Top Court Exposes Polish Banks to Nightmare FX-Loan Scenario
- Pioneer ruling hints banks may need to convert loans at a loss
- Client-friendly verdict may serve as guidance for lower courts
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Poland’s Supreme Court sent the zloty and bank stocks tumbling as its first official verdict in a case over a foreign-currency mortgage stoked concern the local banking sector is exposed to the most-feared scenario in the $31 billion dispute.
The court said on Thursday that loans -- mostly in Swiss francs -- could be converted back to the zloty at an exchange rate that’s unfavorable for the lenders. Additionally, the interest paid by the client would still be benchmarked against a low Swiss Libor rate rather than a higher Polish equivalent.