Warsaw (dpa) - Polish banks are nervously awaiting the result of a European Court of Justice (ECJ) ruling on October 3 that could result in the banking sector losing up to 20 billion dollars.
On October 3, the ECJ will rule on a case that involves a 2008 mortgage loan paid out in Polish zloty, but indexed to the Swiss franc. The ruling could trigger a wave of lawsuits against banks due to unlawful clauses in foreign currency mortgage contracts.
The ruling could empower around half a million consumers to seek compensation - arguably the biggest setback for the banking sector in the 30 years since a free market was reintroduced in Poland.
Foreign-currency mortgages, due to their lower interest rate, were a popular alternative to more pricey zloty-denominated loans in the mid-2000s.
However, as investors flocked to the Swiss franc in the aftermath of the global financial crisis over a decade ago, Polish FX mortgage borrowers saw their monthly instalments and total amount due increase sharply, sometimes to above the value of the purchased property.
Consumers (and, in a number of adjudicated cases, courts) believe that some of the clauses used in contracts to convert zloty into francs were abusive and allowed banks to unilaterally set the exchange rate for calculating monthly instalments.
To date, court rulings in Poland have brought mixed results for borrowers, but the upcoming ECJ ruling could help them make their case. It will decide whether such clauses may be thrown out of the contracts if a local court deems them abusive. In an opinion issued in May, the ECJ advocate general said "yes."
Should the ECJ agree, it would increase the likelihood of borrowers winning local court cases.
The cost of such a ruling for banks could run up to 60-80 billion zloty (15-20 billion dollars), according to market estimates. This represents four to five years of banking sector profits.
"Around 70-80 billion zloty (15-20 billion dollars) is a realistic starting point. From that we may calculate the probability of how many people will go to court and how many will win," Trigon DM brokerage equity analyst Maciej Marcinowski tells dpa.
He believes the number of people willing to go to court may be substantial.
Kacper Jankowksi, head of the banking division at Votum, a stock-market-listed claims management firm, says interest from borrowers has been increasing as the ECJ ruling nears.
Typing in "Swiss franc loans" into a web search in Poland produces several ads from firms encouraging consumers to go to court.
Some 450,000 Swiss franc mortgages remain active, but 150,000 people who have already repaid their loans may also be eligible to file court cases, Marcinowski says.
At the end of July 2019, the value of outstanding Swiss franc mortgages stood at a little over 100 billion zloty, representing some 23 per cent of the banking sector's mortgage book.
Still, the country's banking sector should be able to handle the blow, provided it is not forced to book potential losses in a single year, Marcinowski says.
Only one bank, Getin Noble Bank, the ninth-biggest bank by assets in Poland, could face a shortage of capital in the aftermath of the ruling.
Should the losses need to be booked in a single year, capital shortages might also affect Bank Millennium, a unit of Portuguese Millennium BCP (the seventh-largest in Poland) and mBank, a unit of Commerzbank (the fourth-largest), Marcinowski says.
The Polish banking sector regulator KNF has been implacable in recent years in imposing additional capital buffers for banks exposed to FX mortgages, repeatedly recommending that profits not be distributed, but used to build up capital.
At the same time, the banking sector on the Warsaw stock market may witness tough times.
"Most of the market players believe that the ruling will be similar to the opinion of the advocate general," Marcinkowski says. "If this is confirmed, the market reaction may still be negative. There may be no buyers willing to take the risk."