Economic Analysis - CEE Banking Sector: Where Will The Swiss Franc Move Hit Hardest ? - MAR 2015

Central Europe & Baltic States January 2015 / Europe / Economy 

BMI View: The Swiss National Bank's decision to remove the EURCHF ceiling will have a negative impact on several countries in Emerging Europe, with Poland the worst affected . Overall though, the impact should be relatively containe d, and systemic risks are low.

The shock move by the Swiss National Bank (SNB) to remove the EURCHF ceiling on Jan 16 has seen the franc appreciate rapidly, moving immediately from CHF1.2000/EUR to nearly CHF0.8500/EUR before settling weaker at the time of writing to CHF1.0200/EUR. While this will trigger a tsunami of knock on effects globally, the impact to Emerging Europe appears relatively contained. We examine the impact for major economies across the region.

Poland: Poland will be among the worst affected economies in Emerging Europe, as 37% of the housing loan portfolio is comprised of CHF-denominated loans. Swiss franc mortgages were effectively banned after a major tightening of FX loan criteria in 2013 under 'Recommendation S', which introduced a requirement for housing loans to be granted in the currency of borrowers income (see "Political Risks To Banking Sector", 23 August 2013) but considerable stock is still outstanding. The removal of the Swiss ceiling has seen the CHFPLN cross-rate decrease by around 20%, which will increase debt servicing costs on these loans.

Significant CHF Exposure

Poland - House Loans By Currency, %

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