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CHF loans – judgment of the CJEU. Chairman of the KNF on “dramatic consequences”

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The consequences of this will, of course, be dramatic – judges the chairman of the Polish Financial Supervision Authority Jacek Jastrzębski, referring to a possible negative judgment of the Court of Justice of the European Union on CHF loans for banks. In his opinion, it would mean problems in obtaining financing for the energy transformation or defense spending. As the head of the KNF stated, the banks made a mistake that they were not interested in a systemic solution to the problem of these loans earlier, and later they were insufficiently involved in settlements.

Responding to the question about the expected judgment of the CJEU in case C-520/21 regarding the use of capital after the cancellation of a loan agreement in CHF, the chairman of the KNF said:

– The consequences of this are, of course, dramatic. And I’m not talking about bankruptcies or the collapse of the entire financial system, because banks largely have these costs agreed in reserves. Of course, there will be a need to create additional reserves, but banks are generally prepared for this. And they are also prepared by us. It’s not like nobody expects it and banks are obviously preparing for it – said Jastrzębski during a discussion panel at the 10th Congress of the Polish Insurance Association in Sopot.

Court of Justice of the European Union is to issue a judgment on June 15 in case C-520/21, concerning remuneration for the use of capital after the cancellation of the CHF loan agreement.

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Released earlier ombudsman’s opinion did not constitute a final settlement, but was negative for the banking sector. It was assessed that if the CJEU shared the ombudsman’s position, it would trigger another wave of lawsuits by borrowers seeking the annulment of their contracts.

Big challenges ahead for the banking sector

Jastrzębski assessed that the financial sector is facing major challenges in the near future.

– We have to finance the energy transformation, we have to finance gigantic military expenditures. We have an appetite to participate in the reconstruction Ukraine. And all this requires, above all, capital. And now the question is whether it is really rational that we are transferring the PLN 100 billion of capital – apart from even the question of to what extent this transfer is already included in the reserves and to what extent it is not? In my opinion, this is not justified – said Jastrzębski.

– The statement that the answer to the abusive clause regarding the freedom to set the exchange rate should be a free loan – this is disproportionate. This money, instead of working for our economy, will be redistributed in a disproportionate way, in my view.

“The phenomenon of moral hazard is materializing”

The chairman of the KNF announced that the settlement solution proposed by him was “fair and balanced”, but had previously been contested as too favorable for customers and excessively costly for banks.

At the end of 2020, the chairman of the Polish Financial Supervision Authority, Jacek Jastrzębski, proposed to the banks that they present clients with attractive terms of settlements, which would be a real alternative to going to court. According to the suggestion of the head of the KNF, bank customers could settle accounts with banks as if their loans were zloty loans from the beginning, bearing interest at the appropriate WIBOR rate plus a margin.

– Now, the settlement solution, if it became a statutory solution, would be treated by the banks as a gift. The banks made a mistake not wanting to go for any systemic solution to the problem of CHF loans at the beginning of the previous decade. Later, they did not sufficiently engage in settlements when it was still possible to do so, when interest rates were low and customers would be more willing – said Jastrzębski.

– Now the phenomenon of moral hazard is materializing on the other side, on the side of professional participants of the financial market, because it suddenly turns out that the banks say: Help the KNF, because we are needed to finance the economy – he added.

Main photo source: Shutterstock

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