Opinion of the European Central Bank of 24 March 2017 on foreign exchange-linked loans (CON/2017/9)
Date: 2017-03-24
Institutions: European Central Bank
Subjects: Poland, banking supervision, consumer protection, financial stability, foreign currency, loan, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 March 2017  

on foreign exchange-linked loans 

(CON/2017/9) 

Introduction and legal basis 

On 8 February 2017 the European Central Bank (ECB) received a request from the Polish Parliament for 

an opinion on a draft law amending the Civil Code to resolve issues relating to foreign exchange-linked 

loans (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  relates  to  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  Under  the  Polish  Civil  Code,  provisions  of  a  contract  entered  into  with  a  consumer  that  have  not 

been individually agreed are not binding if they set down the consumer’s rights and obligations in a 

way which is contrary to good practice and are clearly against their interests (prohibited contractual 
clauses)2.  This  does  not  apply  to  provisions  laying  down  the  main  obligations  of  the  parties, 

including price or remuneration, as long as they are clearly worded. The Civil Code further provides 

that, in the event of doubt, certain specified clauses are deemed to be prohibited. The purpose of 

the draft law is to amend the Civil Code by supplementing this list of prohibited contractual clauses 

with clauses which (1) denominate in foreign currency a loan which is then disbursed in Polish zloty 

(PLN) and (2) index to, or revalue in line with, a foreign currency a loan which is denominated and 

disbursed in PLN.  

1.2  The amendment proposed by the draft law is also to apply retroactively. However, according to the 

explanatory  memorandum,  the  draft  law  has  no  effect  on  the  content  of  the  legal  relationships 

between banks and borrowers as the new clauses proposed to be included in the abovementioned 

list were  never valid. Furthermore, the draft law merely  aims to accelerate  resolution of the court 

proceedings between banks and borrowers relating to foreign exchange-linked loans.  

1  

2  

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). 

See Article 3851 of the Polish Civil Code. 

 
 
 
 
 
                                                 
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2. 

General observations 

2.1  Prior to the global financial crisis, borrowing in foreign currencies by households and non-financial 
corporations was popular in several Member States3. 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. 

The  ECB  understands  that  most  of  the  foreign  currency  loans  in  Poland  are  housing  loans 

denominated  in  Swiss  francs  and  that  foreign  currency  housing  loans  constituted  approximately 

40 % of all outstanding housing loans and 24 % of all outstanding loans to households in January 
20175. 

2.2  The  ECB  has  previously  been  consulted  by  the  Polish  Parliament  and  issued  opinions  on  three 

draft legislative proposals, which were subsequently not adopted, dealing with the restructuring of 
foreign currency loans6.  

2.3  The  ECB  notes  that  the  draft  law  has  both  prospective  and  retroactive  elements,  which  raise 

different  issues.  The  ECB  will  therefore  address  these  prospective  and  retroactive  elements 

separately. 

3. 

Prospective elements of the draft law  

3.1  The ECB has pointed out on several occasions the risks associated with foreign currency loans7, 

and referred  to  the analysis of such risks by the European  Systemic  Risk Board (ESRB)  and  the 
ESRB  recommendations  for  addressing  them  in  Recommendation  ESRB/2011/18.  The  ECB  also 

notes that the Polish Financial Supervision Authority took account of the ESRB recommendations 
and issued Recommendation S9 pursuant to which banks are recommended to ensure that future 

mortgage loans to retail borrowers are granted in the currency of the borrower’s income. 

3.2  Against this background, to contain foreign currency lending and, as suggested by the ECB in the 
past10, policymakers are strongly encouraged to create an overall environment for economic agents 

which encourages  prudent  and  well-informed  decision-making. This involves  the  pursuit  of sound 

and  stability-oriented  macroeconomic  policies  and  policies  to  strengthen  financial  literacy  and 

appropriate  financial  regulation  and  supervision.  If  this  proves  insufficient,  additional  policies  to 

prevent an excessive build-up of foreign currency debt could be considered. 

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4  

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9  

For further information on lending in foreign currencies in the Union, see the Annex to the Recommendation of the 
European Systemic Risk Board of 21 September 2011 on lending in foreign currencies (ESRB/2011/1) (OJ C 342, 
22.11.2011, p. 1). 

See for example, paragraph 2.1 of Opinion CON/2016/50. All ECB opinions are available on the ECB’s website at 
www.ecb.europa.eu. 
See the Narodowy Bank Polski report on monetary and financial statistics, available at www.nbp.pl.  
Opinions CON/2015/26, CON/2016/39 and CON/2016/50. 
See the ECB Financial Stability Review of June 2010 and, for example, Opinion CON/2014/76. 

Recommendation  of  the  European  Systemic  Risk  Board  of  21  September  2011  on  lending  in  foreign  currencies 
(ESRB/2011/1) (OJ C 342, 22.11.2011, p.1). 

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 website of the Polish Financial Supervision Authority 
at www.knf.gov.pl. 

10  

See paragraph 3.1.2 of Opinion CON/2010/62. 

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3.3   Therefore, as also noted before11, the ECB in principle welcomes measures promoting responsible 

lending by banks, enforcing market discipline and increasing the transparency of bank’s activities to 

provide a higher level of consumer protection, especially in the area of loans relating to residential 

property. Such specific measures which have been welcomed or suggested by the ECB in the past 

include limitations on the acceptable loan-to-value and debt-to-income ratios where the credit and 

income  currencies  are  different,  a  requirement  for  the  potential  risks  to  be  explained  to  the 

borrower  where  the  credit  is  denominated  in  a  foreign  currency  and  incentives  to  banks  to  offer 
domestic  currency  loans  to  customers,  for  the  same  purposes  as  foreign  currency  loans12.  More 

generally and also as previously noted by the ECB, there is a need to ensure that strict and prudent 

regulatory  measures  are  in  place  for  lending  to  unhedged  domestic  borrowers  in  a  foreign 

currency.  In  addition,  banks  should  always  hold  sufficient  capital  to  reflect  the  specific  risks 

associated  with  foreign  currency  lending,  in  particular  as  regards  the  transformation  of  exchange 
rate risk into credit risk13.  

3.4  Finally, as noted by the ECB in previous opinions14, if the draft law has a cross-border effect in the 

sense  that  it  would  effectively  prevent  borrowing  in  foreign  currency,  it  may  raise  issues  of 
compliance with Article 63 of the Treaty on free movement of capital and payments15. The ECB has 

also noted in this respect that the free movement of capital and payments is without prejudice to, 

inter alia, ‘measures which are justified on grounds of public policy or public security’, as laid down 

in  Article  65(1)(b)  of  the  Treaty.  However,  as  in  the  case  of  exceptions  based  on  the  principle  of 

general good, the exemption in Article 65(1)(b) of the Treaty is narrowly interpreted by the Court of 

Justice  of  the  European  Union,  with  the  implication  that  any  such  measure  would,  for  example, 

need  to  meet  the  proportionality  test.  Under  this  test,  restrictions  are  justified  only  if  no  less 

restrictive measure would suffice to reach the desired end. The ECB notes that the assessment of 

whether  the  measures  affecting  financial  institutions  under  the  draft  law  are  in  breach  of  the  free 

movement of capital and payments, the freedom of establishment or other Union rules is entrusted 

to the Union institutions ensuring the application and observance of the Treaties. 

4. 

Retroactive elements of the draft law 

Legal aspects of retroactivity 

4.1  As  previously  noted  by  the  ECB16,  introducing  measures  with  retroactive  effect  undermines  legal 

certainty and is not in line with the principle of legitimate expectations. 

4.2 

In addition, although Directive 2014/17/EU of the European Parliament and of the Council17 does 

11  
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16  
17  

See paragraph 3.1 of Opinion CON/2011/87. 
See, for example, paragraph 3.2.2 of Opinion CON/2011/74. 
See paragraph 3.1.3 of Opinion CON/2010/62. 
See, for example, paragraph 3.2 of CON/2011/87. 

See  Westdeutsche  Landesbank  Girozentrale  v  Friedrich  Stefan  and  Republik  Österreich,  C-464/98, 
ECLI:EU:C:2001:9. 

See, for example, paragraph 3.2 of Opinion CON/2016/50. 
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). 

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not apply to credit agreements existing before 21 March 2016, as previously noted by the ECB18, 

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  provision  allows  Member  States  to  further  regulate 

foreign currency loans on condition that such regulation is not applied with retroactive effect. In that 

sense the provision reflects one of the key general principles of Union law, namely the principle of 
legal certainty19 which also embraces the principle that the retroactivity of laws must be limited20. 

4.3  

It is for the Polish authorities to assess whether the retroactive character of the draft law complies 

with Polish legal and constitutional principles.  

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

4.4  As noted in previous ECB opinions21, in the case of Poland, risks associated with foreign currency 

loans  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. The ECB notes that this 

was also acknowledged in the recent Resolution of the Polish Financial Stability Committee on the 
recommendation on the restructuring of the FX housing loans portfolio22.  

4.5  The  ECB  notes  that  implementation  of  the  draft  law  may  entail  significant  financial  costs  for  the 

banking  sector.  Whilst  the  explanatory  memorandum  does  not  provide  any  estimates,  the  ECB 
notes that, in its opinion on the draft law23, Narodowy Bank Polski assesses that the potential cost 

of the entry into force of the draft law would exceed the estimated costs associated with the entry 

into force of the proposal presented by the President of Poland on 15 January 2016 and of another 
proposal on foreign currency loans on which the ECB was consulted and issued an opinion24.  

4.6  As  the  ECB  has  noted  previously25,  introducing  measures  with  retroactive  effect  may  also  have 

some  negative  impact  on  the  Polish  economy  if  it  leads  to  deterioration  in  foreign  investor 

sentiment due to a perceived increase in legal uncertainty and country risk. 

4.7  Consequently, the ECB encourages the Polish authorities to carry out a thorough analysis to better 

quantify  the  financial  stability  implications  of  the  draft  law,  in  particular  whether  the  envisaged 

retroactive  measures  could  have  negative  effects  on  banks taken  individually,  the  banking  sector 

as a whole and the overall economy in Poland. In particular, due consideration should be given to 

the capital adequacy of the affected institutions and cross-border effects on the consolidated profits 

of international banking groups. 

18  
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20 

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22  

23  
24 
25  

See, for example, paragraph 3.1 of Opinion CON/2016/50. 

See, for example, the judgment of the Court of Justice of the European Union in Gottfried Heinrich, Case C-345/06, 
ECLI:EU:C:2009:140. 
See,  for  example,  the  judgment  of  the  Court  of  Justice  of  the  European  Union  in  Ditta  Angelo  Tomadini  Snc  v 
Amministrazione delle finanze dello Stato, Case 84/78, ECLI:EU:C:1979:129. 
See, for example, Opinion CON/2016/50. 

See Resolution No 14/2017 of the Financial Stability Committee of 13 January 2017 on the recommendation on the 
restructuring of the FX housing loans portfolio, available at www.nbp.pl.  
Available on the Polish Parliament’s website at http://orka.sejm.gov.pl. 

Opinion CON/2016/39. 
See  paragraph  3.4.1  of  Opinion  CON/2015/26,  paragraph  3.3.3  of  Opinion  CON/2016/39  and  paragraph  3.5  of 
Opinion CON/2016/50.  

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4.8  With  regard  to  any  potential  negative  effects  of  the  proposed  measures,  the  ECB  remains  of  the 

opinion that due consideration should also be given to fair burden sharing among all stakeholders, 

thus also avoiding moral hazard in the future. The ECB also expects that the draft law should be 

balanced with regard to the impact on local and foreign-owned banks. 

ECB-PUBLIC 

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

Done at Frankfurt am Main, 24 March 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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