Law and injustice

Poland makes bank investors political playthings

Warsaw's politically-driven banking crackdown risks scaring away foreign investment. An unexpected amendment to a mortgage law in August potentially doubled to 22 billion zloty ($5.9 billion) the estimated industry hit for providing borrowers with Swiss franc mortgage relief. And the main opposition Law and Justice (PiS) party, with a lead in the polls ahead of October elections, plans a balance sheet tax that could devour a third of the sector's returns.

This newfound taste for banker-bashing should alarm the foreign investors who own 60 per cent of Poland's banking sector, a greater proportion even than in Hungary. Domestic lender PKO has the largest market share of Swiss franc mortgages, with 22.5 per cent according to Barclays. But the next three largest players in the market, with a combined 38 per cent, are Commerzbank's mBank subsidiary, Portuguese-owned Millennium and Santander unit BZ WBK.

It is hard to see what justification there is for the revised mortgage law saddling banks with 90 per cent of the cost of the loans - which a senate finance committee is already talking about challenging. There is little sign of distress among the 550,000 mainly affluent Polish retail customers affected: the proportion of Swiss franc mortgages that are delinquent is below four per cent, according to the most recent central bank data. Compare that to Hungary where the non-performing loan ratio for equivalent mortgages was above 20 per cent.

A tax on balance sheets could hurt still more. PiS's proposal is for a recurring annual levy of as much as 0.39 per cent of assets. That would represent a huge cost, given that Barclays analysis suggests Polish banks only make a one per cent return on their asset base.

Both measures may be political posturing that will evaporate post-election. PiS has already backtracked on its bank levy proposal by saying that it sees 2017 rather than next year as the earliest date for its introduction. The Polish parliament's upper chamber is likely to suggest a 50:50 burden-sharing agreement is more appropriate for the mortgage law.

Yet without a significant climbdown, foreign banks may be forced to consider whether to follow Raiffeisen's lead and sell up. Like aggrieved peers in Hungary or the United Kingdom, Polish lenders now know what happens when banks become political playthings.