A ruling by the Court of Justice of the European Union (CJEU) due on June 14 is expected to hand Poland’s banks a heavy defeat in their quest to neutralise an avalanche of lawsuits by borrowers claiming that the CHF-denominated mortgages handed out by lenders in the mid-00s were unfair and should be cancelled.
The CJEU will rule on whether banks can claim payments beyond reimbursement of the loan principal in the case that a CHF mortgage is declared invalid. The EU’s top court is also expected to say if consumers can pursue claims against banks.
If the CJEU sticks with the opinion of Advocate General Michael Collins on the issue, published earlier this year, the ruling will bar banks from seeking claims for futher reimbursement while giving customers the right to do so.
The CJEU does not have to follow the opinion of an advocate general but it will be a surprise if it does not.
“The contractual term held to be unfair does not produce binding effects on the consumer and, consequently, he or she ought to be restored to the factual and legal position he or she would have been in had that term not been included in the contract in the first place,” Collins said in the opinion.
Banks, on the other hand, “ought not to derive any economic advantage from a situation [they have] created by [their] own unlawful conduct”, the advocate general added.
Bank customers will have to rely on domestic courts to secure their claims, the advocate general added in what potentially is a lifeline for banks, since it might be years before there is an established line of legal practice with regard to FX loans.
The issue taken up by the CJEU goes to the very core of the long-standing problem that the Polish banks have with hundreds of thousands of mortgages denominated in foreign currencies, primarily the Swiss franc, worth an estimated PLN86bn (€19.3bn).
Polish lenders face thousands of lawsuits over the CHF-denominated mortgages, which they granted when the franc was at an all-time low against the Polish zloty.
At a time of a massive property boom in Poland, banks and financial intermediaries highlighted the attractiveness of the loans’ lower repayments to customers who could not afford them in zlotys.
But when the Swiss central bank unpegged the franc from the euro in January 2015, the zloty weakened considerably nearly overnight, causing the repayments to skyrocket.
The franc today is still worth well over twice as much in zloty terms than it was during the heyday of the CHF-denominated mortgage market.
Not only do borrowers have to pay much bigger repayments, but the loan-to-value of their properties has worsened, making it difficult for them to move property.
The Swiss National Bank’s raising of its policy rate from 0.25% to 1.5% only added to the borrowers’ woes.
The borrowers have long said now that the banks lured them into the mortgages by not highlighting the currency risk enough and using a number of so-called abusive clauses, for example in calculating their CHF-PLN spread.
Thousands of Poles have taken their banks to court, looking to annul the loans or clear the loan contracts of abusive clauses – with courts tending to side with the claimants.
Bank stock fared well on the Warsaw Stock Exchange on June 13, with the WIG-Banki index of the sector rising 3.15% in afternoon trading.
“Taking into account tomorrow’s [announcement of] the awaited CJEU ruling … the bulls show a lot of courage or knowledge, which would be even more valuable,” Jacek Rzezniczek, a stock exchange analyst, told the stooq.pl website.
But if the CJEU’s ruling goes against lenders’ expectations and hopes, the costs they might incure could reach PLN100bn (€21bn), an analysis by the financial market watchdog KNF showed in late 2022.
