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Poland’s Swiss Franc Denominated Mortgages in Trouble

Switzerland today, made a move to allow its currency to appreciate, causing concern for Polish mortgage holders who have loans denominated in Swiss francs.

The Swiss franc went from buying 3.5 zloty in the morning to as much as 4.2 in earning afternoon trading, easing off to 4.1 zloty later in the day. It represents a depreciation for the zloty of nearly 20% today.

Some of Poland’s largest lenders; Getin Noble Bank, Bank Millennium and PKO Bank Polski share prices slid significantly on the unexpected announcement.

Other currencies such as the Hungarian forint and the Bulgarian lev, also saw large depreciations on the news.

Huge Exposure

The announcement has revealed the huge exposure Polish banks and borrowers have to Swiss franc denominated mortgages. Data from the Polish financial-market supervisor show 131 billion zloty, or 46% of all home loans were denominated in the currency.

It is sure to put huge pressure on the Polish property market which has been flat lining for a number of years.

Hungarian Exposure

 

The Hungarian forint fell 15% to the franc on today’s news with its largest lender, OTP Bank Nyrt falling 3.1% in Budapest.

Last year, Hungary ordered that $14 billion of foreign currency mortgages be converted into the local currency. This staved off some of the blow from today’s news.

Viktor Orban’s, who has had a generally suspicious stance on foreign banks, may see the popularity improve on the news.

Political Capital

 

In Poland, opposition party Law & Justice have already blamed the government for failing to act earlier in dealing with the Swiss franc mortgages.

Its spokesman said they are seeking information on the condition of Polish banks.

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