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Credits. WIRON will replace WIBOR – a revolution in loans delayed. President of Alior Bank Grzegorz Olszewski comments

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WIRON was to finally replace WIBOR in 2025. However, the Steering Committee of the National Working Group (KS NGR) for the reform of indicators extended the maximum deadline for implementing the reform. This is important information for holders of loans with variable interest rates. – Making such a change quickly could cause customer dissatisfaction in the future, because the new indicator will behave slightly differently than WIBOR – said Grzegorz Olszewski, president of Alior Bank.

WIBOR and the bank’s margin are components of the loan interest rate. This means that the amount of installments paid depends on the WIBOR rate. The WIBOR index is to be replaced by the WIRON (Warsaw Interest Rate Overnight) index. Customers who currently have loans based on WIBOR will have to sign annexes to the loan agreement.

The entire reform, assuming the withdrawal of products and instruments using WIBOR, was to be completed in 2025. This was the result of the road map published at the end of September 2022 on the website of the Polish Financial Supervision Authority.

However, the Steering Committee of the National Working Group on Indicator Reform decided this week to extend the deadlines for implementing the Reform Road Map.

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WIBOR will disappear later

The final moment of converting the portfolio of contracts and instruments with WIBOR is set for the end of 2027. “However, neither the directions of the reform nor the scope of activities planned so far in the Road Map change. The NGR Steering Committee will monitor the implementation of key elements of the Road Map in order to ensure optimal conditions for the development of the financial market in Poland,” it was written.

“Postponing the deadline for completing the reform will provide adequate time to create conditions for the popularization and dissemination of the use of RFR (risk-free-rate) benchmarks in contracts and financial instruments, taking into account operational, technical, communication and legal issues, which will constitute the basis for the development market and increasing the resilience of the domestic financial market,” the committee added.

At the same time, KS NGR reported that the work carried out so far by the users of benchmark indicators is progressing according to schedule and confirms their involvement in the transformation process.

ING Bank Śląski was the first bank in Poland to introduce in June this year. to your offer mortgage loans based on the new WIRON reference index. Work on the implementation of the new mortgage loan offer is also ongoing in other banks, including: in PKO BP, Bank Pekao, mBank, Bank BNP Paribas and Bank Millennium.

“A number of challenges specific to the Polish financial sector have been identified”

The Committee informed that the main challenge for finalizing the reform is the adequate and economically and legally safe conversion of the historical portfolio of contracts and financial instruments in which the WIBOR reference index is used.

“During the work of the NGR, a number of challenges specific to the Polish financial sector were identified resulting from the scale and structure of contracts/instruments using WIBOR that generate risks for carrying out a safe conversion. The complexity of the reform of benchmarks in the Polish financial sector has also increased due to the increased volatility of interest rates,” it wrote. .

These elements have recently been subject to comprehensive analysis. They include scenarios of economic conditions based on historical data that could have led to an unintended increase in the costs of the benchmark switching process for all financial market participants.

“An important argument for changing the reform schedule was the possible accumulation of events in a short period of time, which could have negative financial consequences for the Polish financial market as a whole. The conclusions from these analyzes and discussions led to the revision of the current Road Map and the indication of new deadlines,” it explained.

The President of Alior Bank comments

The President of Alior Bank, Grzegorz Olszewski, assessed that extending the benchmark reform will enable banks to move more smoothly to the new indicator.

– This process takes time. The change must be economically neutral, banks must have time to adapt the product offer and change the current portfolio to the new indicator. From this point of view, it is good that this deadline has been extended, I think the change will go more smoothly – said Olszewski at the Thursday conference.

He noted that “from the client’s point of view, the educational process is very important.” – Making such a change quickly could cause customer dissatisfaction in the future, because the new indicator will behave slightly differently than WIBOR. It’s good that we will have more time to implement new products and educate customers (…) – he added.

Currently, WIRON 3M Folding Rate is 5.63346%. For comparison, WIBOR 3M is 5.64%.

Main photo source: Shutterstock

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