OREANDA-NEWS. The proposed solution to address the Polish banking sector's foreign-currency (FC) mortgage loans outlined by the country's presidential office on 2 August is a better deal for the banks than previous proposals, says Fitch Ratings. Prior proposals included mandatory conversion of all FC loans at exchange rates favourable to customers, which would have been costly for the banks.

More details on the FC mortgage proposal are expected on 10 August, but initial indications are that in the short term banks will only have to return a portion of the FX spreads they charged customers on FC loans between 2000 and mid-2011. The latest proposal does not completely remove risks related to FC loans because the authorities' goal is to convert these fully into local currency, meaning that banks are still exposed to potential valuation losses. However, the proposal appears to offer banks more flexibility on how they will manage the process.

Our ratings of Polish banks have not factored in risks related to FC mortgage restructuring, as we expected that the solution ultimately adopted would not result in significant one-off losses for lenders. The proposal announced this week appears to be broadly in line with those expectations and so will not result directly in any rating actions. However, some Polish banks' ratings remain under moderate pressure due to reduced profitability and capitalisation and greater uncertainty about the operating environment.