Poland’s Government To Reset Swiss Franc Mortgages

Here We Go …

Last week we wrote in the context of Swiss franc denominated loans to consumers in Europe:

“Another problem is that governments may react to the situation by shifting the losses suffered by mortgage debtors back to the banks – this has e.g. already happened in Hungary. Not surprisingly, this policy has been hugely popular with the country’s population, but very costly for the banks. Since the necessary write-downs have already been taken, no further damage is to be expected from CHF mortgages outstanding in Hungary – the main danger for the banks is rather that the governments of other countries may consider adopting similar policies.”

It didn’t take long for a government to get in on the act. Poland’s government faces elections this year (both presidential and parliamentary), which is likely a major motivation for considering going down Hungary’s path with respect to CHF denominated consumer loans. It presumably hasn’t escaped the attention of Poland’s government that Viktor Orban’s Fidesz party has been faring rather well in Hungarian elections. Hence Polish prime minister Ewa Kopacz informed a throng of potential voters up to their eyeballs in CFH denominated debt that she would seek to move their losses to the banks.

Poland’s prime minister Ewa Kopacz wants to rescue Polish mortgage holders at the banks’ expense.

Photo credit: SÅ‚awomir Kamiski/Agencja Gazeta)

As Reuters informs us:

“Poland may help financially troubled holders of Swiss franc-denominated mortgages at the expense of the banks and will present specific proposals by the end of the week, Prime Minister Ewa Kopacz said on Monday.

Kopacz, who faces an election this year, did not spell out what form such help might take. She was speaking after hundreds of people staged protests in several Polish cities at the weekend demanding the government’s help in repaying Swiss franc-denominated mortgages following the currency’s sharp rise.

“If I have to choose between the interests of the banks and of the people who took out these loans, I will stand behind the people, but at the cost of the banks, not of the (state) budget,” she told public radio, without elaborating.

Home buyers across central and eastern Europe took out loans denominated in Swiss francs in the early 2000s, attracted by interest rates in the low single digits over paying double-digit rates on mortgages in their local currencies. They had already faced rising repayments as the franc strengthened with the onset of the global financial crisis in 2008, but repayments have soared in the last two weeks after the Swiss central bank removed its cap on the franc. The currency jumped some 20 percent against the Polish zloty.

Analysts do not expect Poland to follow the example of Hungary, where the government forced banks to convert FX loans and to compensate clients for past loan losses that the government and the courts said had been unfair. Poles hold about half a million mortgages denominated in Swiss francs and they are worth a total $36 billion, or eight percent of Poland’s gross domestic product.

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