Buoyancy Revealed in Stress Tests on Polish Banks
- New Europe Investor
- February 04, 2015
A report released following stress tests on Polish banks, has shown that none of them are in any serious danger as a result of the current mortgage crisis.
Following the removal of their currency cap, the Swiss franc increased in value by well over 20% to the zloty in one day. This has left lenders with a potential black hole in their books, and mortgage holders with significantly larger repayments.
The stress tests also took into account the scenario of an unlikely serious downturn in the economy, which also revealed a good level of resilience.
Poland’s economy is expected to grow by at least 3% in 2015.
According to Reuters news agency, the central bank said that banks return on assets ratio will fall due to lower net interest margins. There will also be a fall in revenue from insurance sales, and higher fees for the bank guarantee fund.
They acknowledged that the banks will have to absorb a larger number of write offs than previously expected from customer defaults, and from falls in asset values.
However, the message from the central bank was clear.
Despite more than half a million mortgages denominated in Swiss francs that total 9% of Poland’s GDP, the banking sector and the economy will pull through.
The full impact of the zloty’s depreciation to the Swiss franc and mortgage holders increased payments is not yet fully understood. This is primarily because the government have yet to rubber stamp any formal arrangement with the banks.
What is currently expected to happen, is a conversion of the Swiss franc loans to the local currency (the zloty). Then there will be some sharing of the costs between the banks and the mortgage holders.