Poland Mulls Helping Banks as EU Ruling on Swiss Loans Looms

(Bloomberg) -- Poland is considering ways to help banks if the European Union's top court rules against them in a case regarding potentially abusive clauses in their foreign-currency mortgage agreements.

The EU tribunal is expected to rule on the issue as soon as next month, which investors fear could trigger a litany of domestic lawsuits by mortgage holders, force banks into large-scale provisions and, according to analysts at ING Bank Slaski SA, even weaken the zloty.

The country's Financial Stability Committee, a body which includes the finance minister, central bank governor, chief financial regulator as well as the bank guarantee fund, is analyzing whether new regulations are needed, according to a report by daily Parkiet.

Watchdogs are monitoring the situation in Polish banks on an ongoing basis, Jacek Barszczewski, the spokesman for the financial regulator, said in an email to Bloomberg Friday. “If necessary, the regulator has the possibility to adjust the parameters of its supervisory policy.” No decisions have been made, he said.

The issue of how to deal with Poland's $32 billion of non-zloty loans, mostly denominated in Swiss francs, has for years played havoc with bank stocks as politicians first proposed, then mostly abandoned helping mortgage holders. Now, banks are scrambling to figure out how to prepare for a verdict by the EU tribunal that could leave them vulnerable.

ING Bank Slaski Chief Executive Officer Brunon Bartkiewicz spooked markets on Thursday, saying that a negative verdict by the EU court could generate new provisions on a scale that may wipe out three months of profit.

“In our case, in the negative scenario, it could mean a loss in a single quarter,” Bartkiewicz said. “For our friends on the market, it could be a number of quarters.”

There are ongoing discussions with auditors about the scale and timing of making provisions for loans in the wake of the EU verdict, he said.

Commerzbank AG's MBank SA fell 2.6%, Alior Bank SA 2.5% and Bank Millennium SA 1.2%, while a number of lenders hovered near multiyear lows. The WIGBank index has lost almost 9% since June, twice as much as the benchmark WIG20. The zloty touched a two-month low against the euro before recovering most losses.

Polish Banking Association has estimated that the cost of a potential negative ruling by the EU court at as much as 60 billion zloty ($16 billion), or four years of industry profit. Since then, bank executives have largely tried to play down fears of large-scale penalties, which has nevertheless left investors unimpressed.

To contact the reporters on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net;Adrian Krajewski in Warsaw at akrajewski4@bloomberg.net

To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net, Piotr Bujnicki

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