Poland's banking sector's stability should not be endangered by cost of FX housing legal risk - c.bank
Costs related to FX housing loans legal risk should not endanger the stability of the banking sector and its ability to provide lending to the economy, Poland's central bank NBP said in the newest financial stability report. NBP pointed to the volatility of the legal environment in which banks operate.
"Legal risk associated with FX housing loans remains the major burden to the domestic banking sector. However, banks manage it effectively. For four years, banks have offered settlements to their clients and set aside appropriate provisions. The costs of provisioning are high and will remain high in the near future, although they will be substantially lower than the costs incurred so far," NBP assessed.
According to the Poland's central bank, the assessment of the stability of the domestic financial system has for some time been significantly affected by the volatility of the legal environment in which banks operate.
"This volatility stems both from new legislative initiatives (i.e. loan repayment holidays) and uncertainty about the interpretation of the provisions of law on consumer protection," NBP pointed out.
"This diminishes predictability of the operating conditions of banks and the credit market and may result in higher costs of credit or its limited availability to customers, especially households. As the costs of such risk materialisation are difficult to estimate, the domestic banking attractiveness is lower in the perception of investors," it added.
tus/ ao/ nl/