Speaker
Description
Over the period between 2008 and 2021, the Polish banking industry has experienced significant growth, as well as changes in its structure and regulation. Most notably, Poland was dubbed a miracle country for remaining stable during the global financial crisis due to a multitude of country-specific factors. The consolidation of the sector has been one of the biggest transformations in the Polish banking industry. Many smaller banks merged with or were acquired by larger banks in the years after the financial crisis, yielding a smaller number of larger, more stable banks. The sector has also been impacted by the adoption of new standards and regulations, both in Poland and at the level of the European Union. However, the Polish banks suffered a significant mortgage crisis in 2015 – an aftermath of the Swiss franc-denominated borrowing in the first 10 years of the century, and especially after the 2008 crisis. Many Polish borrowers chose mortgages in Swiss Francs at the time because the interest rates were lower than those charged by Polish banks for mortgages in Polish Zloty. However, these borrowers saw their installments spike dramatically with the Swiss franc almost doubling in value against the Polish currency (złoty), since the 2008 financial crisis and in particular after the Swiss National Bank allowed the franc to float against the euro since 2015. The European Court of Justice (ECJ) ruled in favor of Polish borrowers in 2019, meaning that borrowers could ask Polish courts to convert their loans into local currency and thousands have done so. Banks suffered immense losses and two banks declared bankruptcy. Given the relative stability of the Polish banking sector in general, I aim to examine the risk exposure that threatened the financial stability in Poland and what can be done or had not been done to mitigate that risk. The methods to be used include regression analysis, Value-at-Risk model, and Mote-Carlo simulation. Lastly, I would like to draw lessons from the Polish experience for other economies to mitigate that risk.
Keywords: Poland, mortgage crisis, foreign exchange risk, credit risk
| Title | The Risk of Foreign Currency Mortgage Loans: The Case of Poland |
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