Polish Banks Gain as New Buffer Said Not to Raise Requirements

  • New 3 percent bank buffer said to replace existing measure
  • Bank stocks under pressure on lending impact, dividend fears

Poland’s new capital requirements, recommended by the country’s financial watchdog, won’t create an additional burden on lenders, a person with knowledge of the plans said. Bank stocks rebounded.

The WIG Bank gauge, which slumped as much as 1.7 percent earlier on Monday, rose 0.1 percent as of 6:19 p.m in Warsaw. The rebound was led by the country’s biggest lenders PKO Bank Polski SA and Bank Pekao SA. The initial decline came after the Financial Stability Committee unexpectedly recommended on Friday that all Polish banks introduce a “systemic risk buffer” of 3 percent of their capital as part of the planned solution to the country’s $36 billion of foreign-currency mortgages.

The new 3 percent buffer will comply with European Union standards and add to an existing 8 percent minimum capital requirement, followed by a further 1.25 percentage-point increase, according to the person, who wasn’t authorized to comment publicly on the plan. This means the total requirements, excluding individual buffers imposed on banks with foreign-currency loans, won’t increase from about 13 percent now, the person said.

“The interpretation that the buffer won’t be an additional measure but will replace existing ones is a big game changer for local lenders” compared with the initial reading of the committee’s statement, Michal Konarski, an analyst at MBank SA’s brokerage unit, said by phone. “Most Polish banks won’t need a capital increase, but of course this has to be officially confirmed by the authorities.”

With the country’s financial supervisors seeking to encourage lenders to ditch foreign-currency home loans, they also proposed increasing risk weights and boosting safeguards against potential losses from bad debts when calculating their exposure to such assets, the committee said on Friday. The shares of banks including Bank Zachodni SA and Alior Bank SA continue to be negatively affected by expectations that new regulatory measures may reduce their ability to pay dividends, according to Konarski.

The watchdog committee, consisting of representatives of the National Bank of Poland, the financial market regulator and the Finance Ministry, was tasked last year by President Andrzej Duda with pulling banks away from foreign currency loans. Such mortgages, popular in the last decade as a less expensive alternative for home purchases, became a major burden for Poles after the Swiss central bank abandoned its cap on the franc two years ago. The committee said loans should be restructured voluntarily with the agreement of borrowers, while additional taxation was ruled out.

The debate over how to help the country’s 565,000 holders of foreign-currency mortgages has pummeled banking shares in the past two years, with investors given some respite in December when the Polish stock market experienced broader capital inflows. Banks with exposure to non-zloty home loans include the country’s biggest lender PKO, Commerzbank AG’s MBank SA, Bank Millennium SA and Getin Noble Bank SA.

Lukasz Swierzewski, a spokesman for the Finance Ministry, which has a leading role in implementing new rules, had no immediate comment when reached by phone. Jacek Barszczewski, a spokesman for the regulator, known as KNF, declined to comment, referring questions to the central bank. The central didn’t reply to an e-mail and calls.

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