EBA issues Opinion to the Ministry of Finance of Poland on measures in accordance with the notification of higher risk weights set for immovable property

The European Banking Authority (EBA) today published an Opinion following notification by the Ministry of Finance of Poland of its intention to extend a measure originally introduced in March 2022. The measure aims to limit risks associated with foreign currency housing loans by encouraging banks to enter in settlements with borrowers. Based on the evidence submitted, the EBA does not object to the temporary extension of the measure until the next periodical assessment takes place, in accordance with the Capital Requirements Regulation (CRR).

With the application of this measure, the Ministry of Finance of Poland extends the current adjustment to the level of risk weights for foreign currency housing loans in force since 18 March 2022 by an additional period of 24 months. The measure sets different levels of risk weights on foreign currency housing loans for banks that actively engage in proceedings leading to settlements with borrowers of such loans. The risk weights of foreign currency housing loans are set depending on the amount of loan loss provisions, write-offs or adjustments to the exposure gross carrying amount created in connection with the planned settlements with borrowers.

In its Opinion, addressed to Poland, the EBA acknowledged the concerns of the Ministry of Finance over the financial stability risks stemming from foreign currency housing loans and the uncertainty surrounding the materialisation of litigation and settlement costs. The EBA understands that the measure may support financial stability in Poland by increasing incentives for banks to conclude such settlements and thus, decreasing the stock of foreign currency housing loans and the associated legal risks. In its assessment, the EBA reminded the Ministry of Finance that it shall reassess the appropriateness of the risk weights periodically, in accordance with the CRR.

Legal basis

On 3 August 2023, the European Banking Authority (EBA) received a notification from the European Systemic Risk Board (ESRB) on the intention of the Ministry of Finance of Poland extend an existing measure in accordance with Article 124(2) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (Capital Requirements Regulation, CRR).  In accordance with the third subparagraph of Article 124(2) of the CRR, within one month of receiving notification from the designated or competent authority entrusted with the national application of Article 124 of the CRR, the EBA is required to provide its Opinion to the Member State concerned.