Opinion of the European Central Bank of 29 July 2016 on specific rules for restructuring loans indexed or denominated in foreign currency (CON/2016/39)
Date: 2016-07-29
Institutions: European Central Bank
Subjects: Poland, debt, financial stability, foreign currency, loan, national law, natural person

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 29 July 2016  

on specific rules for restructuring loans indexed or denominated in foreign currency 

(CON/2016/39) 

Introduction and legal basis 

On 15 June 2016 the European Central Bank (ECB) received a request from the Polish Parliament for an 

opinion on a draft law establishing specific rules for the restructuring of loans denominated or indexed to 

a currency other than the Polish zloty. An updated version of the draft law (hereinafter the ‘draft law’) was 

received on 11 July 2016. 

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/EC 1, 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 law 

1.1  The purpose of the draft law is to facilitate the restructuring of loans denominated or indexed in a 

foreign currency (hereinafter ‘foreign currency loans’) that were granted after 1 January 2000 for a 

period exceeding 60 months, even if such loans have been repaid in full or terminated and settled. 

The draft law also prohibits granting of any future loans involving settlement in a foreign currency. 

1.2  Under  the  draft  law,  all  borrowers  that  are  consumers  or  other  natural  persons  are  entitled  to 

request the restructuring of their loans. Restructuring is subject to the following rules: 

(i) 

Any contractual obligation of the borrower denominated in a foreign currency or indexed 

to a foreign currency is deemed to be null and void; 

(ii) 

The principal amount of the loan is the amount in Polish zloty (PLN) actually paid to the 

borrower.  Based  on  the  explanatory  memorandum,  the  ECB  understands  that  the 

exchange rate used to convert the principal amount will be the exchange rate applicable 

on the date the amount is paid to the borrower; 

(iii) 

The interest rate on the loan,  which  will for each interest period comprise the base rate 

and the margin, is determined based on the following rules: (a) the margin is equal to the 

level  set  in  the  loan  agreement  but  must  not  be  higher  than  4  %,  (b)  the  base  rate  for 

each  interest  period  is  equal  to  the  reference  rate  of  Narodowy  Bank  Polski  (NBP)  in 

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). 

 
 
 
 
 
 
 
                                                 
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force on the first day of a given period, and (c) the interest rate must not exceed 30 % of 

the margin set out in the loan agreement for the entire settlement period (before and after 

the restructuring); and 

(iv) 

The  amount  of  any  fees,  commissions,  insurance  premiums  and  other  costs  which  the 

borrower is obliged to pay and which are denominated in or indexed to a foreign currency 

is set based on the exchange rate applicable on the date of their payment to the lender. 

1.3  The  draft  law  provides  that  any  loan  repayments  made  prior  to  the  date  on  which  the  borrower 

notifies the lender of his/her intention to restructure the loan will be credited towards the repayment 

of the loan following its restructuring. If the borrower has made repayments in a foreign currency, 

the amount repaid will be calculated based on the exchange rate used by the bank on the date of 

payment. If the loan was repaid in Swiss francs (CHF), the lender’s purchase rate on that date will 

be used for the purposes of the calculation.  

1.4   According to the draft law, if the total amount of repayments made prior to the date on which the 

borrower notifies the lender of his/her intention to restructure the loan is lower than the total amount 

of repayments due following the restructuring, the difference between these amounts will increase 

the  borrower’s  debt.  Conversely,  if  the  total  amount  of  repayments  is  higher,  the  difference 

between the amounts will reduce the borrower’s debt. 

1.5  Furthermore,  if,  following  the  restructuring,  the  repayment  instalments  would  be  at  least  10 % 

higher  than  the  first  loan  instalment,  the  borrower  may  extend  the  loan  repayment  term  by  the 

period  necessary  for  the  loan  instalments  to  no  longer  exceed  the  pre-restructuring  loan 

instalments by more than 10 %. Any such extension is for a maximum period of 10 years. 

1.6  The draft law also provides that the lender may not amend any other term of the loan agreement in 

connection with the restructuring. 

1.7   As regards the application procedure, the draft law provides that the borrower may notify the lender 

of  its  intention  to  restructure  his/her  loan  within  two  years  of  the  entry  into  force  of  the  draft  law. 

Following  such  notice,  the  lender  will  have  30  days  to  notify  the  borrower  of  the  following:  (i)  the 

total amount of loan instalments due in the period between the date on which the loan was granted 

up  to  the  notification  date,  (ii)  the  total  amount  of  loan  instalments  paid  by  the  borrower,  (iii)  the 

level of the borrower’s debt following the restructuring, (iv) the interest rate on the loan following the 

restructuring  and  (v)  the  loan  repayment  schedule  following  the  restructuring  for  the  next 

12 months.  The  borrower  may  apply  to  have  his/her  loan  restructured  within  two  months  of 

receiving  the  above  information  from  the  lender.  If  the  borrower  contests  the  correctness  of  the 

information  provided  by  the  lender,  he/she  may  within  one  month  request  that  the  Financial 

Ombudsman,  through  mediation,  determines  the  rules  for  the  loan  restructuring.  Where  no 

agreement  can  be  reached  following  such  mediation,  the  borrower  may  request  that  the  court 

determines the rules for the loan restructuring. 

1.8  With  regard  to  any  loans  that  have  been  repaid  in  full,  the  draft  law  provides  that,  if  the  lender’s 

calculation  of  the  loan  following  the  restructuring  indicates  that  the  borrower  has  overpaid  an 

amount, the lender must return any overpayment to the borrower within 30 days of the borrower’s 

request. 

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1.9  With regard to any loans that have been terminated, within 30 days of the borrower’s request, the 

lender must notify  the  borrower of the information set out in paragraph 1.7  as  well  as of the loan 

repayment arrears outstanding on the date the loan was terminated. If requested by the borrower, 

the loan is restructured and the previous termination of the loan agreement becomes null and void. 

The restructured principal amount of the loan is increased by 1 % of the arrears. 

1.10  The draft law also provides that if the lender has caused the borrower to suffer a loss, he/she must 

remedy such loss or reinstate the state of affairs that existed on the date the loan agreement was 

entered into. 

1.11  Under the draft law, the borrower is entitled to refer any doubts concerning mutual settlements and 

terms of the restructuring for verification, determination and assessment by a civil court. The draft 

law prescribes that the court’s decision must not include restructuring terms which are worse than 

those included in the information provided by the lender. 

1.12 

In addition, the draft law provides that the loan restructuring  entitles the borrower to apply for the 

removal of the current mortgage securing the loan and its replacement by a new mortgage over the 

same real estate for the amount of the restructured loan plus 20 %. 

1.13  The  draft  law  amends  the  provisions  of  the  Banking  Act  of  29  August  2007  by  inserting,  among 

other things, a provision pursuant to which borrowers that are consumers are entitled to discharge 

all  of  their  debt  arising  from  a  loan  secured  by  a  mortgage  over  real  estate  by  transferring  the 

ownership of the real estate to the lender who is bound to purchase it. 

1.14  Finally,  the  draft  law  provides  that  any  bank  enforcement  titles  concerning  claims  arising  under 

loans denominated in or indexed to foreign currencies become void. 

1.15  The draft law is to enter into force after one month following the date of its publication. 

2. 

General observations 

2.1  The ECB notes that it has previously been consulted by the Polish Parliament and commented on 

a  draft  proposal,  which  was  not  adopted  subsequently,  dealing  with  the  restructuring  of  foreign 
currency  home  loans 2.  The  ECB  also  understands  that  various  other  proposals  dealing  with  the 

conversion  of  foreign  currency  loans  are  currently  being  discussed  by  the  Polish  authorities.  The 

current opinion relates only to the draft law submitted to the ECB on 15 June 2016. 

2.2  Prior to the global financial crisis, borrowing in foreign currencies by households and non-financial 
corporations was popular in several Member States 3. As previously noted by the ECB4, the lower 

interest rates applicable 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  CHF.  Foreign 

2  

3  

4  

See Opinion CON/2015/26. All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 

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). 
See paragraph 2.2 of Opinion CON/2014/59, paragraph 2.1 of Opinion CON/2015/26 and paragraph 2.1 of Opinion 
CON/2015/32. 

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currency housing loans constituted approximately 43 % of all outstanding housing loans and 26 % 
of all outstanding loans to households in May 20165. 

3. 

Specific observations 

3.1  Retroactivity 

3.1.1  Acknowledging that Directive 2014/17/EU of the European Parliament and of the Council 6 does not 
apply  to  credit  agreements  existing  before  21  March  2016,  as  previously  noted  by  the  ECB7,  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 loans, on the condition that such regulation is not applied with retroactive effect. 

3.1.2  As  previously  noted  by  the  ECB8,  introducing  measures  with  retroactive  effect  could  in  principle 

undermine legal certainty and might not be in line with the principle of legitimate expectations. It is 

however  for  the  Polish  authorities  to  assess  whether  the  retroactive  character  of  the  draft  law 

complies with the applicable principles under Polish law, including the Polish Constitution. 

3.2  Eligibility criteria 

The ECB notes that the draft law does not prescribe any eligibility criteria for borrowers applying for 

loan  restructuring  other  than  specifying  that  borrowers  must  be  consumers  or  other  natural 
persons. As noted previously9, this raises concerns with regard to the purpose of the draft law. In 

particular, the application of certain targeted eligibility criteria such as, for example, linking the right 

to  convert  to  the  borrower’s  actual  income  position  or  to  the  loan-to-value  (LTV)  ratio  may  be 

appropriate. 

3.3.  Effects on the banking sector, financial stability and Polish economy. 

3.3.1  The ECB reiterates its comments regarding risks associated with foreign currency loans made in a 
previous opinion10. In particular, 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 perspective. 

3.3.2  The ECB notes that the implementation of the draft law is expected to entail financial costs for the 

banking  sector.  Whilst  the  explanatory  memorandum  does  not  present  a  comprehensive 

assessment  of  the  impact  of  the  draft  law,  the  ECB  is  of  the  view  that  the  conversion  of  foreign 

currency loans at the exchange rate  prevailing on the loan origination date,  as anticipated by the 

draft law, may have a significant impact on the financial stability of the Polish banking sector, which 

could result in substantial losses and reduced capital buffers. Banks need to take into account the 

5  

See NBP Monetary and financial statistics report at 
http://www.nbp.pl/en/statystyka/czasowe_dwn/nalez_zobow_banki_en.zip.  

6      Directive 2014/17/EU  of the European  Parliament  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). 

7  

8  
9  
10   

See paragraph 3.2 of Opinion CON/2014/59, paragraph 2.2 of Opinion CON/2015/26 and paragraph 3.2.1 of Opinion 
CON/2015/32. 
See paragraph 3.2.2 of Opinion CON/2015/32. 
See paragraph 3.3 of Opinion CON/2015/32. 

See paragraphs 3.3.1 and 3.3.2 of Opinion CON/2015/26. 

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direct costs of conversion as well as any costs relating to the closing of currency positions due to 

the unwinding of existing hedges and refinancing. This would reduce the resilience of the financial 

sector  to  adverse  shock  and  may  have  a  further  negative  impact  on  the  Polish  economy,  in 
particular due to the possibility of a strong depreciation of the PLN11. 

3.3.3  The  draft  law  may  also  have  some  negative  effects  on  the  Polish  economy  if  it  leads  to  a 

deterioration  in  foreign  investor  sentiment  due  to  a  perceived  increase  in  legal  uncertainty  and 

country risk. 

3.3.4  In addition, the ECB notes that the proposed interest rate for the restructured loans, which is to be 

composed of NBP’s current reference interest rate and  a restricted margin, is substantially below 

the  usual  pricing  of  collateralised,  long-term  non-mortgage  loans,  and  could  therefore  have  a 

further negative impact on the future profitability of the affected banks.  

3.3.5  Whilst the conversion of foreign currency loans should reduce part of the currency mismatches in 

households’  balance  sheets,  which  could  provide  relief  for  distressed  foreign  currency  borrowers 

and contribute to reducing the credit risk of banks in the longer term, the potential overall negative 

impact of the draft law on the financial stability of the Polish banking sector and the future lending 

capacity  of  certain  institutions  may  be  significant,  thus  resulting  in  overall  negative  effects  on  the 

Polish economy. 

3.3.6  Consequently,  the  ECB  suggests  that  the  Polish  authorities  carry  out  a  thorough  analysis  as  to 

whether the envisaged retroactive measures could have negative effects on the banking sector and 

the  overall  economy  in  Poland,  in  particular  on  the  sound  capital  base  and  the  internal  capital 

adequacy assessment processes of the affected institutions, including cross-border effects on the 

consolidated  profits  of  international  banking  groups,  potentially  leading  to  increased  write-down 

requirements. With regard to any potential negative effects of such measures, the ECB remains of 

the opinion that, when introducing provisions 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 future 12. 

3.3.7  From a banking supervisory perspective, as previously noted by the ECB13, the restructuring of the 

foreign  currency  loans,  as  proposed  by  the  draft  law,  does  not  eliminate  all  risks  relating  to  such 

loans, in particular interest rate risks. 

3.8  Miscellaneous 

3.8.1  The ECB notes that the draft law contains provisions that are unclear, or may be interpreted very 

broadly and therefore give rise to legal uncertainty. For example, it is difficult to reconcile how the 

interest rate on the loan would comprise a base rate equal to the NBP reference rate and margin 

equal  to  the  level  set  in  the  loan  agreement  (not  higher  than  4  %)  with  the  specification  that  the 

interest  rate  must  not  exceed  30  %  of  the  margin  set  out  in  the  loan  agreement  for  the  entire 

settlement  period  (before  and  after  the  restructuring).  Also,  in  the  provision  which  requires  the 

11 

12  
13   

Risks associated with blanket currency conversion of foreign exchange loans at the exchange rate prevailing on the 
loan origination have been discussed and analysed by the National Bank of Poland in the Financial Stability Review 
July 2015. See http://www.nbp.pl/en/systemfinansowy/fsr201507.pdf, Box 2 on p. 39-41.   

See paragraph 3.4 of CON/2014/59 and paragraph 3.3 of CON/2014/87.  
See paragraph 3.2.3 of CON/2015/26. 

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lender to remedy ‘any loss’ incurred by the borrower it is not clear what is meant by a loss on the 

part of the borrower and what kind of liabilities might arise for lenders as a result of this provision.  

3.8.2  The  ECB  also  notes  that  the  draft  law  prescribes  that  if  the  borrower  refers  his/her  doubts 

concerning mutual settlements and the terms of the restructuring for verification, determination and 

assessment  by  a  civil  court,  the  court’s  decision  must  not  include  restructuring  terms  which  are 

worse  than  those  included  in  the  information  provided  by  the  lender.  It  might  be  useful  to  clarify 

more precisely what is intended by this provision. 

3.8.3  Finally, the ECB notes that a temporary relief programme funded by  the banks has recently been 

set up in Poland to assist borrowers in a difficult financial situation in meeting their foreign currency 

loan  obligations.  The  Polish  authorities  might  consider  analysing  the  impact  of  this  programme 

before introducing other measures dealing with foreign currency loans. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 29 July 2016. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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