EU top court adviser backs FX borrowers, Polish bank stocks fall

WARSAW, Feb 16 (Reuters) – An adviser to the European Union’s top court on Thursday backed in an opinion Polish borrowers with Swiss franc-denominated mortgages in a long-running case that the country’s regulator has warned could cost the country’s banks 100 billion zlotys ($22 billion).

Advocate General Anthony Michael Collins said in a statement that the banks cannot pursue claims for extra remuneration from thousands of borrowers with mortgage contracts which are deemed invalid because they contained unfair terms.

While the advocate general’s opinion is not binding, the Luxembourg-based European Court of Justice (CJEU) usually follows it when making a final ruling, which could be handed down before the summer judicial recess.

“After a mortgage contract is declared invalid due to unfair terms, consumers can pursue claims against banks beyond the reimbursement of monetary benefits; banks do not have this right,” Advocate General Anthony Michael Collins said in a statement.

Poland’s WIG Banks index (.BNKI) was 2.6% down at 1120 GMT.

The country’s KNF financial watchdog has warned that the banking sector could face a 100 billion zlotys hit in case of an unfavourable ruling.

“The opinion is negative for the banks,” Santander BM analyst Kamil Stolarski told Reuters.

He said that if the final verdict confirms banks cannot make claims for the use of capital it will cost the sector tens of billions of zlotys. He added that if Polish courts grant remuneration to consumers the additional cost would be similar in the worst case scenario.

The Polish Bank Association said in a statement that the opinion is not binding for either the judges of the CJEU or national courts, as it is a starting point for an internal discussion on the final shape of the judgment.

MORTGAGES

“It is a very pro-consumer opinion,” said Kamil Chwiedosik founder of the Life Without Credit organisation which helps mortgage holders in legal proceedings with banks.

“What surprised on the plus side…is that … the entity that is weaker will be able to use the additional right to remuneration for its capital paid under a dishonest contract to the bank,” he added.

Hundreds of thousands of Poles took out mortgages in foreign currencies, mainly in Swiss francs, attracted by lower interest rates. They are now paying far bigger instalments than expected after the Swiss franc soared against the zloty and following interest rate hikes in Switzerland.

Many mortgage holders took banks to court, while banks started offering settlements to find an out-of-court solution. In 2022 there were at least 9,600 court verdicts, 97% of which in favour of customers, PAP news agency reported quoting Votum Robin Lawyers.

The total stock of foreign currency mortgages in Poland stood at almost 79 billion zloty in December based on the latest available KNF data, with Swiss franc mortgages accounting for over 52 billion zloty.

The total value of zloty mortgages exceeded 391 billion, their share having increased to some 83% of the total from just 30% at the height of a foreign currency lending bonanza in 2008.

Reporting by Anna Koper, additional reporting by Alan Charlish, Anna Wlodarczak-Semczuk, Anna Banacka; editing by Jason Neely and Emelia Sithole-Matarise

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