March 9, 2015 / 2:52 PM / 5 years ago

UPDATE 1-Poland to finalise relief plans for Swiss franc mortgages by May-adviser

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WARSAW, March 9 (Reuters) - Polish banks will work with the government to finalise plans by May on how to resolve problems posed by mortgages denominated in Swiss francs, Janusz Lewandowski, the head of the prime minister’s Economic Council, said on Monday.

About 550,000 Poles hold Swiss franc mortgages mainly taken out before the financial crisis when the Polish zloty was relatively strong against the franc.

Now some of them are struggling to repay them, especially after the franc jumped in value when Switzerland scrapped its cap against the euro in January.

Several hundred holders of the mortgages demonstrated in Poland’s capital in February, demanding banks ease the burden of these loans.

The Polish central bank said in a report on Monday the January jump in the Swiss franc consumed on average up to 4 percent of the indebted households’ disposable monthly income.

Lewandowski, speaking at a joint conference with head of the Polish banking association, said that banks would present their proposals at a banking forum in Warsaw on Wednesday.

“I confirm the commitment of Polish banks regarding the key point that instalments should not be higher than before the freeing of the Swiss franc (exchange rate),” Lewandowski said.

The Polish government, facing an election in autumn this year, has already proposed a relief scheme that would involve banks cutting interest rates. But it has ruled out a Hungary-style forced conversion of the mortgages into zlotys at historical rates.

The head of Polish financial services regulator KNF has proposed that borrowers be allowed to convert their mortgages into zlotys at a historical exchange rates, but his proposal failed to get the backing of the government or the central bank.

“There will be no agreement on a one-off conversion. This must be spread out in time,” Lewandowski said.

Lewandowski said the government could only intervene directly as a last resort, if banks failed to provide their customers with adequate relief measures.

The issue of helping Swiss franc borrowers is mostly political as the impact on the economy has been small.

The central bank also said that the Swiss franc jump would reduce Polish annual economic output by 0.1 percent if the Swiss currency remained at about 4.30 to the zloty, but it has since weakened by about 12 percent. (Reporting by Wiktor Szary; Writing by Marcin Goettig. Editing by Jane Merriman)

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