* Loans in francs ballooned as Swiss currency rose
* Court rulings forcing Polish banks to face bill
* Banks provision for costs of more than $525 million
WARSAW, Sept 4 (Reuters) - Poland's top banks have set aside
more than 1.96 billion zloty in total to pay for
Swiss franc-denominated mortgages, recent filings analysed by
Reuters show, after Polish courts recently ruled many were
mis-sold to borrowers.
These provisions, however, represent just 2% of the sector's
entire outstanding Swiss franc portfolio, which regulatory data
shows totalled 100 billion zloty at the end of June, equivalent
to around a third of all Polish mortgages.
Like other Europeans, thousands of Poles borrowed in Swiss
francs to take advantage of low interest rates available in the
currency more than a decade ago. Many borrowers have seen their
instalments balloon after the Swiss franc almost doubled in
value against Poland's zloty since the global financial crisis.
After a series of recent court rulings against the banks,
Poland is the last country in Europe to face up to a problem
which Hungary, Croatia and others tackled years ago.
Polish banks and political parties sought for years to avert
such a bill, but a recent decision by a Luxembourg tribunal has
left them little choice but to pay out to borrowers who, the
courts say, were mislead.
Now Polish borrowers are pursuing their banks in the courts
and winning nine out of 10 cases against them, data collated by
law firm Votum Robin Lawyers shows, increasing pressure on the
country's lenders as they grapple with the coronavirus crisis.
"We estimate the entire cost for the banking sector at 20
billion zloty, but there are other estimates, namely by (the)
bank association, that are several fold higher," Michal
Sobolewski, an analyst with BOS brokerage, said.
"This is an additional significant burden for banks when the
economy is in the worst shape in years," he added.
ROOM TO FALL
What seemed like one-off provisions at the start of the year
have become routine as the number of court cases increased and
mostly went in favour of the borrowers.
In 2017-2019 the number of Swiss franc cases in the Polish
courts was almost 21,000 but has risen this year to 34,000,
Votum Robin's data shows.
So far in 2020 the biggest banks have set aside around 1.96
billion zloty to pay for the Swiss franc currency swings,
Reuters calculations based on their regulatory filings show.
Each bank has its own methodology when it comes to
provisioning for the legal risks linked to the Swiss franc
mortgages, and every court case is different.
Many borrowers have alleged that credit agreements involved
abusive clauses and in these cases the courts have largely ruled
that this means they are no longer valid, resulting in an early
repayment of the mortgage.
Poland's biggest lender PKO BP said this year that
it had made 636 million zloty in provisions for legal risks
connected with Swiss franc court cases, while other big players
such as Santander Bank Polska and Commerzbank's mBank
have set aside 429 and 496 million zloty respectively.
The latest round of provisions were last month, when most
banks reported their second quarter results, although Getin
Noble Bank, the last with a large foreign currency
mortgage portfolio, is due to release its earnings next week.
"The market has already priced in some of the risk, but
there are some banks that still have a potential for a fall,"
Marta Czajkowska-Baldyga of investment bank Haitong IB said.
However, Kamil Zubelewicz, a policy maker at the Polish
central bank, said banks could withstand the strain.
"The vast majority of banks will cope," Zubelewicz said.
($1 = 3.7417 zlotys)
(Reporting by Marcin Goclowski; Editing by John O'Donnell and