Polish Capital Demands May Force Some Banks to Skip Dividends

  • For some banks new requirement will be `serious burden'
  • Banks will receive the regulator's decision in two weeks

Some Polish banks with non-zloty mortgages may need to refrain from paying out dividends from 2014 and 2015 profits to cover capital shortfalls, the country’s financial regulator said.

Ten to 15 Polish banks will receive notice of how much more capital they will have to set aside in the next two weeks, said Wojciech Kwasniak, the regulator’s deputy chairman.

For some of them “it will be a serious burden and will impact their strategy for the future,” he told reporters in Warsaw Thursday. He declined to say which banks would be affected and or to discuss details of their capital needs.

At issue are banks that have high proportion of Swiss-franc mortgages in which the loan value is lower than that of a property used as its collateral. PKO Bank Polski SA, MBank SA, Bank Zachodni SA , Bank Millennium SA and Getin Noble Bank SA have the largest franc loan portfolios.

In Poland, as in other eastern European countries including Hungary and Croatia, mortgages in foreign currencies, most often in Swiss francs, were once popular because they offered lower rates than those in the zloty.

They became a pressing problem in January, when Switzerland’s central bank lifted its currency cap, allowing the currency to surge and, at the same time, boosting payments for 565,000 Polish households with such loans and shifting the value of loans in zloty terms.

It will be up to lenders whether to retain their profits or use other options, including a share issue, Kwasniak said. Some Polish banks, including PKO, Zachodni and MBank, earlier this year decided not to pay 2014 dividends, while leaving profits “unappropriated” as they awaited the regulator’s decision.

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