Polish Banks, Zloty Slump as Swiss Franc Mortgages Get Expensive

(Bloomberg) — Poland’s currency tumbled and banks slumped after Switzerland allowed its currency to appreciate, boosting costs of mortgages denominated in the Swiss franc.

Polish banks had 131 billion zloty ($35 billion) of Swiss- franc mortgages in their portfolios as of Nov. 30, amounting to 46 percent of all home loans, according to data from the country’s financial market supervisor. Poles and other Eastern Europeans rushed for cheaper funding in francs and euros in the run-up to the global financial crisis in 2008, only to see their borrowing costs surge due to currency swings.

The zloty weakened 14 percent to 4.1357 against the franc at 11:37 a.m. in Warsaw, paring an earlier loss of as much as 40 percent. The Polish currency declined 2.3 percent to the euro and 2.2 percent versus the dollar. Shares in Warsaw-listed lenders tumbled, with Getin Noble Bank SA sliding 8.9 percent, Bank Millennium SA 9.1 percent and PKO Bank Polski SA, the country’s biggest, dropping 2.6 percent.

“This will be a painful year for Polish households with Swiss franc loans,” Piotr Matys, an emerging-markets foreign- exchange strategist at Rabobank International in London, said by e-mail. The zloty’s drop to the franc “might fuel concerns about financial stability in Poland,” he said.

The proportion of Swiss-franc loans, which was at more than 60 percent at the end of 2009, has been falling after non-zloty home loans were first limited and then banned in Poland. The financial markets supervisor said it will issue a statement on Polish banks later today, according to spokesman Maciej Krzysztoszek.

Poland’s finance ministry delayed the deadline for bids in a bond auction by one hour to 12 p.m., citing market volatility after the Swiss National Bank unexpectedly gave up its minimum exchange rate of 1.20 franc per euro, ending a three-year-old policy designed to shield the economy from the euro area’s sovereign debt crisis.

–With assistance from Maciej Onoszko and Marta Waldoch in Warsaw.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at [e-mail] To contact the editors responsible for this story: Wojciech Moskwa at [e-mail]; Balazs Penz at [e-mail] Pawel Kozlowski