Preview: Polish FX mortgage holders, banks face crunch Supreme Court ruling

Ipopema Securities SA

10/05/2021 14:57

* Polish Supreme Court due to issue guidance on FX loans on
May 11
    * Court aims to provide consistency on how cases treated
    * Banks await sitting before deciding on settlements
    * Sitting has been postponed twice

    By Alan Charlish and Pawel Florkiewicz
    WARSAW, May 10 (Reuters) - When Polish IT specialist
Przemyslaw Rowinski's wife died in 2013, he was left alone in
the central Warsaw flat which they bought together in 2005 with
a mortgage in Swiss francs whose repayments soon shot up.
    In 2015, the franc - already appreciating against the zloty
- skyrocketed as the Swiss central bank removed a currency cap. 
    "I was left alone with this mortgage," Rowinski told Reuters
in the 10th-floor flat overlooking the capital's old town. "The
removal of the cap on the franc -- it was a shock... the
instalments jumped by 100%."
    Thousands of Polish borrowers took out the loans more than a
decade ago to take advantage of low Swiss interest rates but
faced higher costs when the zloty slumped.
    Many, like Rowinski, have decided to take the banks to court
over clauses they say are abusive and the problem could cost the
banking sector over 200 billion zlotys ($53 billion) in
worst-case scenario estimates. More than 37,000 lawsuits were
filed in 2020, according to data from the Polish Justice
Ministry cited by Rzeczpospolita daily.
    Germany's Commerzbank  CBKG.DE , Portugal's BCP  BCP.LS  and
France's BNP Paribas  BNPP.PA  all have foreign-exchange
denominated mortgage portfolios in Poland as do domestic lenders
such as PKO BP  PKO.WA .
    While most cases are won by mortgage holders, there have
been variations in how courts treat the issue. 
    This could be resolved by the Polish Supreme Court sitting
on Tuesday which is expected to determine whether banks agree to
sign up to a plan for settlements with clients.
    All 28 judges of the Civil Chamber of the Supreme Court are
scheduled to address six questions from the President of the
Supreme Court, clarifying issues surrounding the claims that can
be made when a contract is found to have an unfair clause.
    "This sitting is important because... it is the complete
opinion of all the judges, the whole chamber," said  Kamil
Chwiedosik, founder of the Life Without Credit organisation
which helps mortgage holders in legal proceedings with banks.
    
    SETTLEMENTS
    While many borrowers like Rowinski have already decided to
sue, others, like 42-year-old manager Piotr Brzostek are waiting
to see how banks react to the Supreme Court guidelines.
    "We will see how the banks behave," Brzostek told Reuters by
telephone. "If the banks start to propose some sensible...
conversion maybe I will lean towards that, not suing the bank."
    In December, the head of Poland's financial market regulator
KNF proposed a plan for banks to convert foreign currency loans
into zlotys as if they had been taken out in the local currency
originally.
    However, so far only the nation's largest lender PKO BP has
committed itself to settlements, with others waiting for
Tuesday's guidance.
    "If the Supreme Court guidance is unfavourable for the
banks, they will need to increase their provisioning against
losses related to these mortgages and may lose bargaining power
in out of court settlements," ratings agency Moody's said in a
recent note.
    The KNF estimates that the cost to banks of court cases
could be between 70.5 billion and 234 billion zlotys, while the
cost of its settlement plan would be 34.5 billion zlotys.
 urn:newsml:reuters.com:*:nL5N2L02NE
    The Polish banking sector had a net profit of 7.7 billion
zlotys in 2020.
    "In the blackest scenario... the banking sector is seriously
threatened, a situation in which some banks are insolvent is
possible," said Tadeusz Bialek, deputy head of the Polish Bank
Association (ZBP).
    Rowinski hopes the Supreme Court will give a clear line for
judgements. "For me, personally... it gives hope that in the end
there will be some justice," he said.

($1 = 3.7482 zlotys)

 (Reporting by Alan Charlish, Pawel Florkiewicz and Kacper
Pempel; additional reporting by Anna Wlodarczak-Semczuk, editing
by Emelia Sithole-Matarise)
 ((alan.charlish@thomsonreuters.com; +48 22 104 25 27 ;))