Saturday, 15 March 2025
The National Bank of Poland (NBP) estimates that additional write-downs needed to cover the legal risks of active Swiss franc (CHF) loans could total PLN 10-15 billion. The central bank also highlights potential legal risks for borrowers who took loans in other currencies, particularly euros, or those who have already repaid their loans.
According to NBP’s “Report on the Stability of the Financial System”, the current jurisprudence on CHF-denominated loans continues to burden the banking sector. Despite this, the NBP believes that, in an environment of strong interest income, the sector can absorb the estimated PLN 10-15 billion write-downs even in the short term.
“Additional reserves may also be needed to address lawsuits filed by borrowers who took loans in other currencies, primarily euros, or those who have already repaid their debt. These costs could potentially double the burden caused by Swiss franc loans,” the report states. The central bank notes that banks have started to proactively increase reserves for repaid loans and euro-denominated mortgages, amounting to approximately PLN 8 billion in total.
The NBP acknowledges that legal risks surrounding foreign currency housing loans remain significant, but their overall scale will gradually decrease over time. “Mass borrower challenges to loan agreements under consumer protection laws have resulted in exceptionally high costs for banks,” the NBP points out. However, the substantial reserves already created put banks in a better position to handle this risk compared to previous years.
By June 2024, the total value of reserves for legal risks amounted to approximately PLN 80-85 billion, with PLN 25 billion already utilized to cover costs from court rulings and settlements. Although the growth rate of reserves has slowed since late 2023, banks continue to incur costs from creating new write-downs.
The NBP expects a gradual increase in the usage of reserves in the coming years, particularly as final court rulings are issued and settlements are reached with more borrowers.
The NBP highlights the ongoing interest among borrowers in contesting CHF loan agreements. Currently, Polish courts are handling around 165,000 cases involving foreign currency housing loans. While most cases remain in the first instance stage, approximately 25,000 cases have been resolved through final judgments or settlements.
An increasing number of borrowers are also challenging agreements for loans that have already been repaid. At the same time, the number of settlements between banks and borrowers continues to rise. By mid-2024, approximately 110,000 settlements had been reached, providing faster and more predictable outcomes compared to lengthy court proceedings.
The NBP estimates that 80,000 borrowers with CHF loans have yet to take any steps to reduce their debt through settlements or court actions. These loans represent roughly one-third of the total outstanding value of CHF-denominated mortgages.
Given the high costs already absorbed by banks, the NBP expects the process of creating new reserves to slow down in the near future. However, the central bank underscores that legal challenges, particularly in the context of euro-denominated loans and repaid mortgages, remain a critical area for banks to monitor.
The report concludes that while the banking sector is better prepared for legal risks than in previous years, it must remain vigilant as legal disputes continue to evolve.
Source: NBP and ISBnews
