Loans in Swiss francs: the bill is getting heavier for European banks

It’s a ball and chain that European banks have been pulling for a decade. Variable-rate loans indexed to the Swiss franc left thousands stranded as the Swiss currency soared after the financial crisis. In Poland, where nearly 700,000 customers are affected, the case went to court in 2019 when the Court of Justice of the European Union (CJEU) authorized them to sue banks in local courts to claim their contracts.

To deal with these growing disputes – 95,000 lawsuits were pending as of June 30, 2022, according to the Polish Association of Banks – the Polish subsidiaries of large groups are constantly revising their regulations upwards. The second bank most exposed to Swiss franc loans (9% of its portfolio), mBank, a subsidiary of Commerzbank, just took a new provision of 2.3 billion zlotys, or 490 million euros. In total, the German bank has so far set aside 1.43 billion euros to settle the Polish disputes, a press release states. Mbank is therefore expected to have a net loss in 2022, which does not prevent Commerzbank from maintaining its target of more than one billion euros in net profit this year.

BNP Paribas, which has already suffered a legal setback in France in the Helvet Immo case, is also exposed via its Polish subsidiary BNP Paribas Polska. The latter is currently being prosecuted in 2,858 legal cases, including 846 new cases in the first half of 2022. For the provision, the bank “takes into account the judgments that have been passed on it and developments in case law”. However, Polish courts tend to agree with customers by declaring the annulment of loan contracts. Out of 158 judgments already handed down, only 46 were in favor of BNP Paribas, of which 23 gave rise to a settlement agreement with the customer.

Per As of June 30, 2022, BNP Paribas had provisioned 1.486 billion zlotys compared to 1.3 billion in December 2021. The increase in provisions resulted in a negative impact of 222 million zlotys (46 million euros) in the accounts of its Polish subsidiary in the first half of ​​2022.

Developments in jurisprudence

The development of these provisions remains subject to the legal development of the case. The banks present in Poland, among which we also find Millenium, the subsidiary of the Portuguese BCP, Santander and ING, remain suspended from an upcoming decision by the Supreme Court of Poland. Originally planned for October 2021, it had to be postponed, as the Court of Justice of the European Union first had to rule on its jurisdiction in the case. “At the moment, it is not possible to predict whether the resolution will be adopted and even more so its impact on the estimate of the provisions”, remembers BNP Paribas.

In the first half of 2022, almost 18,000 new complaints were filed by Polish customers. The amount of provisions made by the banking market as a whole reached 19.6 billion zlotys last June.

This amount is likely to increase further as banks continue to adjust their models. A 20% increase in the number of lawsuits, for example, will have an effect of 99 million zlotys, explains BNP Paribas Polska. If the number of lost lawsuits increases by 5%, the impact will be 63 million zlotys.

Alongside trials, Polish banks have also developed mediation with their customers. ING and the largest local lender PKO are actively involved. The latter indicated in August that he had reached almost 15,500 amicable settlements to date. BNP Paribas, which started this type of negotiations in December 2021 alone, offered deals to 3,690 clients, of which 890 accepted. The cost of these voluntary resolution procedures is estimated by the bank at 1.3 billion zlotys. Mbank has just announced on its website the opening of a new round of negotiations with its affected customers.

.

Leave a Comment