Poland Proposes Franc Loans Conversion at Current Exchange Rate

By Patryk Wasilewski

WARSAW--Poland's economy ministry on Wednesday proposed taking steps to ease the burden on borrowers with Swiss franc-linked loans, including converting them to zlotys at the current exchange rate.

Comments from Prime Minister Ewa Kopacz earlier this week suggested the Polish government was ready to consider exposing banks to some losses on foreign-currency loans. The safe-haven Alpine currency soared this month after the Swiss National Bank removed a cap against the euro, a move that boosted the franc against the zloty, sharply increasing private debt owned by more than half a million Polish borrowers.

The economy ministry fell short of expectations that it would consider allowing borrowers to convert into the zloty at a historical, lower exchange rate. Instead, it proposed solutions already on the table and that banks had agreed to.

Banks will account for negative London interbank offered rates, which will mean lower monthly payments for borrowers, said Economy Minister Janusz Piechocinski.

Borrowers will also have the option of converting loans at the central bank's official current exchange rate without fees, as well as a three-year freeze on capital payments. The government will also ask banks not to seek additional collateral or guarantees from borrowers when the value of the loan exceeds the value of the asset it financed.

Polish bank stocks soared on the news. Poland's top bank by assets, PKO Bank Polski SA (PKO.WA), was 2.8% higher at around 1130 GMT, and Bank Zachodni WBK SA (BZW.WA) was 1.11% higher, outperforming the blue-chip WIG20 index, which was up 0.3%.

Getin Bank SA (GTN.WA), with a relatively high portfolio of Swiss franc loans, was 3.2% higher.

-Write to Patryk Wasilewski at [e-mail]