Polish banks may bear significant costs due to legal and regulatory risks related to free credit's sanction - macroprudential body
Poland's macroprudential body KSF-M during the meeting identified a new source of risk in the Polish financial system and its environment related to the application of the sanction of free credit (SKD), the KSF-M said in a statement after the regular meeting. In KSF-M's view, the legal and regulatory risks associated with the free credit sanction may create significant costs for banks.
"As a result of ongoing analysis and discussion, KSF-M has identified a new source of risk associated with the application of the free credit (SKD) sanction. In the Committee's view, the legal and regulatory risks associated with the free credit sanction may cause significant costs for banks," Poland's macroprudential body assessed.
"In addition, by increasing uncertainty in the financial market, it may increase the cost of credit in the future and limit its availability. The Committee has therefore decided to take action to mitigate these risks at an early stage by issuing a position paper," it added.
During the meeting, the members of KSF-M also discussed other sources of risk in the Polish financial system and its environment.
According to them, the legal risk of foreign currency housing loans remains at the top of the risks to the stability of Poland's financial system. However, as stressed in the statement, its severity is decreasing due to the high level of provisions made by banks so far and the progressive settlement process.
"As a result, the overall risk assessment has decreased compared to the fourth quarter of 2024," KSF-M assessed.
The geopolitical situation and WIBOR undermining were listed next as other important sources of risk.
"The risk of weakness in some institutions and contagion next quarter was assessed as non-systemic, resulting in its removal from the list of vulnerabilities," KSF-M reported.
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