Opinion of the European Central Bank of 5 August 2015 on a draft law on specific terms of restructuring of home loans denominated in foreign currency

OPINION OF THE EUROPEAN CENTRAL BANK of 5 August 2015 on a draft law on specific terms of restructuring of home loans denominated in foreign currency:

(CON/2015/26)

Introduction and legal basis

On 23 July 2015 the European Central Bank (ECB) received a request from the Polish Parliament for an opinion on a draft law setting specific terms for the restructuring of housing loans denominated in a foreign currency and amending certain other Acts (hereinafter the ‘draft law’).

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth indent of Article 2(1) of Council Decision 98/415/EC1, as the draft law contains rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets.

In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The purpose of the draft law is to facilitate the restructuring of home loans denominated in a foreign currency (hereinafter ‘foreign currency home loans’) that were granted before the date of entry into force of the draft law.

In particular, banks will be required, on the request of an eligible borrower, to restructure foreign currency home loans, in accordance with the terms set out in the draft law, until 30 June 2020.

1.2 Under the draft law, borrowers who are consumers will be eligible to request a restructuring of their foreign currency home loans, provided that:

a) the property is used by the borrowers to satisfy their own housing needs;

b) the borrowers own no other residential unit nor single family house;

c) the usable area of the property does not exceed 75 square metres in respect of a residential unit or 100 square meters in respect of a single family house (unless at the date of filing a restructuring request the borrower is raising three or more children, in which case no square meter limit applies);and

d) the loan to value (LTV) ratio of the foreign currency home loan is above 80%.

1.3 The draft law provides that the restructuring request may be filed at different points of time depending on the LTV ratio. It may be filed as soon as the draft law comes into force where the value of the LTV ratio is above 120%, no sooner than one year after the draft law comes into force where the LTV ratio is above 100% but equal to or lower than 120%, and no sooner than two years after the draft law comes into force where the LTV ratio is above 80% but equal to or lower than 100%.

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