Poland presses banks on Swiss franc mortgages

By bne IntelliNews January 20, 2015

Jan Cienski in Warsaw -


Poland’s government is planning to lend a helping hand to hundreds of thousands increasingly worried borrowers with mortgages denominated in Swiss francs by cranking up pressure on banks to pass through negative interest rates to their customers.

Ewa Kopacz, Poland’s prime minister, asked financial supervision authorities on January 20 to look into whether banks are changing loan agreements to take account of the Swiss National Bank’s new benchmark rate of minus 0.75%. Most Polish loans – unlike those in Hungary – have floating rates pegged to the SNB benchmark. Borrowers faced with larger repayments because of the depreciation of the zloty agains the Swiss franc, would get some relief if the banks passed on the lower interest rates. 

Adam Jasser, head of the government’s competition watchdog, said his agency would take a close look at how banks were treating their customers. “In our opinion, that is a potential violation of regulations,” he said. “From our point of view it is key that consumers not be harmed.”

Jasser met during the day with Mateusz Szczurek, Poland’s finance minister, as well as other senior officials to try to come up with a solution to the crisis unleashed last week when the SNB dropped its peg to the euro, causing the Swiss currency to soar in value. The zloty fell from about 3.55 to the franc last week to the 4.28 it was trading at on Tuesday. The sagging zloty is causing enormous pain to the 550,000 Poles with mortgages denominated in the Swiss currency.

Such loans were very popular before the economic crisis because Switzerland’s interest rates were substantially lower than those in Poland. However, banks, customers and regulators largely underestimated the risk being taken by borrowing in a foreign currency. Although very few new franc mortgages have been issued in recent years, they still account for 37% of outstanding housing loans.

With parliamentary elections scheduled for October, the franc has quickly become a political issue. The opposition Law and Justice party is proposing allowing clients to repay at the rate before the Swiss central bank decision. The government wants to lessen the immediate pain, mindful of the example in Hungary, where Viktor Orban won power in 2010 partly on the promise to help Hungarians trapped by expensive foreign currency mortgages.

“Sharp zloty depreciation may trigger renewed political pressure to support private Swiss franc borrowers, especially as 2015 is an election year in Poland and the Hungarian precedent (at the time considered highly unorthodox) may be used as a populist argument,” writes Artur Szeski of Fitch, the ratings agency.

For now, Polish authorities are trying to calm the impact of the currency swing. Marek Belka, governor of the National Bank of Poland, has warned that banks should not impose additional insurance costs on clients whose property value has dipped below the value of their mortgage. “I would advise against that because it could end badly for banks,” he said in a radio interview.

However, Belka did not have good news for borrowers hoping for a quick improvement in their situation, predicting that the franc’s recent strength is a “fairly permanent” phenomenon. The near future is likely to involve further stress for Polish borrowers, as the European Central Bank’s is set to begin quantitative easing on Thursday, which could lead to another increase in the franc’s value.


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