Regulator calls on Polish banks to tackle FX loans

Bloomberg

The Polish Supreme Court’s inability to provide guidance in Swiss franc-mortgage lawsuits gives local banks an opportunity to resolve their multi-billion zloty disputes directly with borrowers, according to the country’s financial markets regulator.
The cases against about a dozen of Polish financial institutions, including PKO Bank Polski SA and Commerzbank AG’s unit MBank SA, have surged in recent months despite the talk of the industry potentially offering their customers out-of-court settlements. Banks have been dragging their feet, arguing they want to wait for clear guidelines from the country’s top court. With a brewing conflict among the Supreme Court justices, the final ruling may not come soon and banks should act now, Jacek Jastrzebski, head of the KNF, said in a joint interview with PAP newswire.
The KNF first proposed a blueprint for settlements late last year. Jastrzebski said it may now offer incentives to those banks that decide to settle out-of-court by applying a “pragmatic” approach in case their capital ratios suffer on new provisions.
“For example, we could give them more time to fill in the capital gaps from profits instead of asking their owners to do so,” Jastrzebski said.
The watchdog also prepared a model that would ease additional capital buffer requirement if lenders offer settlements.
The regulator, which estimated settlements could cost the industry 34.5 billion zloty ($9 billion), is aware of banks concern that they may be exposing themselves to bigger costs by offering settlements.
While not all clients may sue — some banks predict about 20% of customers will go to courts — settlements would have to be offered to almost all borrowers and it could be impossible to reach agreements with those who already filed lawsuits.
So far only state-run PKO said it would start offering settlements this year and already created a 6.7 billion zloty provision that would cover the operation.
The industry could face a bill of more than 100 billion zloty if all customers sue and win their court cases, according to the regulator. Currently, about 90% of non-binding rulings are in favor of borrowers.
Banks should be aware that the lack of the decision on their part is also a decision, Jastrzebski said. By choosing not to settle, they won’t be able to blame their situation on external factors anymore, he added.