WARSAW, Oct 11 (Reuters) - Poland's banks could face a 100 billion zlotys ($20 billion) hit if the European Union's top court rules against the industry in a case involving Swiss franc mortgages, the country's KNF financial watchdog warned on Tuesday.
Hundreds of thousands of Poles took out mortgages in foreign currencies, mainly in Swiss francs, attracted by lower interest rates. They are now paying far bigger installments than expected after the Swiss franc soared against the zloty and following interest rate hikes in Switzerland.
Many mortgage holders took banks to court, while banks started offering settlements to find an out-of-court solution.
The case referred to by the KNF relates to whether the banks could charge Swiss franc mortgage holders for the use of capital if contracts were found to be at fault.
"Our estimates are based on 14 banks that hold approximately 98% of the portfolio (of foreign currency loans)," KNF head Jacek Jastrzebski said.
"Such a decision would entail a one-time cost for the sector of 100 billion zlotys," he added, referring to a potential ruling against the banks.
Jastrzebski said he did not believe the time for reaching settlements was used well, adding the number of mortgages taken to court amounted to around 100,000 compared with around 34,000 settlements.
($1 = 5.0174 zlotys) (Reporting by Anna Koper Writing by Alan Charlish and Anna Koper Editing by Mark Potter)
