ING: Polish Mortgage Rulings “Balanced”

In an update to customers, ING in Poland says that the country’s Supreme Court has thus far offered a balanced take in the FX mortgage saga that has been returned to Polish courts by the European Union’s Court of Justice.

The long running lawsuits sought a decision demanding local banks annul mortgages taken out in Swiss francs by a huge number of Poles seeking to benefit from Switzerland’s low interest rates. A collapse in the Polish zloty of some 35% early in the last decade saw the cost of servicing these mortgages skyrocket, triggering the lawsuits.

ING’s analysts say that the risk of imminent settlements, including conversion of credits into zloty, has diminished, hence it expects a gradual decline in EUR/PLN.

ING observes “importantly” that the Supreme Court has decided that the limitation period for counterclaims is calculated from the date of credit annulment not from the date of credit origination. “That has important implications for both sides, as banks can still expect capital returns from clients, while clients can still expect that banks return all instalments paid (and not only those from last 10 years),” ING writes. “That limits the banks losses significantly.”

It adds that it expects to see further balanced decisions, which will limit losses for the banking sector and therefore discourage banks from offering mass settlements, which would include the widespread sale of zloty for Swiss francs.

The analysts say that based upon their projections, the FX market has already priced in any risk to the zloty from the issue. They also say that banks are likely to gradually hedge out of their remaining FX positions related to the court cases, reinforcing a gradual decline in EUR/PLN.