KNF: presidential loan conversion law may lead to a financial crisis

The Polish Financial Supervision Authority (KNF) has estimated that presidential mortgage law may lead to a financial crisis. On January 15, Poland's president Andrzej Duda presented a draft legislation to convert existing mortgages denominated in Swiss francs into Polish zloty loans to help borrowers saddled with bloating debt. KNF carried out its analysis in two variants, each of which has four scenarios. According to its survey (published on March 15), a burden for Polish banking sector amounts from PLN 44.6 billion to PLN 67.2 billion regarding to the most likely scenario of presidential law. The biggest costs, some 69 percent of the PLN 66.9 billion sum, are expected to be shouldered by banks which "actively issued CHF loans" in 2007-2008. Furthermore, financial market regulator KNF indicated, that losses would be recorded in 15 banks, including three domestic banks, with the aggregate loss of PLN 58.4 billion.