World Economy

Polish Banks’ Owners to Seek Compensation

Polish Banks’ Owners to Seek CompensationPolish Banks’ Owners to Seek Compensation

Polish banks’ foreign owners plan to seek compensation for any losses incurred by their operations from a bill on Swiss franc-denominated mortgages, according to letters they sent to Poland’s Senate.

Poland’s lower house of Parliament passed a draft law this month that would allow nearly half of holders of Swiss franc mortgages–whose repayments have spiraled due to a surge in the Swiss currency–to convert their loans to zlotys at the banks’ cost, Reuters reported.

On Tuesday, the senate published letters it had received from US conglomerate General Electric and Germany’s Commerzbank, owners of Poland’s Bank BPH and mBank, respectively, criticizing the proposed bill.

Commerzbank’s Chief Executive, Martin Blessing, and Chief Financial Officer, Stephan Engels, said in a letter to Poland’s Senate, prime minister and finance minister, that the bill would infringe EU law, as well as the Polish constitution.

“The effects of the bill for the Polish banking sector, especially for mBank, will be very damaging. Commerzbank will consider further steps and legal actions,” they said in the letter.

GE Capital’s Chief Executive, Keith Sherin, in a separate letter, said that GE would seek “full compensation for any damage caused by the adoption and signing of the bill.”

Germany’s Deutsche Bank, owner of Deutsche Bank Polska, also sent a letter to the senate, saying the bill “would undermine the stability and predictability of the investment environment in Poland and the free movement of capital in the European single market,” according to an email the bank sent to Reuters.

More than half a million Poles took out home loans in Swiss francs, mostly between 2007 and 2008, hoping to benefit from low interest rates. Since then, the franc has risen by more than 80% against the zloty, trapping owners in homes whose value is well below the zloty market price.

Polish lenders, also including PKO, Banco Santander’s BZ WBK, Getin Noble Bank, and Millennium, hold Swiss franc portfolios worth 144 billion zlotys ($39.1 billion), about 8% of Poland’s gross domestic product.

According to a Reuters source, Millennium’s owner, Portugal’s Millennium bcp, also sent a similar letter to parliament. Millennium bcp was not immediately available for comment.

The bill, which will now be voted by the Senate and return to the lower house, imposes 90% of the cost of converting the mortgages on banks.

The central bank has estimated it will cost banks more than $5 billion, much more than an original draft which had envisaged splitting the cost equally between lenders and clients, but was amended on the insistence of opposition parties.