Banks Join Belka to Warn Polish Taxes Threaten Lending, Economy

Polish lenders, under attack as politicians gear up for elections, warned that squeezing the banking industry with new taxes risks slowing credit growth and damaging the economy.

The levies, along with plans to make lenders partly fund the conversion of Swiss franc mortgages into zloty, may hurt “longer-term” economic growth, Poland’s banking association said on Thursday. The comments came a day after an annual address by central bank Governor Marek Belka, in which he asked lawmakers not to destabilize lenders with additional taxes.

“All the levies, on the scale that was proposed, would basically make banks less active,” Krzysztof Pietraszkiewicz, head of the association, said in Warsaw. “In short, they’d slow lending growth, which means we might face slower economic expansion in the longer term.”

Polish lenders are caught in a political tumult as the ruling party battles to stem a plunge in its support before general elections in October. Civic Platform is introducing a bill that would allow homeowners to switch their loans into zloty at a charge to lenders of about 9.5 billion zloty ($2.5 billion), while the opposition Law & Justice party wants to tax bank assets at an annual cost of about 5 billion zloty to finance some of its spending pledges.

Hungarian Model?

The complaints in Poland echo similar criticism made by lenders in nearby Hungary, where Prime Minister Viktor Orban introduced special taxes and levies in 2010 that cost banks $8.4 billion and caused a plunge in lending. Orban this year vowed to make his policies more predictable and ease the tax burden that left his nation’s banking industry unprofitable, curbed lending and contributed to a cut in the sovereign’s credit rating to junk.

Polish banks could afford to take on the costs of a potential conversion of Swiss franc loans, provided that’s not accompanied by any other burdens, Pietraszkiewicz said. Poland’s parliament starts discussing the bill on Thursday, according to a schedule published on its website.

About 565,000 homeowners in Poland have the equivalent of $38 billion in mortgages denominated in francs. Civic Platform’s plan envisages giving borrowers a choice to convert franc-denominated loans into zloty, using the exchange rate from the day before their application, according to the bill. Banks and their customers would then equally split the difference between the historical and current values of the loan.

The lenders’ association wants lawmakers to shorten the period during which franc mortgage holders can apply for conversion to below four years, a term proposed by Civic Platform. It also wants the parliamentary finance committee to determine if the proposed conversion law complies with the country’s constitution, Pietraszkiewicz said.

Law & Justice will also propose some amendments to the draft bill, the party’s candidate for prime minister, Beata Szydlo, told reporters on Thursday.

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