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Franc loans – economists on the CJEU judgment on remuneration for the use of capital

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On Thursday, the judgment of the Court of Justice of the European Union is to be announced regarding remuneration for the use of capital in invalidated CHF loans. Experts expect the CJEU to issue a verdict unfavorable for the banking sector – we learn from a survey by “Rzeczpospolita”.

The newspaper reminds that “already on Thursday, June 15, the judgment of the Court of Justice of the European Union, which is extremely important for Swiss franc borrowers and lenders, will be issued on mutual settlements after the cancellation of a loan agreement containing unfair provisions”.

The judgment on franc loans

“Advocate General CJEU in an opinion from February this year, he indicated that in the light of EU regulations, consumers may demand additional benefits from the bank (and the national court is to decide), but banks are absolutely not entitled to such a right. Since the opinion of the ombudsman is not binding for the Tribunal, and the final judgment is not yet fully settled, we asked market economists what they think can be expected. In our survey, we presented four theoretically possible scenarios regarding the situation of banks” – he explains.

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As Rzeczpospolita informs, out of 16 analysts who answered her question, “no one pointed to the option that the CJEU would not raise the issue of lenders’ rights at all, and only one person decided that in their opinion the Court may rule in favor of banks.”

“The remaining 15 people believe that the Tribunal will treat banks harshly, denying them the right to remuneration for non-contractual use of capital. Two variants can be distinguished here as well” – he adds.

According to the daily, “in the first judgment of the CJEU, following the opinion of the ombudsman, it can be categorical and unambiguous, recognizing that the bank cannot under any circumstances benefit from the situation arising as a result of its own unlawful action”. “Six economists surveyed by us indicate such a variant” – the article states.

In the second scenario, we read, “the CJEU’s verdict may be slightly less firm, leaving some little room for interpretation as to how the refusal of the right to remuneration is to be applied, or indicating, for example, a greater role of national courts in this matter.”

Nine economists we surveyed point to such a possibility.

Opinion of the CJEU spokesperson

According to the February opinion of the Advocate General of the CJEU, if the cancellation of a loan agreement was due to unfair terms, consumers may pursue claims from banks that go beyond the reimbursement of cash benefits. Banks, on the other hand, do not have a similar right.

The market assessed that the opinion of the CJEU spokesperson is negative for the banking sector. The pro-consumer decision of the CJEU may mean that Swiss franc borrowers, who have been hesitant to make such a move, may decide to sue banks. The influx of new CHF cases will make it necessary for banks to establish further provisions for legal risk, which would weaken their capital positions.

The chairman of the Polish Financial Supervision Authority, Jacek Jastrzębski, recently assessed that the Polish banking sector is prepared for a negative judgment of the CJEU, and the supervision is finalizing work on the assumptions of a statutory solution to the problem of CHF loans. In 2022, the supervision estimated that an unfavorable judgment of the CJEU could cost banks about PLN 100 billion.

In recent statements, representatives of the sector shared the opinion as to the readiness and preparation of banks for a negative ruling, but at the same time assessed that the condition of the financial sector and its ability to finance the economy would be undermined in such a scenario.

Main photo source: Court of Justice of the European Union

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