Polish mortgage borrowers will be able to address problems with their forex-denominated loans using a number of options including conversion to the zloty at vaguely defined “fair rates” or handing in keys, an expert team from the office of the President Andrzej Duda said on June 7.

Contrary to expectations, presidential officials offered only general guidelines on the scheme to deal with the issue of Swiss franc mortgages, and appeared to pass the buck to the government. Around 550,000 Poles took in the early years after Poland joined the European Union in 2004, but a spike in the value of the Swiss currency in January 2015 sent repayments spiralling.

An earlier scheme put forward by Duda was rejected by the central bank and financial regulator, who said it risked destabilising the banking sector by loading huge costs on lenders. The imminent new proposal had sent bank shares dropping in recent days.

However, the contradiction between the concern over financial stability and Duda's populist promises to soothe the difficulties of borrowers appears to have stumped the president's men for the time being. “It is a work in progress,” Slawomir Horbaczewski, a member of the team working on the issue, told a news conference.

The actual draft will come from the office of the prime minister, the presidential team said. That will only prolong the uncertainty that has stalked the banking sector for around 18 months, while Duda has often taken a less confrontational approach to issues than the government in recent months. Hungary - often cited as a model for the Law & Justice administration that took power in Poland in November - and Croatia have implemented conversion schemes in the past year or two that have been tough on lenders.

Despite insistence from Warsaw that the eventual Polish scheme will seek to smooth the effect on the banks, the WIG Banki index has been suppressed for over a year by certainty that a big hit is on the way. The issue has also all but stalled the Polish banking M&A market. The woolly outline presented on June 7 will not do much to clear the outlook.

According to the proposal, borrowers could choose from among four alternative FX calculations and conversion mechanisms to convert their mortgages to local currency. Some elements of the new proposal have been repeated from the previous effort. For example, borrowers will be able to file for the return of spreads banks have charged them or hand in keys under a non-recourse option. The proposal did not mention any role for the National Bank of Poland, contrary to earlier speculation.

The proposed solution did not contain estimates of the cost of the scheme for the banks, which – presumably – will be difficult to assess given the bigger number of options available to borrowers. Presidential experts only said vaguely that “in one of the scenarios” – not clear which – the cost for the sector would amount to PLN30bn-40bn (€6.9bn-9.2bn). They insisted the costs will be spread over time. The previous proposal was estimated to have the potential to cost the banking sector up to PLN70bn (€16bn).

At the same time, lenders continue to fail to work constructively within the framework of the authorities that some solution is necessary. The banking lobby ZBP proposed its latest proposal on May 30, but as has been the case since the start of last year, it is seen as unrealistic, applying only to a tiny fraction of outstanding loans.