ECJ rules in favour of Polish borrowers in Swiss franc mortgage case

ECJ rules in favour of Polish borrowers in Swiss franc mortgage case
By bne IntelliNews October 3, 2019

The Court of Justice of the European Union (ECJ) decided in favour of Polish consumers who took out mortgages in Swiss francs in a ruling announced on October 3. 

The ruling by the EU’s top court will allow mortgage borrowers to ask Polish courts to convert their loans into the local currency, the Polish zloty.

Around 700,000 Poles have taken mortgages out in foreign currencies, mainly Swiss francs, as these offered lower interest rates. However, borrowers struggled to make repayments after the Swiss central bank ended the franc's peg against the euro in January 2015. 

The ECJ ruling was in the case Kamil Dziubak and Justyna Dziubak v. Raiffeisen Bank International AG. The Dziubaks had signed a mortgage contract with Raiffeisen Bank in 2008 for a loan specified in zlotys but indexed to the Swiss franc. The Court of Warsaw asked the ECJ for guidance after discrepancies between local court verdicts. 

An analyst note from ING published ahead of the ruling says: “This is nonbinding for Polish courts but should increase the number of such cases and encourage banks to hedge short CHF positions, thus affecting the zloty.”

"The ruling is a risk for the Polish zloty. It is scheduled just ahead of general elections so the response from authorities may be muted,” ING analysts also commented. They note that the ruling is likely to encourage more court cases. In addition, "The creation of provisions for future FX losses is a factor that could burden banks' current profits."

Commentig on the decision, Finance Minister Jerzy Kwiecinski told reporters: “The position of Polish consumers who took out Swiss franc denominated mortgages was strengthened by the ECJ ruling,” Reuters reported. 

According to the newswire, the Polish banks with the biggest FX mortgage portfolios include units of Santander, BCP, BNP Paribas and Commerzbank, and Polish lenders PKO BP and Getin Noble Bank.

Lenders in Poland were not the only ones to provide Swiss franc-denominated loans during the 2000s to take advantage of low Swiss interest rates; several countries across Central and Eastern Europe are still dealing with this legacy. 

They include Croatia where last month the Croatian Supreme Court ruled in favour of consumers in a landmark case concerning loans pegged to the Swiss franc. The court ruled that banks breached the collective interests and rights of borrowers who took out loans pegged to the franc.