Polish President Andrzej Duda will submit an adjusted bill to force banks to convert forex loans, officials announced on January 15.

The plan leaves uncertainty hanging over the Polish banking sector, with no clarity on the costs or timing of implementation. As was the case throughout 2015, that suggests M&A will remain stuck and banking stocks will trade largely sideways at relatively low pricing.

Duda submitted a bill on the issue to parliament under the previous Civic Platform (PO) government, which was rejected. That scheme – estimated to cost the banks PLN30bn or more - had sought to force lenders to convert the loans at historical rates. The spike in the value of the Swiss franc in January 2015 led repayments to rise dramatically for the 550,000 or so borrowers who took out CHF mortgages in the middle of the last decade.

However, while the issue was a major plank in the successful election campaign of the Law & Justice party (PiS), it had recently appeared to back off the plan. Officials have publicly fretted over its potential to hit the stability of the financial sector.

The new plan offers few details for the moment. Borrowers will be allowed to make further payments on their loan at a 'just exchange rate", which is reached by a comparison of the cost of the forex loan compared with a zloty-denominated loan.

"We wanted a situation, where there is safety both for CHF-borrowers and for the banking sector," presidential minister Maciej Lopinski said, according to PAP. "It's a compromise between what's possible and what's wanted."

The first responses of analysts hinted at some relief. The "shape of the bill does not generate a serious threat to the FX market and for the banking system," BZWBK suggested, although somewhat tentatively.

However, the president's office says it has no guidance on the cost to lenders. Financial market regulator KNF has been asked to prepare an estimate. Neither is it clear when the scheme will be drawn up into a bill and submitted to lawmakers.

Banking stocks retreated on January 15, although losses tended to remain within around 1%. Longer term, given the uncertainty, banking equities "will simply trade with the DAX/WIG20" for the meantime, suggested one trader.

Others say they expect the finance ministry, which had appeared to have persuaded the PiS leadership in recent weeks that the move could put the banking sector's stability at risk, to oppose the bill. That could lead implementation to shift to at least 2017.

The risk that the previous government might force a painful scheme onto lenders all but halted M&A in the sector through 2015. GE Capital and Raiffeisen are both seeking buyers for their Polish units, but agreement on valuations has proved all but impossible because of the risks surrounding forex loans.

However, another uncertainty has now been ended. The same day that Duda put his re-jigged forex loans bill forward, Poland's lower house of parliament passed the final bill on the bank tax. Duda will next sign the legislation, which is due to come into force in February.

MPs accepted a range of amendments proposed by the Senate on the bill, which will impose a 0.44% tax on all bank assets over PLN4bn, Insurers will face a levy on assets over PLN2bn; loan companies on assets over PLN200mn.

PiS' market friendly appointment, former banker and now Development Minister Mateusz Morawiecki claimed recently that Poland is only following in the steps of other EU countries. “Bank taxes have already been introduced in a majority of EU countries, and many other countries around the world. In this sense we are only doing the same as other countries," he said.

However, on January 12 the European Central Bank warned in a letter to Warsaw that while other EU bank tax regimes were motivated by the need to reduce risk within the sector or claw back state bail outs, Poland's is the only one driven purely by a desire to raise funds for social programmes. The Eurozone's central bank also claimed the levy could hurt the Polish economy by limiting lending.

While the forex loans bill appears to essentially shift all currency risk onto the banks and away from both borrowers and the state, officials from the president's office sought to soften the blow somewhat. The suggest that lenders could be compensated for losses by a reduction in their bank tax bill, capped at 20% per month, according to PAP.