EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 5 August 2015  
on a draft law on specific terms of restructuring of home loans denominated in foreign currency  
(CON/ 2015/26)  
 
Introduction and legal basis  
On 23 July  2015 the European Central Bank (ECB) received a request from the Polish Parliament for an 
opinion on a draft law setting specific terms for the restructuring of housing loans denominated in a 
foreign currency and amending certain  other Acts  (hereinafter the ‘draft law’ ). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth  indent of Article 2(1) of Council Decision 98/415/EC1, as 
the draft law  contains  rules applicable to financial institutions insofar as they materially influence the 
stability of financial institutions and markets . In accordance with the first sentence of Article 17.5 of the 
Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the draft la w 
1.1 The purpose of the draft law is to facilitate the restructuring of  home  loans denominated in a foreign 
currency (hereinafter ‘foreign currency home loans’) that were granted before the date of entry into 
force of the draft law. In particular, banks  will be required, on the request of an eligible borrower,  to 
restructure foreign currency home loans , in accordance with the terms set out in the draft law , until 
30 June 2020.  
1.2 Under the draft law, borrower s who are consumer s will be eligible to request a  restructur ing of their 
foreign currency home loans , provided that: a) the property is used by the borrower s to satisfy their 
own housing needs ; b) the borrower s own no other residential unit nor single family house;  c) the 
usable area of the property does not  exceed 75 square met res in respect of a  residential unit or 
100 square meters in respect  of a single family house (unless  at the date of filing a restructuring 
request  the borrower is raising three or more children,  in which case no square meter limit applies ); 
and d) the loan to value (LTV)  ratio of the foreign currency home loan is above 80%.  
1.3 The draft law provid es that t he restructuring reques t may be filed at different points  of time 
depending on the LTV ratio. It may be filed as soon as the draft law comes into force where the 
value of the LTV ratio is above 120% , no sooner than one year after the draft law comes into force 
where the LTV ratio is above 100% but equal to or lower than 120%, and no sooner than two years 
after the draft law comes into force where the LTV ratio is above 80% but equal to or lower than 
100%.  
                                                      
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42) . 
ECB -PUBLIC  
2 1.4 The draft law provides that, once the borrower exercises the right to restructure a home loan, the 
borrower’s new obligation towards the bank  will be  the total of the following three components : 
(i)  First, the principal  amount of the home loan,  denominated in zloty ( PLN), which would have 
remained payable on the date of filing the restructuring request had the borrower concluded , 
with the same bank , a home loan denominated in PLN  with identical loan payment terms on 
the date he or she concluded the foreign currency home loan which is being restructured;    
(ii)  Second, the difference between:  a) the remaining principal amount of the foreign currency  
home loan which is being restruc tured,  converted into PLN at the buying exchange rate for 
the relevant currency published by Narodowy Bank Polski (NBP) on the day preceding the 
borrower ’s restructuring request ; and b) the amount represented by the first component  in 
point i) above.  If, based on such calculation,  the resulting amount has a  positive  value , the 
bank will be required to redeem half of the amount . The non- redeemed half will form the 
second component of the borrower’s  new obligation to the bank ;  
(iii)  Finally, the difference between  two further amounts. First,  the amount equal to the total 
principal and interest payments which  the borrower would have made up to the date of filing 
the restructuring request , had the borrower concluded,  with the same bank, a home loan 
denominated in PLN with identical loan payment terms on the date he or she concluded the 
foreign currency home loan which is being restructured.  In calculating this amount, an 
interest rate based on the Warsaw Interbank Offered Rate base rate on the relevant dates  
will be applied, in line with the specific time period for the Euro Interbank Offered 
Rate/L ondon Interbank Offered Rate base rate applied in the contract for the foreign 
currency home loan. It will be  assum ed that the bank’s margin would have been equal to that  
set in the relevant contract concluded by the borrower . If the contract provides for changes to 
the interest rate at the discretion of  the bank’s management , the interest rate will be applied 
according to the terms stipulated in the relevant contract . Second,  the amount  representing, 
in PLN, the total principal and interest payments  which the borrower has made under the 
foreign currency home loan up to the date of filing the restructuring request . The conversion 
to PLN will be based on the buying exchange rate for the relevant currency on the day 
preceding each respective payment date,  as published by NBP  (unless the borrower was 
obliged to make payments based on the buying exchange rate set by the bank, in which 
case that exchange rate shall be used) . The difference between the two amounts described 
in this paragraph forms the third component  of the borrower ’s new obligation to the bank.  
The amount represented by the first component  will substitute for  the borrower’s obligation under 
the original, now -restructured foreign currency home loan.  The loan will be performed according to 
the contractual  terms of the original foreign currency home loan and  bear the same interest  rate as 
that described in section ii) above.  
In order to facilitate payment of  the second and third components , the bank will be required to grant 
a new loan to the borrower for the remaining period of the original  foreign currency home loan. 
Article  8 of the draft law refer s to a ‘ non-mortgage loan redeemed by the bank ’ and the ECB  
therefore understands that the new loan will be uncollateralised.  The interest rate on the new loan 
may not exceed NBP’s current reference rate.  
ECB -PUBLIC  
3 1.5 Finally, t he draft law amends personal income tax law to provide relevant tax exemptions for the 
borrower as regards the amount of the debt subject to write- off. The draft law also amends 
corporate income tax law to treat the  non-mortgage backed debt written off by the bank as a tax 
deductible expense.   
 
2. General observations  
2.1 Prior to the global financial cr isis, borrowing in foreign currencies by households and non- financial 
corporations was popular in several Member States2. As previously noted by the ECB3, the l ower 
interest rates appli cable  to foreign currency loans compared to loans in the domestic currency, as 
well as the expectation of domestic currency appreciation, increased the demand for such loans . 
Most of the foreign currency loans in Poland are housing loans  denominated in Swiss francs  
(CHF) . Foreign currency housing loans constituted approximately 47% of all outstanding housing 
loans and 29% of all outstanding loans to households in June 20154. 
2.2 Acknowledging that Directive 2014/17/EU of the European Parliament and of the Council5 does not 
apply to credit agreements existing before 21 March 2016 , as previously noted by the ECB6, the 
retroactive effect of the draft law does not seem to be in line with the general aim and principle of 
Article 23(5) of Directive 2014/17/EU.  This Directive allows Member States to further regulate 
foreign currency l oans, on the condition that such regulation is not applied with retroactive effect.  
2.3 It is for the Polish authorities  to assess whether the retroactive character of the draft law complies 
with Polish legal and constitutional principles.  
2.4 The ECB notes that the draft law draws on previous proposal presented  by the Polish Financial 
Supervision Authority  (KNF), with the notable difference that the KNF ’s proposal anticipated that 
the restructuring of foreign currency loans would be voluntary for both bank s and borrowers.  
 
3. Specific observations  
3.1 Eligibility criteria  
3.1.1  The rationale behind the eligibility criteria  for participation in the restructuring scheme  raises some 
doubts. In particular, t he ECB notes that these criteria are not directly link ed to the borrower’s  
actual income position. Given that not all households with a lower income and/or a fragile financial 
situation due to exchange rate fluctuations will be eligible , it is unclear to what extent  the measures 
proposed in the draft law would substantially reduce overall loan default risks , or provide debt relief 
for low income households holding foreign currency home loans .  
3.1.2  The ECB also notes that the  proposed eligibility criteria , in particular , the fact that they do not refer 
                                                      
2  For further information on lending in foreign currencies in the Union see the Annex to Recommendation 
ESRB/2011/1 of 21 September 2011 on lending in foreign currencies (OJ C 342, 22.11.2011, p.1).  
3  See Opinion CON/2014/59, para. 2.2.  All ECB opinions are availabl e on the ECB website at www.ecb.europa.eu . 
4  See NBP Monetary and financial  statistics  report  at 
http://www.nbp.pl/en/statystyka/czasowe_dwn/nalez_zobow_banki_en.zip.  
5  Directive 2014/17/EU of the European Parliam ent and of the Council of 4 February 2014 on credit agreements for 
consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and 
Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34).  
6  See Opinion CON/2014/59, para. 3.2.  
ECB -PUBLIC  
4 to a given  household ’s available income,  could raise issues of equal treatment.  
3.1.3  Finally , the ECB notes that the criterion linked to the LTV ratio may be difficult to assess given 
fluctuations in the exchange rate.   
3.2 Effects on the banking sector  
3.2.1 The ECB notes that t he implementation of the draft law is expected to entail  financial costs for the 
banking sector . This , in turn, may negatively affect profits and the future lending capacity of certain 
credit institutions . In particular, by introducing a restructuring right that will be exercisable over  
several years, the draft law m ight create a challenge for the Capital Adequacy Assessment 
Process es (ICAAP) of the affected institutions , potentially leading  to increased write- down 
requirements. As a result , and given that foreign banking groups are dominant investors in banks 
that hold almost  60% of banking assets in Poland, it cannot be excluded that the measures 
affecting foreign currency  loans  in Poland might also have cross- border effects on the consolidated 
profits of international banking groups. However, given the cost estimates presented in the 
explanatory memorandum to the draft law , and the relatively small size of the majority of Polish 
banking subsidiaries , as compared to their parent banking groups, such spill -over effects should be 
limited.  
3.2.2 As regards  the proposed burden- sharing mechanism described in points (ii) and (iii) of paragraph 
1.4 above, the ECB notes that the new loans granted to borrowers who take advantage of the right 
to restructure will not be priced at market rates. The proposed establishment of NBP’s  current  
reference interest rate as  the maximum interest rate for such new loans is substantially  below the 
usual pricing of uncollaterali sed, long- term non- mortgage loans. T his could have a further negative 
effect on the future profitability of the affected banks.  
3.2.3  From a banking supervisory perspective, the ECB notes that t he restructuring of the foreign 
currency loans as proposed by the draft law does not eliminate al l risks relating to such loans, in 
particular interest rate risks . 
3.2.4 It should also be noted that the restructuring will lead to a one- off increase in operational costs for 
the affected credit institutions  in Poland , in particular , due to revaluation , unwinding of existing 
hedges and refinancing. In that context, the KNF  is recommended to consider how it c ould address  
potential  negative effect on the sound capital base of the credit institution s concerned resulting 
from the application of the draft law.  
3.3  Effects on f inancial stability  
3.3.1 The ECB has pointed out on several occasions the risks associated with foreign currency loans7. In 
particular, they represent a major risk to financial stability in several Member States, where the 
share of foreign currency loans is relatively high. The ECB points in this respect to the analysis of 
such risks made by the European Systemic Risk Board (ESRB) and to the ESRB 
recommendations for addressing such risks , made in Recommendation ESRB/2011/1 of 
21 September 2011 on lending in foreign currencies8.  
                                                      
7  See in particular the ECB Financial Stability Review of June 2010 and,  in respect of the foreign currency loans in 
Hungary,  Opinions CON/2011/87, CON/2012/27, CON/2014/59, CON/2014/72 and CON/2014/76.  
8  Recommendation ESRB/2011/1 of 21 September 2011 on lending in foreign currencies (OJ C 342, 22.11.2011, p.1) . 
ECB -PUBLIC  
5 3.3.2  However, in the case of Poland,  such risks do not , at present,  appear  to be of a systemic nature for 
the financial system and are not seen as representing a particular risk  from a financial stability  
perspec tive. First , the share of such foreign currency  housing  loans in the total housing loan 
portfolio is diminishing and currently amounts to around 47%. Second, following the adoption and 
revision by the KNF of Recommendation S9, the supervisory guidelines related to the granting of 
housing loans  have  tightened significantly , main ly from January 2014. This measure includes, inter 
alia, a maximum loan maturity (35 years, with a recommended maximum maturity of 25 years), the 
requirement to grant the loan in the currency of the borrower’s income (in force as of July 2014) 
and a maximum level for the LTV ratio for newly granted housing loans (95% in 2014, with the 
general target value of 80% from  2017). The revised Recommendation S has contributed to 
maintaining th e positive trend in the currency structure of new mortgage lending in Poland and, in 
the longer -term, should result in a more balanced growth of housing loans . Finally, the current 
macroeconomic situation in Poland is characterised by sustained strong economic growth, 
increasing real disposable income of households  and an ongoing declin e in unemployment , 
reducing the default risks associated with  home  loans.   
3.3.3  From a financial stability perspective,  and subject to the comments on the appropriateness of  the 
eligibility criteria  set out in paragraph 3.1, the conversion of foreign currency  loans should reduce 
part of the currency mismatches in households’ balance sheets . This is expected to provide relief 
for distressed foreign currency borrowers and contr ibute to reducing the credit risk of banks in the 
longer -term.  
3.3.4  As regards the longer -term effects on financial stability, the ECB remains  of the opinion that, when 
introducing measures in relation to settling and converting foreign currency  loans, due 
consideration should always be given to fair burden sharing among all stakeholders , thus also 
avoiding moral hazard in the future10. This consideration should also include foreign banking 
groups, whose Polish subsidiaries currently hold close to 60%  of all banking assets in Poland.  
3.4  Effects on  the Polish economy  
3.4.1 The draft law might also have some negative effects if it leads to a deteriorati on of  foreign investor 
sentiment due to a perceived increase in legal uncertainty and country risk. Consequently, the ECB 
suggests that the Polish authorities carry out a thorough analysis of the possible effects on the 
economy of introducing measures having retroactive effect.  
 
This opinion will be published on the ECB’s website.  
 Done at Frankfurt am Main,  5 August 2015.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                      
9  Recommendation S on good practices with regard to management of credit exposures that finance property and are 
mortgage- secured, last  revised in June 2013.  Available on the KNF  website at  www.knf.gov.pl .  
10  See CON/2014/59, para. 3.4 and CON/2014/87, para. 3.3.