Financial and
ESG report 2020

Solutions for fx mortgage borrowers

Bank Millennium is currently serving 2.6 million active retail customers. The number of active agreements regarding FX mortgage loans is 57.8 thousand (without former Euro Bank).

Mortgage loans indexed to or denominated in foreign currencies, in majority in Swiss francs, were offered to clients in years 2000, most of them were granted in 2005-2008. At the time of their granting, the loan agreements were in accordance with Polish law and applicable regulations, in particular with recommendations from the Polish Financial Supervision Authority KNF (in particular, Recommendation S). At the time of taking the loans in foreign currencies, clients had first to expressly reject the loan in Polish zloty. Polish Banking Association ZBP, at proper moment in time, suggested abandoning currency mortgages, but supervision and the public sphere encouraged them, which was described and documented in the ZBP study entitled „White book of franc loans in Poland”. The reasons for this were significant. In Poland there was a lack of capital and significant demand for mortgage loans and the relatively high interest rate of the zloty was an obstacle to support finance the housing expansion carried out at that time. Foreign currency mortgages, supported by lower interest rates in Swiss francs and in euros, had a positive impact on Poland’s economic growth and contributed to the creation of approx. 775,000 flats and houses. 

Credit agreements were not questioned in the period when the Swiss franc to PLN exchange rate was favourable for borrowers. The borrower’s questioning of contract provisions began when the exchange rate began to change to the detriment of customers. Clauses referring to exchange rate tables of some banks have been included in the list of abusive clauses as a consequence of abstract abusiveness control procedure. It is worth emphasizing that said inclusion does not necessarily mean unlawfulness in particular case. In fact, loans indexed to foreign currencies (which was in fact Bank Millennium main offer) were offered for the convenience of borrowers that wanted to be sure that at the moment of taking the loan they would have the exact amount in zlotys that they required. 

The turn in increased dissatisfaction of borrowers was caused by the Swiss central bank, which unexpectedly removed the floor on its currency on 15 January 2015, as a result of which the Swiss franc appreciated significantly against other currencies including the Polish zloty. In this way, the decision taken had impact far beyond the borders of Poland and also hit Polish citizens who took out housing loans in this currency. 

According to data from the Polish Bank Association, gathered from all banks, which have FX mortgages, the definite majority of the litigations were eventually resolved to the banks’ benefit by 2019. However after the judgement of the Court of Justice of the European Union (CJEU) of 3 October 2019 (Case C-260/18) the proportions turned and in most cases banks lost the court cases. However the case law regarding FX loans has not definitively developed yet. Significant influence on future court rulings may come from replies to further questions sent by Polish courts to CJEU (Court of Justice of European Union) as well as the judgement of the Civil Chamber of the Supreme Court, in its full composition, which sitting is planned for 25 March 2021.  

On 8 December 2020 Mr. Jacek Jastrzębski, the Chairman of the Polish Financial Supervision Authorityat Rzeczpospolita daily, proposed introduction of a “sectoral” solution regarding risk involved with FX mortgages. The proposal assumes that banks would voluntarily offer to customers the opportunity to convert FX mortgages loans to PLN as if the loans had been in PLN from the day of origination, with simultaneous retrospective change of interest calculation formula to WIBOR plus historical margin applicable to such credits from the day of granting the loan. The proposal has been under consultation with banks under the auspices of KNF and ZBP. In the current stage the final outcome as well as its timing remains unclear. Hence the Bank remains open towards customers, offering them amicable solutions under its own terms.  

Bank Millennium is engaged in case-by-case arrangements with customers regarding terms of loan repayment or currency conversion, taking into consideration the particular situation and expectations of each customer. Bank Millennium has always been talking with its customers and offering solutions adjusted to their needs. During 2010-2015 customers were largely interested in changing the property, which is collateral to the loan, while in 2015-2020, due to strong growth of salaries during that period, first of all in making early repayment, hence enquiries concerned the possibility of offering a more favourable exchange rate. Since 2020, due to strong reduction of WIBOR, customers are mainly seeking an opportunity to convert currency of the loans to PLN, eliminating FX risk and maintaining a still low monthly payment. The bank’s proposal is prepared for customers on a case-by-case basis. The interest on part of customers is significant in our opinion. During 2020 the number of active agreements fell to 57.8 thousand by almost 6%, with full repayment and voluntary currency conversion accounting for 80% of that decrease.  

Bank Millennium regularly prepares and presents to FX mortgage customers solutions, which aim i.a. to make it easier for borrowers repaying a loan directly in CHF to convert the currency of the loan (i.e. change repayment currency to PLN) or to repay the loan under terms favourable for the customer.  One of the most important changes in 2020 was introduction in settlements of CHF loans of the average NBP rate and restriction to a minimum of formalities involved with loan currency conversion or repayment. 

Since January 2015, when rapid growth of the CHF rate was observed, Bank Millennium is offering a special solution known as sixpack”, comprising:  

  1. Taking into accountnegative LIBOR to calculate housing loan interest rate. 
  2. Strong reduction of FX spread, which results in a visible reduction of monthly loan payments for customers.
  3. Extension of loan repayment period upon the customer’s request or temporary suspension of loan payment so that the payment is not higher or is only slightly higher than before unpegging the rate. These applications could be submitted only by borrowers living in the loan-financed real property.
  4. Resignation from demanding new collateral as well as loan insurance for customers making loan payments on time.
  5. Enabling borrowers to convert loan currency from CHF to PLN at a rate equal to average NBP rate.
  6. Increasing flexibility of rules for restructuring mortgage loans for customers living in the loan-financed real property.

Customers of Bank Millennium, who took a housing loan in Swiss francs and in PLN and are in a difficult financial situation, can apply for support from Borrowers Support Fund created by banks, including Bank Millennium, in 2015. Under the Act on support of borrowers who took a housing loan and are in a difficult financial situation, adopted in 2019, which came into force on 1 January 2020, criteria were changed for applying for support, which is to make the Fund more available.  

The support is temporary aid granted to borrowers, who are in a difficult living situation, such as job loss or decrease of income. A borrower, who was granted support, receives money every month to be used for loan payments. The money is paid during a period of not more than 36 months, in amounts corresponding to loan payments, however not more than PLN 2,000. If the amount obtained from sale of the real property was not sufficient to repay the housing loan, the borrower may get a loan for debt repayment (interest-free aid) in a maximum amount of PLN 72,000. Returning the aid received starts after two years from disbursement of the last part of the support or loan and is spread into 144 interest-free payments. Part of the money may be forgiven provided that payments are regular. 

Since its origination the Fund has been used-up in merely a few per cent and is still awaiting full allocation to borrowers in need. 

[GRI 206-1]

As at 31 December 2020 the Bank had 5,018 loan agreements and additionally 496 agreements from former Euro Bank subject to pending individual litigations (except for recovery cases) regarding indexation clauses of FX mortgages submitted to courts. The total value of claims filed by plaintiffs is PLN 562.4mn and CHF 34.3mn. Cases regarding 98% of loan agreements are before courts of first instance and regarding 2% before courts of second instance. Until 31.12.2020 only 69 cases were finally resolved. 

The Bank is a party in a class action, which aims to ascertain the Bank’s liability vs. members of the group on the basis of unjustified enrichment in relation to concluded FX mortgage loan agreements. This is not a litigation regarding payments. The ruling in the above cases will not involve awarding any amounts to members of the group. The number of loan agreements covered by these litigations is 3,281. The case has currently been postponed for an indefinite term.  

In 2020 number of banks, including Bank Millennium, received a decision of the President of the Office of Competition and Consumer Protection recognising clauses stipulating principles of currency exchange applied in the so-called anti-spread annex as abusive and prohibited the use thereof. A penalty was imposed upon Bank Millennium of PLN 10.5 million; its amount takes account of two extenuating circumstances: good cooperation with the UOKiK and discontinuation of the use of the provisions in question. The Bank appealed against the UOKiK decision and the matter is at a court of first instance.  

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