WARSAW, June 15 (Reuters) – The European Union’s top court on Thursday backed 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 ($24.31 billion).
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 installments than expected after the Swiss franc soared against the zloty and following interest rate hikes in Switzerland.
The court ruling means that banks cannot charge for the cost of capital on foreign currency loans which were deemed invalid because they contained unfair terms, a verdict which had been expected by analysts.
“EU law does not preclude, in the event of the annulment of a mortgage loan agreement vitiated by unfair terms, the consumers from seeking compensation from the bank going beyond reimbursement of the monthly installments paid,” the court said in a statement.
“By contrast, it precludes the bank from relying on similar claims against consumers.”
While the cost to the Polish banking sector will be large, analysts have said it will be able to absorb the blow. The ruling was in line with an opinion from an adviser to the court which was issued in February.
The court said in its statement that the argument about the stability of the financial markets is not relevant in the context of the interpretation of the directive, which is intended to protect consumers.
SETTLEMENT OR COURT
Polish financial regulator KNF said in a statement that the ruling was negative for the Polish banking sector and wider economy, but that the country’s lenders were safe.
Poland’s WIG Banks index (.BNKI) was down 1.8% at 0937 GMT.
While banks have been offering out-of-court settlements to clients, many prefer to go to court, especially seeing as judges have ruled in their favour in 97% of cases in the first quarter according to Votum Robin Lawyers.
Andrzej Zorski, a partner at law firm Pilawska Zorski, said that he believed the ruling would encourage more mortgage holders to take banks to court.
“Borrowers who were afraid to sue the bank due to the threat of a bank lawsuit for remuneration for the use of capital after today’s judgment should no longer have such fears,” he wrote in an email.
However, Tadeusz Bialek, president of the Polish Bank Association, told a news conference that banks had already concluded around 60,000 settlements with customers and hoped to reach more, saying it was a “cheap and quick way of amicably resolving cases”.
($1 = 4.1129 zlotys)
Reporting by Alan Charlish, Anna Wlodarczak-Semczuk, Pawel Florkiewicz, Karol Badohal; Editing by Frank Jack Daniel, William Maclean
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