Central Bank Says Financial System Is Stable But Balance Of Risks Is Deteriorating

The National Bank of Poland released its bi-annual Financial Stability Report, warning that the balance of risks to the stability of domestic banking sector is deteriorating due to a possible decline in in capital surpluses. The document came out on the eve of a verdict by the EU's top court on controversial FX loans, which is expected to favour the consumers.

• The reduction in excess capital "may occur, among others, if banks would comply with the MREL requirement with capital and not with eligible debt instruments. This would increase the risk of a credit crunch."
• "The outcomes of legal risk related to FX housing loans remains the main challenge for the stability of the domestic banking sector. (...) The costs of this risk will remain high in the coming years, regardless of the incoming CJEU ruling regarding potential customers claims."
• "If the CJEU ruling in case C-520/21 turns out to be in line with the opinion of the Advocate General of the CJEU, it may result in the need of further increase of the provisioning making, but this does not fundamentally change the situation regarding the scale of banks burden."
• Click here to see a short summary of the NBP's findings and recommendations.