Tier 1 capital at four of Poland’s biggest banks saw a slight decline in 2021. PKO Bank Polski recorded a 8.1% drop, BGK saw a decline of 6.5%, Bank Pekao of 9.9% and Alior Bank of 12.3%.
In the coming quarters, banks are also expected to book more provisions to cover risk related to Swiss franc mortgages.
The European Court of Justice will decide whether Polish banks can charge interest on Swiss franc mortgages that have been invalidated by local courts. The court is expected to issue an opinion on February 16, while a decision will follow later in the year.
In the early 2000s, the country’s banks encouraged borrowers to get mortgages in Swiss francs to benefit from lower interest rates in Switzerland. However, following the global financial crisis (2007-2009), the value of the Swiss franc spiked against the Polish zloty and other currencies.
As a result, many borrowers were left with higher repayments. Courts in the country ruled that banks used “abusive” foreign exchange rates compared with those of the National Bank of Poland.
Foreign currency mortgages also were partly the cause for the collapse of Getin Noble Bank in the second half of 2022.
Polish banks’ capital and profits have already been hit in the past few quarters by regulatory burdens such as a mortgage repayment deferral scheme.
