Polish official hints forex conversion scheme could be relaxed

By bne IntelliNews January 27, 2016

Poland could change the parametres of its proposed scheme for conversion of foreign currency loans should the costs create danger for the stability of the banking sector, a government official hinted on January 27.

The comments are in contrast to an earlier statement from a presidential minister that relieving banks from too high cost of the bill was unlikely. Polish lenders are being dogged by uncertainty over the cost and timing of the proposed bill to allow over 500,000 Poles to convert their forex loans – mostly mortgages in the Swiss franc – to the Polish currency. That suggests M&A will remain stuck and banking stocks will trade largely sideways at relatively low pricing.

The cost of the conversion is going to come on top of a tax on bank assets, which is planned to take effect from February. Both measures threaten lenders’ profitability, Moody’s warned on January 25. The rating agency said that if the conversion bill is approved, the banking sector’s stability could also come into question. The outoging governor of the National Bank of Poland has spoken in similar fashion.

“If [the cost of conversion runs into] tens of billions [of Polish zloty], then we may reconsider  the effect on banks,” Henryk Kowalczyk, from the prime minister’s office, told RMF FM. He said if the cost is "a few million" then there is “nothing to discuss,” while if it runs at more than PLN10bn, the discussion may be necessary on how to spread the cost over time.

It may take some time before any estimate of the cost is known, however. The presidential office, which originated the conversion bill on January 15, did not present a calculation, tasking financial watchdog KNF to come up with a figure.

KNF, however, has now begun sending questions to the banks. It is impossible to say how long it will take before it has all necessary data to start working on the estimate, the regulator said.

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