Press release after the meeting of the Financial Stability Committee
On 20 January 2015, the meeting of the Financial Stability Committee (FSC) was held at the Ministry of Finance.
The meeting was attended by:
- Mateusz Szczurek, Minister of Finance, FSC Chairman;
- Marek Belka, President of Narodowy Bank Polski;
- Andrzej Jakubiak, Chairman of the Polish Financial Supervisory Authority;
- Jerzy Pruski, President of the Bank Guarantee Fund;
- Adam Jasser, President of the Office of Competition and Consumer Protection,
and the accompanying experts.
Representatives of a number of commercial banks holding substantial portfolios of foreign-currency mortgage loans were also invited to participate in part of the meeting. The purpose of the meeting was to discuss the developments in the foreign exchange markets and the potential impact of the SNB decision changing the stance on the Swiss franc exchange rate on the situation of borrowers and banks in Poland in the context of loans extended in foreign currencies.
During the meeting, FSC members expressed the opinion that the removal of the Swiss franc’s cap against to the euro did not pose a threat to the stability of the financial system in Poland. In spite of a relatively large share of housing loans denominated or indexed in Swiss francs in the entire portfolio (131 billion zlotys, 7.7% of GDP as at the end of November 2014; after CHF appreciation – almost 160 billion zlotys and 9.4% of GDP), the banking sector is stable and resilient to external shocks, including major changes in the exchange rate.
FSC members were presented with the banks’ assessment of the situation, according to which the banking sector would remain stable even in the face of a much sharper appreciation of the Swiss franc. Foreign currency loans are among the best serviced ones - the ratio of impaired loans is 3.1% against the average of around 8% for all loans. In addition, the value of loans denominated in the Swiss franc has been falling steadily due to gradual repayment and absence of new loans. Despite the franc appreciation, rendering a nominal increase in principal and interest instalments, these have not risen against average household income as compared with the time of loan origination (they amount on average to 50-55% for loans originated in 2006-2008). During the meeting, banks pointed to the fact that there was no need to require additional loan collateral.
The negative impact of higher servicing costs of foreign-currency loans on economic growth, through curbing household consumption, was regarded as insignificant at approx. 2 billion zlotys per year. This corresponds to roughly 0. 2% of households’ annual gross disposable income and approx. 0.1% of Poland’s GDP.
FSC members agreed that any measures with a potential long-term impact should be withheld until the situation in FX market has stabilised and a new Swiss franc equilibrium exchange rate has been set in global markets.
FSC recommends that banks should apply restructuring solutions in line with individual needs and capabilities of the client, matching them to current market conditions. It was also pointed out that it is necessary to keep in touch with clients who hold large foreign-currency mortgage loan, notably with those who are experiencing repayment problems.
At the same time, FSC members observed that banks should take into account the complexity of the situation surrounding the CHF loans, including the interest rate cut in Switzerland (reduction in the interest rate of 50 basis points to –0.75%). FSC emphasized the need of a symmetrical approach to market risk, both as regards banks and their clients. Therefore, FSC has accepted the banks’ declaration that they will consistently apply negative LIBOR rates. At the same time, the Committee recommends that banks should consider not introducing limitations to the interest formula applied in loan contracts.
FSC will monitor the situation in the mortgage loan market.
- FSC Chairman, MINISTER OF FINANCE - Mateusz Szczurek
- NBP PRESIDENT - Marek Belka
- PFSA CHAIRMAN - Andrzej Jakubiak
- BGF PRESIDENT - Jerzy Pruski