(Bloomberg) — Poland’s government played down the risk of a looming court ruling which is set to decide the legality of foreign-currency loans and could trigger losses worth as much as four years of bank industry profits.While investors continue to ditch Polish bank stocks, Development Minister Jerzy Kwiecinski on Wednesday reprimanded lenders for selling home loans in foreign currencies and said they shouldn’t expect the government to help them cope with potentially spiraling costs.“Banks with sizable exposure to these products are vulnerable but, I’m sorry to say, one of the key tenets of banking is that you should take credit in the currency of your revenue stream,” Kwiecinski told Bloomberg at an economic conference in Krynica, Poland. “This rule is good for clients and banks, so it would be hard to expect that the country would quickly offer some big support program for such lenders.”Polish banks’ $32 billion non-zloty loan portfolio is putting the government in a tight spot ahead of a general election on Oct. 13. The cabinet seeks to bolster its credentials as the creator of Poland’s “economic miracle,” combining fast expansion, generous welfare spending and budget discipline, which a bank blowout could erode.Forced WritedownsThe European Union’s top court is due to decide this year a case about potentially abusive clauses in foreign-currency loan agreements.Banks with hefty non-zloty loan portfolios have lost more than a quarter of their market value since June amid concerns that the ruling could trigger more litigation in Polish courts, forcing writedowns. The Polish Bank Association estimated the costs of a negative verdict at 60 billion zloty ($15.2 billion).Polish regulators have so far been silent on the issue, other than saying that they’re analyzing the situation. Even at the Krynica forum, the year’s biggest gathering of Polish executives and government officials, many refused to discuss the topic, signaling concern about potential negative developments ahead of the elections.Pawel Borys, the head of government’s investment fund and co-author of the country’s planned pension reform, said this week that the Swiss loan issue posed the biggest danger for Poland’s economy. On Wednesday, he clarified that he sees a low risk of the negative scenario materializing as banks have built up their safety buffers for years.Asked about Borys’s comments, Kwiecinski said: the verdict is a “much smaller risk for our economy than the external shocks that are visible on the horizon,” such as slowdown in global trade.–With assistance from Maciej Martewicz.To contact the reporters on this story: Wojciech Moskwa in Warsaw at [email protected];Konrad Krasuski in Warsaw at [email protected] contact the editors responsible for this story: Balazs Penz at [email protected], ;Blaise Robinson at [email protected], Andras GergelyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
