December 7, 2016 / 9:34 AM / a year ago

Polish regulator clamps down on dividends in banks with forex loans

WARSAW, Dec 7 (Reuters) - Polish financial market regulator KNF has imposed more restrictions on dividend payouts by banks with foreign exchange loan portfolios to help them boost their capital and tackle potential legal risks related to converting Swiss franc mortgages, KNF said late on Tuesday.

Banks including state-run PKO, a unit of Spain’s Banco Santander BZ WBK and a unit of Germany’s Commerzbank mBank gave Swiss franc loans to more than half a million Poles, some of whom now have problems with repayments because the Swiss currency has doubled in value against the zloty over the last few years.

In August Poland offered banks inducements to help its home owners struggling with Swiss franc mortgages to switch them into zlotys.

It was seen as a softening of earlier proposals for a compulsory conversion process, but is still considered as a risk factor for the sector.

“The significant risk related to the potential legal solution to FX mortgages will weigh on the banks’ results if the law is implemented,” KNF said in a statement.

The regulator also pointed to increased, external risks to Polish economy and the banking sector, including Britain’s vote to leave the European Union and Italy’s ‘no’ vote in a referendum on constitutional reform.

As part of KNF’s dividend policy for banks, additional criteria that fix the maximum dividend yield had been introduced for lenders involved in FX mortgages, the regulator said.

It said it had taken into account whether a bank is in a restructuring process, its leverage, capital buffers and the results of risk assessments.

KNF will also look at the size of forex loans in a bank portfolio and the size of forex loans signed in 2007 and 2008 when suggesting a dividend yield for a given bank. Most of the risky loans were signed in 2007 and 2008.

Other banks with large portfolios of Swiss franc-denominated mortgages include Portugal’s BCP’ Millennium, BPH and Getin.

It was a top issue in last year’s presidential election, with the winning conservative Andrzej Duda promise to solve the problem forming a key element of his campaign.

Reporting by Agnieszka Barteczko; editing by Susan Thomas

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