providing details.
–With assistance from Konrad Krasuski and Dorota Bartyzel in Warsaw.
To contact the reporter on this story: Marta Waldoch in Warsaw at mwaldoch@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net David McQuaid, Paul Abelsky
