The NBP Management Board was asked by a group of banks to support their planned operation to convert foreign currency housing loans into zloty-denominated ones. The banks’ plan follows the proposal by the Chairman of the Polish Financial Supervision Authority, who called on banks to offer their clients the possibility of converting FX housing loans on the terms that would be equal for foreign currency borrowers and zloty borrowers. The banks did not consult NBP on their initiative before it was made public.
In the NBP Management Board’s opinion, it is difficult to assess the banks’ initiative unequivocally at this stage as it involves both potential benefits and threats to financial stability. However, at the current juncture, in the first place there is no information on the extent of the planned operation or whether the conversion will be offered to all borrowers. Information is also lacking on what share of the banks’ clients would be willing to benefit from the offer and how the banks are going to solve issues related to the loans which have already been repaid.
What’s more, such an assessment is difficult from the systemic point of view as not all banks have decided to join the initiative.
From the point of view of the possible involvement of NBP, the systemic nature of the operation is of critical importance. It should be borne in mind that due to the fact that not all banks participate in the operation, not all clients will benefit from the conversion. Therefore, the problem of FX loans in the Polish banking system will remain unsolved and the risk associated with the loans will continue to weigh on the banking sector.
The NBP Management Board welcomes banks’ initiatives aimed at reducing the legal risk of FX housing loans via agreements with borrowers. In this context, the Management Board may consider a possible involvement in the process of converting foreign currency housing loans into zloty-denominated loans, on market terms and rates, after the banks have met the following required conditions:
- A sufficiently large group of banks will join the initiative to convert foreign currency loans into zloty-denominated loans to ensure that the overwhelming part of the portfolio of FX housing loans in Poland will be subject to the conversion;
- Banks will present reliable information that a significant share of their borrowers are interested in the conversion offer;
- Banks will eliminate legal doubts about the effectiveness of the initiative as regards the decision of competent decision-making bodies on banks’ participation, including in particular obtaining the shareholders’ approval for the conversion;
- Banks will eliminate legal doubts about the effectiveness of the initiative as regards relations with clients, in particular, in order to rule out possible further claims, including those associated with the conversion rate clauses, after reaching a settlement;
- Banks will present binding plans of capital recovery, pledging to take actions aimed at returning to pre-conversion solvency and leverage ratios; these should in particular involve refraining from dividends distribution and taking cost saving measures, such as refraining from bonus payments and payment of other variable remuneration components for the duration of the conversion plan.