BCP shares fall 6% due to Poland business

Banco Comercial Português (BCP) shares took a 6% tumble on Thursday because of a decision from the European Court of Justice (ECJ) which was unfavourable for the bank in Poland on mortgages taken out in Swiss francs.

According to the judges, the mortgagees and borrowers should not have to face long bureaucratic processes to see the money that they paid, but did not have to pay, and the banks have been prevented from applying interest or additional charges on these operations.
Following this decision, the Association of Banks of Poland issued a communiqué stating: “Today’s agreement does not change the position of the banks or borrowers in any way”, also stressing that as a consequence, “the banks continue to defend the position that the resolution of lawsuits continues to be the best form of resolving them”.
The decision by the ECJ is part of a case that has been running for almost a decade, having created tens of thousands of legal lawsuits in the Polish courts from mortgage holders who are not happy with “potentially abusive clauses” in their contracts, usually calling for them be cancelled.
Polish banks suffered the defeat at the European Union’s top court over unfair terms in foreign currency loans after the judges said borrowers shouldn’t have to wade through piles of red tape to get money back they wrongly paid and that lenders, like Millennium Bank, can’t slap them with extra interest or fees.
Bank Millennium shares — the institution is 50.1% controlled by BCP, are currently trading down 2% after having fallen by over 4%.
In the early, 2000s, Polish banks encouraged domestic borrowers to take out mortgages in Swiss francs to benefit from low interest rates in Switzerland, a move that soured once interest rates increased.
In 2008, the mortgages taken out in zlotys had an average annual interest rate of 8.7%, while similar Swiss franc-denominated loans issued by local banks had an average rate of 4.4%.
But many borrowers saw their instalments spike dramatically, with the Swiss franc almost doubling in value against the złoty after the 2008 financial crisis and then after the Swiss franc was unpegged from the euro in 2015.
In 2019, the ECJ ruled in favour of Polish borrowers who had taken out loans from Polish banks in Swiss francs. The ruling meant that borrowers could ask Polish banks to convert their loans into the domestic currency. Thousands have done so to date.
The Luxembourg court also ruled that Polish borrowers may assert additional claims against banks for compensation on paid instalments on Swiss franc mortgages.
Simply put: Banks do not have the right to demand remuneration from former borrowers for non-contractual use of capital after the contract is annulled.