Opinion of the European Central Bank of 9 November 2017 on support to home loan borrowers in a difficult financial situation and support for the voluntary restructuring of home loans denominated or indexed in a foreign currency (CON/2017/48)
Date: 2017-11-09
Institutions: European Central Bank
Subjects: Poland, State aid, banking supervision, central bank, debt, financial stability, indebtedness, national law, real estate credit

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK  

of 9 November 2017 

on support to home loan borrowers in a difficult financial situation and support for the voluntary 

restructuring of home loans denominated or indexed in a foreign currency 

(CON/2017/48) 

Introduction and legal basis  

On 21 August 2017 the European Central Bank (ECB) received a request from the Polish Parliament for 

an  opinion  on  a  draft  law  amending  the  law  on  support  to  home  loan  borrowers  in  a  difficult  financial 

situation and amending the law on corporate income tax (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/EC 1, as 

the  draft  law  relates  to  rules  applicable  to  financial  institutions  in  so  far  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  law  of  9  October  2015  on  support  to  home  loan  borrowers  in  a  difficult  financial  situation2 

specifies  the  rules  for  granting  and  the  conditions  of  use  for  repayable  financial  aid  for  natural 

persons  in  financial  difficulties  with  a  home  loan  (hereinafter  ‘financial  aid’).  Financial  aid  is 

provided through a State-owned bank, Bank Gospodarstwa Krajowego (BGK). The law covers any 

home loans that are secured by a mortgage arrangement, regardless of the currency in which they 

were granted. 

1.2  The main purpose of the draft law is to (1) change the mechanism for providing financial support to 

those borrowers who find themselves in a difficult financial situation and are also required to repay 

instalments  on  a  home  loan  that  represents  a  significant  burden  on  their  household  budgets  and 

(2)  introduce  a  new  instrument  to facilitate  the  voluntary  restructuring  of  loans  denominated  in  or 

indexed to a foreign currency.  

1.3  The draft law extends the scope of the law on support to borrowers in a difficult financial situation 

by introducing rules for granting a loan (hereinafter the 'repayment loan') to pay back the remaining 

part of the home loan and by specifying the conditions of use for the repayment loan if the amount 

obtained from the sale of the property fails to cover the entire obligation. Furthermore, the draft law 

modifies  the  criteria  for  granting  financial  aid  and  defines  criteria  for  granting  repayment  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). 

Published in Dziennik Ustaw (Dz. U.) of 2015, item 1925. 

 
 
 
 
                                                      
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Under  the  draft  law  financial  aid  or  repayment  loans  may  be  granted  if  (1)  when  applying  for 

financial aid or a repayment loan at least one of the borrowers is an unemployed person; or (2) the 

proportion  of  the  borrower's  expenses  allocated  to  paying  monthly  instalments  of  principal  and 

interest  on  a  home  loan  exceeds  50  %  of  the  borrower’s  household  income;  or  (3)  the  monthly 

household  income  minus  any  monthly  costs  related  to  the  home  loan  is  lower  than  Polish  zlotys 

(PLN)  1268  for  a  single-person  household  or  PLN  1028  per  person  for  a  multi-person  household 

(these  amounts  are  subject  to  adjustment  every  three  years),  which  is  twice  the  amount  of  the 
current thresholds3. 

1.4  The  draft  law  extends  the  duration  of  financial  aid  from  18  to  36  months  and  increases  the 

maximum amount of financial aid from PLN 1 500 to PLN 2  000  per month, up to a maximum of 

PLN 72 000 over 3 years. Also, the new support in the form of a repayment loan may not be higher 

than PLN 72 000. For home loans that should be repaid in foreign currency BGK will transfer the 

repayment  loan  in  the  currency  in  which  the  home  loan  is  repaid,  at  the  selling  rate  of  exchange 

published  by  Narodowy  Bank  Polski  (NBP)  on  the  day  preceding  the  transfer  of  the  repayment 

loan.  

1.5  The  draft  law  introduces  an  appeal  procedure  against  a  creditor's  decision  to  reject  a  borrower's 

application for support (financial aid and/or a repayment loan). If the borrower is found to comply 

with  the  criteria  for  granting  financial  aid  or  a  repayment  loan,  the  creditor  must  pay  the  financial 

aid  which  would  have  been  paid  during  the  appeal  period,  or  8.33  %  of  the  total  amount  of  the 

repayment loan, from its own funds.  

1.6  The  draft  law  facilitates  the  provision  of  financial  support  related  to  the  voluntary  restructuring  of 

home  loans  denominated  in  or  indexed  to  a  currency  other  than  the  currency  of  the  borrower's 

income, by specifying that such loans may be voluntarily converted into home loans denominated 

in the currency of borrower’s income. This financial support aims to cover the difference between 

the  carrying  (balance  sheet)  amount  of  the  pre-restructuring  debt,  calculated  according  to  the 

average exchange rate published by NBP, and the carrying amount of the post-restructuring debt. 

Such support would be granted to the creditor, who would be responsible for offering the borrower 

adequate  restructuring  terms  and  obtaining  the  borrower's  consent.  The  creditor  may  apply  for 

funds  intended  for  voluntary  restructuring  up  to  the  amount  of  the  quarterly  contribution  made  by 

the creditor to the restructuring fund. Such funds may only be used by the creditor for any voluntary 

restructuring  agreements  concluded  within  six  months  of  the  end  of  the  quarter  in  which  the 

contribution  was  made.  If  the  creditor  fails  to  fulfil  their  responsibilities,  or  if  the  creditor  and  the 

borrower fail to reach agreement, the funds will not be granted to the creditor, instead they will be 

divided among all other creditors contributing to a restructuring fund established under the draft law 

for  a  given  period  and  in  proportion  to  the  contributions  made.  Komisja  Nadzoru  Finansowego 

(KNF,  The  Financial  Supervisory  Authority)  may  issue  recommendations  for  creditors,  which  set 

forth rules determining the sequence of voluntary restructuring of the pre-restructuring debt, taking 

3  

See Article 3(1)(3) of the Law on support to home loan borrowers in a difficult financial situation in connection with 
Article 8 Section 1 of the Law of 12 March 2004 on social assistance (Dz. U. of 2016, item 930) and Regulation of 
the  Council  of  Ministers  of  14  July  2015  on  the  verification  of  income  criteria  and  the  amount  of  social  assistance 
(Dz. U. of 2015, item 1058). 

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into account the stability of the financial system and the efficient allocation of funds made available 

for this purpose. 

1.7  Under  the  draft  law  financial  support  would  be  financed  by  a  supporting  fund  and  a  restructuring 

fund,  both  of  which  would  form  part  of  a  support  fund  for  borrowers  managed  by  BGK.  The 

supporting  fund  would  be  used  to  make  financial  aid  payments  and  disburse  repayment  loans, 

while the restructuring fund would be used to support the voluntary restructuring of foreign currency 

denominated  or  indexed  home  loans.  The  supporting  fund  will  be  financed  by  (i)  quarterly 

contributions from creditors in proportion to the portfolio of home loans whose principal or interest 

have  been  outstanding  for  more  than  90  days,  (ii)  reimbursement  of  financial  aid  or  repayment 

loans  by  borrowers  and  (iii)  income  from  the  investment  of  funds  from  the  supporting  fund. 

Quarterly  contributions  made  by  creditors  to  the  supporting  fund  may  not  exceed  1  %  of  the 

carrying  amount  of  the  portfolio  of  home  loans  referred  to  above.  The  restructuring  fund  will  be 

financed  by  (i),  quarterly  contributions  from  creditors  in  proportion  to  the  portfolio  of  home  loans 

denominated or indexed in a foreign currency and (ii) income from the investment of funds from the 

restructuring  fund.  Quarterly  contributions  made  by  creditors  to  the  restructuring  fund  may  not 

exceed 0.5 % of the carrying amount of the portfolio of home loans denominated or indexed in a 

currency other than the currency of the borrower’s income.  

1.8  Under  the  provisions  of  the  draft  law,  quarterly  contributions  to  the  supporting  and  restructuring 

funds will be set by the Council of the support fund for borrowers on the basis of the opinion of the 
Polish Financial Stability Committee4, acting in its macroprudential function. In exceptional cases, 

the Council may, at the request of a creditor, consent to the contributions being paid in instalments. 

The Council may,  with  the  consent of the  Minister competent for financial  institutions, temporarily 

suspend  a  creditor’s  obligation  to  contribute  to  the  supporting  fund  if  the  supporting  fund  has 

sufficient  funds.  Following  the  consultation  of  the  Financial  Stability  Committee,  acting  in  its 

macroprudential 

function, 

the  Minister  competent 

for 

financial 

institutions  may  suspend 

contributions  to  the  supporting  and  restructuring  funds  in  order  to  ensure  the  stability  of  the 

financial sector. 

1.9  Under the draft law persons receiving financial support must start to repay the funds received, at 

the  latest,  in  the  month  following  the  month  that  marks  two  years  since  either  the  last  tranche  of 

financial  aid  was  paid  out  or  the  disbursement  date  of  the  repayment  loan.  The  funds  are  to  be 

repaid  in  144  equal,  interest-free,  monthly  instalments.  If  the  borrower  repays  100  instalments 

without any delay the remaining 44 instalments will be cancelled.  

4  

The  Financial  Stability  Committee  was  established  by  the  Law  of  7  November  2008  (Dz.  U.  of  2008  No  209, 
item 1317).  The  functioning  of  the  Financial  Stability  Committee,  which  is  the  competent  authority  for  macro-
prudential  supervision  and  crisis  management,  is  currently  governed  by  the  Law  of  5  August  2015  on  the  macro-
prudential  oversight  of  the  financial  system  and  crisis  management  in  the  financial  system  (Dz.  U.  of  2015, 
item 1513). 

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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 States 5. As previously noted by the ECB6, the lower 

interest  rates  applicable  to  foreign  currency  loans  compared  to  loans  in  domestic  currencies,  as 

well as the expectation that domestic currencies might appreciate, increased the demand for such 

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

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

36.4 %  of  all  outstanding  home  loans  and  21  %  of  all  outstanding  loans  to  households  in 
July 20177. 

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 loans 8. However, the ECB notes that the draft law contains provisions applying not 

only  to  foreign  currency  loans,  but  also  to  home  loans  regardless  of  the  currency  in  which  they 

were granted. 

3. 

Specific observations 

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

3.1  The ECB has pointed out on several occasions the risks associated with foreign currency loans 9, 

and referred  to the  analysis of such risks by the  European  Systemic Risk Board (ESRB)  and the 

ESRB’s recommendations  for addressing them in Recommendation ESRB/2011/1. The ECB also 

notes that KNF took into account the ESRB’s recommendations when issuing its Recommendation 
S10  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  The  ECB  would  repeat  its  past  comments  regarding  the  risks  associated  with  foreign  currency 
loans11.  Nevertheless,  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 regarded as representing a particular risk from 

a financial stability perspective.  

3.3  The ECB notes that the draft law may have a considerable impact on the profitability of the Polish 

banking sector, particularly when the quarterly contributions to both funds are set at their maximum 

level. In such a case, contributions could reduce the profits of the banking sector by up to 20 % of 

the  current  total  pre-tax  operating  profits.  Although  the  resulting  financial  impact  appears 

manageable at the aggregate level, it could reduce the Polish banking sector’s capacity to provide 

5  

6  

7  
8  
9  

10  

11  

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/2017/9.  All  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See Narodowy Bank Polski’s report on monetary and financial statistics, available at www.nbp.pl. 

See Opinions CON/2015/26, CON/2016/39 and CON/2016/50. 
See,  for  example,  the  ECB’s  June  2010  Financial  Stability  Review,  available  on  the  ECB’s  website  at 
www.ecb.europa.eu, and paragraph 3.3 of Opinion CON/2016/50. 
Recommendation S on good practices with regard to management of credit exposures that finance property and are 
mortgage secured, available on the KNF’s website at www.knf.gov.pl. 
See paragraphs 3.3.1 and 3.3.2 of Opinion CON/2015/26 and paragraph 3.3.1 of Opinion CON/2016/39. 

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credit.  The  impact  may  also  be  unevenly  distributed  across  the  sector,  with  banks  holding  large 

portfolios  of  foreign  currency  loans  being  particularly  affected.  Against  this  background,  the  ECB 

notes that the draft law includes neither a limit on the size of the restructuring and the supporting 

fund, nor a time limit on the contributions. Thus, the financial impact of the draft law is likely to be of 

a  recurring  nature,  subject  only  to  the  discretion  of  the  Council  of  the  support  fund  for  borrowers 

and,  ultimately,  of  the  Minister  of  Finance.  This  marks  a  material  change  from  the  previous 

scheme, which was initially set at PLN 600 million with a possibility for further increases if needed 

and for which the cut-off date for borrowers’ application submissions was 31 December 2018.  

3.4  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.  These  effects  may  be  aggravated  if,  in  parallel,  the  Polish  authorities  implement 

further measures related to foreign currency lending that are currently under discussion.  

3.5  The  ECB  also  notes  the  considerable  expansion  of  the  perimeter  of  households  eligible  for 

financial support under the draft law. The draft law doubles the amount of the maximum per capita 

income threshold, below which a household is eligible to receive financial support. This may enable 

some  households,  which  are  not  in  financial  distress,  to  take  advantage  of  both  the  zero  interest 

rate applicable to the repayments of the financial aid and the debt write-off mechanism provided for 

in  the  law.  This  may  lead  to  moral  hazard  and  put  an  undue  financial  burden  on  the  supporting 

fund. 

3.6  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  as  regards  whether  the 

proposed  measures  could  have  negative  effects  on  credit  institutions  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 any cross-border effects on 

the  consolidated  profits  of  international  banking  groups.  The  Polish  authorities  are  also  invited  to 

assess  the  risks  that  the  draft  law  might  introduce  moral  hazard  and  weaken  the  repayment 

discipline of eligible borrowers.  

Legal certainty 

3.7  The ECB notes that the draft law does not make it fully clear what constitutes a failure to reach an 

agreement  for  which  the  creditor  can  be  made  responsible,  even  though  the  failure  to  conclude 

voluntary restructuring agreements within the six-month period, following the date of the quarterly 

contribution payment, means that the creditor will not be entitled to receive financial support from 

the restructuring fund and recoup his quarterly contribution to the fund. 

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

Done at Frankfurt am Main, 9 November 2017.  

[signed] 

The President of the ECB  

Mario DRAGHI 

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