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The head of Poland's central bank is warning that a bill offering relief to holders of Swiss franc mortgages combined with new taxes on banks amount to a 'recipe for a banking crisis'


WARSAW, Poland — The head of Poland's central bank warned Tuesday that a bill offering relief to holders of Swiss franc mortgages combined with new taxes on banks amount to a "recipe for a banking crisis."

Marek Belka's comments come amid heightened political uncertainty under a new populist government in Warsaw. The anxiety prompted the rating agency Standard & Poor's to downgrade Poland's foreign credit rating last week.

Speaking to private broadcaster TVN, Belka said he believes the S&P's pessimistic assessment went too far. Still, he had harsh words for the bill, which promises relief to about half a million Poles with mortgages in Swiss francs, even calling it "evil."

President Andrzej Duda proposed the bill last week. Duda is a strong ally of the country's conservative ruling party, Law and Justice. The party won an election last October on a populist message: it vowed to put higher taxes on banks and foreign supermarkets and promised relief to the many Polish families struggling to pay back mortgages taken out years ago in Swiss francs.

Several years ago the mortgages were hugely popular across Central and Eastern Europe because of their low interest rates. But in the intervening years the Swiss franc has strengthened strongly against currencies in the region, translating into dramatically higher monthly payments.

The legislation proposed by Duda would allow mortgage holders to convert their debt into Polish zlotys at a loss to the banks.

Belka said the bill "is particularly nasty for the budget because it will lead to a significant weakening of the banking system with very serious consequences for the economy."

"Banks can swallow the new tax, but that, plus other burdens ... plus that Swiss franc bill — that's a recipe for a banking crisis," Belka said.

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