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Polish financial watchdog KNF, FinMin warn against CHF to PLN move in mortgages

January 21, 2014

Calling on banks to renegotiate mortgage loans so as to change loan currency to PLN from CHF would be detrimental to the Polish banking system, according to statements issued by the Polish Financial Supervision Authority (UKNF) and the ministry of finance. According to the June 2013 data, more than 43% of household mortgage loans' value was denominated in CHF. A few months ago, the opposition Law and Justice (PiS) called on the government to help around 7-- thousand persons who drew mortgage loans in CHF and declared its willingness to cooperate on the issue. Recently, the ruling coalition's junior partner, the Polish Peasants' Party (PSL) called on banks to renegotiate mortgage loans so as to change loan currency to PLN from CHF. According to the calculation of the ministry of finance, the banking sector's loss would amount to PLN 44.4bn ( EUR 10.7bn ), if these loans were recalculated in line with the Jun 30 CHF/PLN exchange rate. It argues that such losses would result from the unfavourable structure of CHF mortgage loans portfolio (over 60% of such loans were granted in 2007-2008, i.e. at the times of the strongest zloty). This would translate into the need to lower the value of most CHF mortgage loans by around 30-40%. KNF estimates the losses for the sector resulting from such a move at PLN 40-50bn. At the same time, seven banks would see their solvency ratio cut below the minimum-required level of 8%; it warns that in the case of three banks, these losses would eat up their entire capitals, resulting in their bankruptcy.

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Source: IntelliNews - Weekly Reports

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