Polish Lawmakers Soften Swiss-Loan Hit on Banks as Shares Drop

  • Banks facing 9.5 billion zloty Swiss-mortgage conversion cost
  • Lenders are political battleground ahead of Oct. 25 election

Polish lawmakers cut in half to 9.5 billion zloty ($2.5 billion) the costs banks face from converting foreign-currency mortgages into zloty after Commerzbank AG and other lenders protested against the plan.

The upper house of parliament voted on Friday to split the costs evenly between lenders and their clients, undoing a lower-house amendment that had raised the burden on banks to 90 percent. The WIGBank index of listed Polish lenders dropped 0.7 percent in Warsaw. The gauge has declined 15 percent this year, compared with a 1.2 percent fall in the WIG.

Banks have become a political battleground ahead of next month’s general election, with candidates wooing voters with promises of relief for franc borrowers and new levies on lenders. The Law & Justice opposition party, which is leading in opinion polls, says banks in Poland have the highest fees in Europe.

“The outlook remains gloomy even after these positive developments,” Michal Konarski, a Warsaw-based analyst at MBank SA’s brokerage, said by phone on Friday. “If Law & Justice wins power there is risk they will go for a more radical steps.”

Further Debate

The costs of the legislation, which will now be sent back to the lower house for further debate, amount to 59 percent of last year’s combined profit for the banking industry.

Lawmakers could drag out the debate until their term expires next month, essentially killing the legislation, Gazeta Wyborcza reported on Friday, citing sources it didn’t name. 

“It’s difficult to say how long lawmakers will debate the bill,” Krystyna Skowronska, a Civic Platform lawmaker who heads parliament’s public finance committee, said by phone Friday.

PKO Bank Polski SA, the country’s biggest lender, dropped 1.7 percent to 29.41 zloty on Friday, while Getin Noble Bank SA fell 4.4 percent.

Switzerland’s central bank has allowed the franc to strengthen this year, forcing Poles to dole out more zloty to cover their franc mortgage payments. Half of these mortgages are now worth more than the underlying property, according to the financial regulator. 

New Levies

The draft law has drawn protests from Commerzbank, Banco Comercial Portugues SA, Raiffeisen Bank International AG and General Electric Co. Commerzbank and GE said they could take legal action, while Raiffeisen warned the proposal may violate an Austrian-Polish agreements on investment.

If Law & Justice comes to power, banks may also face a new tax on of between 0.25 percent and 0.39 percent of their assets, while the ruling Civic Platform wants banks lenders to finance a 600-million zloty fund for troubled borrowers.

Shelving the Swiss-franc legislation would “certainly be good for banks,” Dariusz Gorski, an analyst at Bank Zachodni WBK SA, said by phone on Friday. Still, lenders “risk a new banking tax in 2016.”

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