Foreign Currency Loans and Stability of the Banking System in Poland

Abstract

The aim of the study was to answer the question whether and to what extent foreign currency loans may pose a threat to the stability of the banking system in Poland. The reason for exploring this problem is the situation in which Swiss franc mortgage loan parties found themselves. The problem concerned not only Poland, but also appeared in Hungary, Spain and Ukraine. The aforementioned countries have adopted various strategies in order to solve this issue. Currently, there is a discussion in Poland over the form of solution to the situation in which the Swiss franc debtors have found themselves. This article presents the following hypotheses: (1) The credit policy of banks, which includes mortgage lending in Swiss francs, was a typical action in terms of risk management which in this case was two-way in nature. In addition, banks did not have the opportunity to significantly impose its policies on customers, as evidenced by the degree of market development and market competition. (2) Conversion of mortgage loans according to the CHF historic exchange rate can affect the stability of the banking system. The article presents the main types and sources of bank risks with particular emphasis on credit risk and foreign exchange risk. In addition, the paper shows the importance of this kind of risk in the context of the systemic stability of the banking sector in a situation of exchange rate stability disturbances. Verification of the research hypothesis was based on literature studies and analysis of statistical data.