KNF: presidential loan conversion law may lead to financial crisis

The Polish Financial Supervision Authority (KNF) has estimated that the presidential FX mortgage conversion law may lead to a financial crisis. The KNF carried out its analysis in two variants, each of which has four scenarios. According to a survey among banks, the burden for the Polish banking sector amounts to between PLN 44.6 billion and PLN 67.2 billion. The latter figure was deemed to be the most probable by banks, KNF said. Furthermore, financial market regulator KNF indicated, that losses would be recorded in 15 banks, including three domestic banks, with aggregate losses of PLN 58.4 billion. On January 15, Poland's president, Andrzej Duda presented a draft legislation to convert existing mortgages denominated in Swiss francs into Polish zlotys to help borrowers saddled with bloating debt. The project envisages that the borrowers would gain the opportunity to convert their FX-denominated loans into złoty-denominated credits at "a fair rate," defined individually by an algorithm set in the legislation and used for the remaining lifetime of the loan. Earlier, central bank NBP calculated the cost of the Presidential bill to be at least PLN 44 billion. In a separate report the NBP declared that the FX mortgage bill would have a negative impact on the public finance sector's stability.