KNF proposes changes to the FX mortgage relief plan to ensure greater protection for at-risk lenders

Financial Supervision Authority KNF proposes the possibility of suspending all or part of the contributions to the FX-mortgage relief funds for banks that are undergoing a regulator-supervised restructuring program and transitional financing of these contributions by state-run development bank BGK. “The solution is aimed to protect the stability of the banking and the financial systems in part or in whole, and in consequence protecting their customers,” KNF said. “A given bank would issue quarterly bonds with a value equal to the premium due for a given quarter, which would be transferred to BGK. The maturity of the first tranche of bonds should be correlated with the expected completion of the bank’s repair plan,” KNF explained. KNF also proposes dividing the planned conversion fund into two subfunds for CHF-denominated mortgages and a second one for other FX-denominated housing loans. “Borrowers who have taken out loans in € will show a relatively less interest in voluntary currency conversion. As a consequence, in the first period, a significantly lower number of such loans will be subject to conversion which should be reflected in the calculation mechanism for the quarterly premium,” KNF explained. President’s Andrzej Duda plan aimed to help those with FX mortgages (mostly in Swiss Francs), proposes to expand the current fund set up to support those with problems in paying off their mortgages and setting up a new one for restructuring FX mortgages. Establishing the new fund will cost lenders up to PLN 3.2 billion annually, according to the calculations. The potential monthly support will be increased from PLN 1,500 to PLN 2,000, extending the support period from 18 to 36 months and repayment period from 8 to 12 years. Currently, the funds accumulated in the existing borrower support fund amount to PLN 600 million. Subsequent contributions will not exceed 1 percent of the overdue loan portfolio's value quarterly.