The Swiss Franc Mortgage Discussion in Polish Media
Introduction to the topic
At the end of 2015 Polish media were dominated by the Swiss franc loans problem. More than half a million Poles had taken out foreign-denominated loans. The situation of so-called ‘frankowicze’ is difficult because they decided to take out loans owing to the Swiss franc exchange rate, which was more cost-efficient at that time, without taking into consideration the risk of currency fluctuation. The dramatic rise of the exchange rate in January 2015 generated a heated debate among the government and the borrowers. The crisis reached its climax when the exchange rate exceeded 5 PLN per 1 CHF, which caused an increase in loan installments. The borrowers started to feel deceived and began to seek the source of this critical situation.
Below you can find a summary of how media have responded to the issue.
Responsibility
Both centre-left daily Gazeta Wyborcza and centrist monthly Forbes agree that the burden of responsibility for this situation falls mainly on banks, which created such an unreasonable product as foreign-denominated loans, as well as financial advisors, who failed to provide relevant information connected with the currencies’ constantly changeable rate. They do not blame the borrowers who were not cautious about future risk, such as a rise of the exchange rate, while getting a foreign-denominated loan.
Solutions
The idea of helping ‘frankowicze’ emerged under a government led by Civic Platform (PO). As right-wing niezależna.pl reports, when the Swiss franc mortgage holders started to rebel against the increased installments of their foreign-denominated loans, former Prime Minister Ewa Kopacz offered a ‘fifty-fifty’ deal, which was to divide the costs evenly between banks and borrowers.
Currently media point out two possible solutions for the victims of banks which offered their clients foreign-denominated loans.
One of them is suggested by Krzysztof Oppenheim, an expert in field of mortgage loans, in an interview with the centre-left news portal naTemat.pl. The basic idea of the plan is that a client should quit his job and file for consumer bankruptcy. After that, a debtor’s apartment would become part of the bankruptcy estate, and it can be sold later, which would help the concerned to rent another apartment for the next twelve to twenty-four months. Oppenheim says that struggling with additional loans, taken to pay off previous debts, is not a sensible step to take. He advises reaching an agreement with the bank, which will help its clients avoid the intervention of a debt collector.
Another solution, discussed in great detail by media, is the project introduced by the president, Andrzej Duda, aimed at currency conversion, which is based on the idea of ’fair rate’ calculated on the basis of comparison between the costs of credit in Swiss francs and zloty. The assumption of the plan is that the costs resulting from the currency rise would be paid off by the bank.
The views on governmental and president’s projects
According to niezależna.pl, the project prepared by Kopacz was likely to destabilize Poland’s financial system. Moreover, considering calculations revealing the truth about the party’s project, made by Katarzyna Hyrtek-Prosiecka, an economic journalist, the monthly installments would be higher than the original ones. Eventually, the bill was not introduced.
Taking into account the current situation, the potential outcome of president’s draft bill is perceived differently by media.
Forbes and Gazeta Wyborcza claim that the president’s project would be an unnecessary expenditure and that his actions are focused on saving face, rather than on solving the real problem of foreign-denominated loans. Moreover, the president based his decision only on long-ongoing dialogue with the victims of the rise of the exchange rate of the Swiss franc. He did not consult on the issue with the finance ministry, the financial regulator or the central bank, which would be the most reasonable step to take, say Forbes and liberal weekly Newsweek. Consequently, the project may prove to be a huge financial loss and the currency translation may lead to more catastrophic consequences by which the potential cost of the bill would considerably increase. Needless to say, the repercussions of the plan would be felt by the domestic economy and Poland would get into enormous debt.
As Newsweek puts it, the project’s assumptions are questionable since they fail to take into consideration the banks’ opinion. The experts and financial analysts cannot reach a consensus in this subject since the bill is not clearly estimated in terms of potential costs and benefits for the borrowers. Therefore, nothing more can be done than considering the bill as ‘a step in the right direction’.
As reported by tabloid daily Fakt, the support for Swiss franc mortgage holders may lead to the bankruptcy of at least two out of six banks which are responsible for three quarters of the Swiss franc loans. Furthermore, the project is viewed as unfavourable to the borrowers who took out a loan in order to undertake business activity. The association Stop Banks’ Lawlessness argues that the Polish Financial Supervision Authority (KNF) had failed to solve the problem. Due to the fact that the estimates, which are being prepared by the institution, will be based on the declarations of banks that may be inaccurate, the profit of the banks is likely to increase at the expense of the borrowers.
On the other hand, Forbes notes a few strengths of the project, that are proposals for mechanisms of debt restructuring, which may include a voluntary agreement between the client and the bank, a transfer of client’s ownership of a property in exchange for the exemption from paying the debt, and compulsory debt restructuring at the so-called ‘equitable rate’. However, even minimal negligence may cause billions in losses for the banks.
In addition, right-conservative Gazeta Polska, which is in favour of the president’s actions, argues that the bill would not put banks and borrowers at a disadvantage. According to the president, the bill must not be unfair to those who took loans in zloty. As he states: ‘I will not agree to a solution that Swiss franc mortgage holders, putting themselves at the risk but knowing that it is possible to earn money due to a low exchange rate of Swiss francs, after its rise, suddenly find themselves in a better situation than those who took loans in Polish zloty’. The final outcome of the project would be satisfactory despite calculated costs which would be incurred by banks that in comparison with their annual income are rather low.
Newsweek concludes that taking into consideration the complexity of the problem, it will take some time to announce the final decision concerning the bill.
