Will Polish banks face massive lawsuits over Swiss franc mortgages?

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Polish Banks Face Potential Flood of Lawsuits Over Swiss Franc Mortgages

A landmark ruling by Europe's highest court next week could expose Polish banks to a wave of lawsuits concerning Swiss franc-denominated mortgages, potentially impacting their profitability for years. Approximately 700,000 Polish homeowners took out these loans nearly two decades ago, attracted by lower interest rates compared to the Polish zloty. These foreign currency loans now total 124 billion zloty, representing a significant portion of all Polish mortgages, with many borrowers struggling with increased installments due to the Swiss franc's appreciation.
Legal Challenge to Foreign Currency Mortgages

The European Court of Justice (ECJ) is slated to rule on October 3 regarding the legality of Raiffeisen Bank selling foreign currency-denominated mortgages. This decision stems from a query by a Polish judge concerning whether such contracts violated European law. The outcome is anticipated to have profound implications for the Polish banking sector, which has already seen a substantial increase in new court cases related to these mortgages.
Financial Impact on the Banking Sector

The potential financial repercussions for Polish banks are considerable. The banking lobby, ZBP, estimates that if all borrowers with Swiss franc loans are successful in court, the total cost could reach 60 billion zloty, a figure four times the net profit recorded by Polish banks in 2018. Analysts suggest the ECJ ruling might necessitate unwinding these mortgages, treating them as if they were originally denominated in zloty, a scenario that could wipe out profits and potentially require some banks to seek additional capital.
Precedent and Ongoing Legal Battles

Legal actions currently claim that bank contracts abused borrowers' rights, with over 11,000 cases already pending in Polish courts. A lawmaker predicts the ECJ judgment will trigger an "avalanche of lawsuits." The situation is compared to crises faced in other European countries; for instance, Croatia implemented legal changes in 2015 that converted most foreign currency loans into euros, and borrowers can now seek compensation. While some cases in Slovenia have favoured banks and others borrowers, many remain unresolved, highlighting the complex and protracted nature of these legal disputes across the region.

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Will Polish banks face massive lawsuits over Swiss franc mortgages?

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