Poland unlikely to ease banks' burden from forex loans conversion says official

By bne IntelliNews January 21, 2016

Warsaw is open to compromise, but Polish banks are unlikely to see the parliament ease the cost of FX loan conversion in the bill recently proposed by the president, an official told local media on January 20.

Maciej Lopinski from the presidential office told PAP that while some changes to the bill were possible as the bill goes through parliament, amendments leading to lessening of financial burden on the banks were unlikely because the draft is already a “compromise”. There is currently no estimate of how much the scheme will cost lenders.

"We don't foresee such a possibility," Lopinski said when asked if the bill could be "eased" should the costs for banks prove excessive. "The Chancellery presented a compromise proposal. I don't know what this 'easing' could consist of, but we are open to constructive proposals from all interested parties."

At the same time, the bill once sent to the lower house becomes "the property of the parliament" and its final shape may be "far from the proposal submitted by the president," he added.

Delivering on his campaign promise from last spring, President Andrzej Duda proposed a bill allowing more than 500,000 holders of mostly Swiss franc denominated forex mortgage loans to convert them to Polish zloty. The president’s has asked financial regulator KNF to assess the cost to the banks.

Analysts suggest the tab is likely to come in at at least PLN30bn. While there is some hope that the scheme will be spread over several years and thus lessen the hit on the banking sector, the draft currently offers no schedule.

Neither is there any concrete detail on the timing of the implementation of the scheme, although Lopinski claimed the bill should be finalized and implemented by the end of the year. "This . . . deadline is attainable from my point of view," he said. "Even further, I expect efficient works on the draft and faster finalization."

The lack of details leaves huge uncertainty hanging over Polish banks. While KNF works on its estimate, some have suggested the banks could be hit for up to PLN50bn (over €11bn).

"We have asked the KNF for a possibly quick estimate of the effects of this regulation on the banking sector, whose stability the president has at heart," Lopinski told PAP. "The Chancellery is ready to cooperate with the KNF on a running basis to make the process smoother."

The governor of the National Bank of Poland (NBP) Marek Belka added to criticism of the bill saying earlier this week that if the bill’s cost for bank was likely to be in “tens of billions of zloty” it would create risk of some banks going bankrupt. That risk is elevated by a new tax on bans’ assets signed into law by Duda on February 15, the departing central banker claimed.

“If the banking sector has problems, the entire economy will run aground,” Belkaa said. Alongside political controversy over the constitutional court and state media, tampering with the financial sector helped push Standard and Poor’s into a surprise downgrade of the sovereign on February 15, which sent the zloty tumbling and bond yields’ spiking.

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