Hundreds of thousands of Poles took out mortgages in foreign currencies, mainly in Swiss francs, attracted by lower interest rates. But they are now paying far bigger instalments than expected after the Swiss franc soared against the zloty and following interest rate hikes in Switzerland. The Court of Justice of the European Union (CJEU) has previously guided that banks' practice of making a profit on the exchange rate spread in foreign currency loan contracts was unfair, with Polish courts then rendering such terms invalid and setting off a chain of lawsuits. The CJEU is now considering a case pending before a Polish court, which has asked whether either party to a loan contract deemed invalid due to unfair terms may pursue any further claims in connection with the use of capital beyond the obligation to return the nominal amounts of money exchanged. Poland's financial watchdog has said a CJEU ruling against banks could cost them up to 100 billion zloty ($22.3 billion). However, some economists say that would be a worst-case scenario and Polish lenders have built substantial provisions on Swiss franc loans. Some have also reached out-of-court settlements with borrowers, mitigating the possible hit. Poland's main banking share index has fallen 5% since the case was lodged at the CJEU in August 2021. ING's Polish unit has said it has no reason to fear the CJEU's preliminary ruling, expected before the summer recess, while rival Bank Millennium said its recovery plan would not be jeopardised by an adverse ruling. Bank Millennium had the highest share of Swiss franc mortgages among Poland's top lenders at 9.4%, followed by mBank with 5.4% and the Polish arm of BNP Paribas with 4.7%, according to an analysis by S&P Global Market Intelligence. "In the event of a negative ruling, there will be additional costs, but they will probably not be so problematic for banks that we would have to worry about their condition," Erste Securities analyst Lukasz Janczak said. Whatever the outcome, the issue of whether Polish or Swiss interest rates should be applied to any additional payment obligations arising from the CJEU's ruling will not be decided as part of the current deliberations, CJEU press officer Balazs Lehoczki said.
($1 = 4.4842 zlotys) (Reporting by Anna Koper and Gergely Szakacs Editing by Mark John and Mark Potter)
