Economy minister seen delivering killer blow to Poland's forex loans conversion bill

By bne IntelliNews February 18, 2016

The multi-billion tab for the banks stemming from the Polish president's draft bill on conversion of forex loans is a threat to financial sector stability, deputy Prime Minister and Development Minister Mateusz Morawiecki reiterated on February 18 .

Morawiecki was following up comments made the previous day, and which prompted improved sentiment on Polish assets, which have been battered since the populist Law & Justice (PiS) took office in November. Coming on top of alarms sounded by the central bank, the comments from the former head of BZWBK have analysts anticipating that the draft bill, which the National Bank of Poland has suggested would cost lenders PLN38bn-44bn, is virtually certain to be changed significantly.

"If the initial calculations of around PLN40bn in losses prove true, this would be a big threat to the banking sector," Morawiecki told private radio RMF FM, according to Reuters.

The statement appears to confirm mounting opposition inside the PiS government to the bill proposed by the President Andrzej Duda in mid-January. Morawiecki had said on February 17 he does not expect Duda to push on with the bill in its current form.

Analysts has increasingly suggested recently that the bill in original format is essentially deal in the water. It is “unlikely that lawmakers will approve the proposal in its current form, owing to the significant negative implications for the economy, zloty and overall stability of the financial system,“ Moody’s wrote on February 15.

Morawiecki, meanwhile, will be unwilling to alienate the banks, which are needed to play a central role in his long-term development plan for the economy, which was also announced on February 17. Lenders will be expected to help push PLN1tn in new investments during the next 25 years to address issues such the middle-income trap and a lcak of innovation.

"The news is slightly positive for Polish banks and indirectly for the zloty too as it suggests that the controversial president´s bill will be softened and the banks will not be hurt as much as many observers feared," write analysts at KBC. "By the same token, the news may have mild positive impact on the Polish sovereign bond rating outlook."

Following the statements, the zloty has indeed been firming. The Warsaw Stock Exchange’s blue chip index WIG20 moved up 3.5% on February 17, in what the analysts described as one of the strongest sessions in years. The yield on the 10-year benchmark fell below 3%, the first time since January’s downgrade by Standard and Poor’s.



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