Financial Regulator Warns CJEU Ruling Will Weigh On Bank's Lending Capacity

Commenting on today's pro-consumer verdict of the CJEU in a case regarding annulled FX mortgages, the financial regulator KNF called on banks to include the ruling in their provision models and actively seek court settlements with borrowers.

• The KNF said that the banking sector is liquid and well capitalised, but the erosion of capital stemming from the so-called C-520/21 ruling will negatively affect banks' capacity for meeting the financing needs of households and the wider economy.
• The regulator criticised the CJEU's decision, arguing that it goes against public interest and the principles of social justice, by making a narrow group of borrowers eligible for preferential treatment in the form "free credit."
• Separately, the banking lobby ZBP said that the C-520/21 verdict entails the necessity of creating additional provisions (to the tune of up to PLN100bn vs. PLN40-50bn already set aside). As a consequence, banks expect a "significant" decline in lending, especially in long-term loans.