Page 13 - Poland Outlook 2020

many Polish banks appears to have gravitated towards a more incremental strategy.
Courts have increasingly sided with debtors, but final verdicts are less encouraging for borrowers and are likely to prevent a significant spike in new cases. Also, the prevailing provisions policy is likely to be on a case by case basis rather than all FX loans/losses being provisioned upfront.
In theory, if the courts were to side with debtors, however, the conversion of CHF mortgages to PLN at origination rates takes place and the FX loss will burden banks. That appears unlikely at the moment. It cannot be ruled out, however, that the issue will return in the rhetoric of the presidential campaign that is about to kick off ahead of the May vote and thus impact banks’ stocks.
Overall, the Polish financial system is “stable and resilient and systemic risk is moderate,” the National Bank of Poland (NBP).
“The rate of lending growth and the level of debt relative to GDP remain moderate, and the structure of financing of banks is stable. The Polish banking system, as a whole, remains resistant to shocks due to the accumulated capital and low level of financial leverage. The vast majority of banks with a surplus meet capital requirements and short-term and long-term liquidity standards,” the NBP wrote.
That said, a number of challenges do exist and will require monitoring or action, according to the NBP. Apart from the problem of CHF mortgages, these are:
● difficult financial situation of some banks, which may indirectly affect other banks, mainly if the need arises to replenish the deposit guarantee fund or carry out resolution;
● low profitability of some, mostly smaller and medium-sized, banks, which impedes their ability to raise capital, maintain resilience to shocks and to expand activity;
● growing share of high-value consumer loans with long maturities may, during the economic downturn, be the source of higher credit risk than the remaining part of the banks’ portfolio;
● the growing value of housing loans originated in the environment of low interest rates and increased price growth on the real estate market;
● development challenges faced by the cooperative banking sector, which is characterized, among others, by low efficiency and an insufficient degree of integration;
● greater role of the government sector as an owner of a large portion of the financial system (including the banking sector, in particular) and, at the same time, as its supervisor and debtor (through the government bond portfolio);
● need for the adjustment of the WIBOR and WIBID reference rates to the requirements of the Benchmark Regulation (BMR) effective in the EU
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