WARSAW (Reuters) - PKO BP (NYSE:BP) will set up a 6.7 billion zloty ($1.77 billion) fund for foreign exchange loan settlements after shareholders of Poland's biggest bank backed the plan on Friday as a possible solution to the problem of Swiss franc mortgages.
The chances of resolving cases through out-of-court settlements remain uncertain, with many banks waiting for a Polish Supreme Court sitting on May 11 before they decide whether to sign up to a settlement plan proposed by financial regulator KNF.
Thousands of Polish borrowers took out franc loans more than a decade ago to take advantage of low Swiss interest rates but then faced ballooning repayments when the zloty weakened sharply against the Swiss currency.
"The KNF's proposal minimises the bank's losses and completely eliminates the currency risk on the client's side," said chief financial officer Rafal Kozlowski.
"A settlement is always better for the bank than a court dispute, we avoid legal costs, it relieves the client of debt and gives (the bank) a tax shield."
PKO BP is so far the only bank to have committed itself to the KNF scheme. Kozlowski said that according to a survey carried out by the bank two thirds of customers would be ready to accept settlements under the KNF plan.
With many other banks waiting for the Supreme Court ruling before making a decision on the settlement plan, there had been speculation in Polish media that PKO BP shareholders would opt to put off the decision regarding the fund.
However, a motion at Friday's Extraordinary General Meeting (EGM) to adjourn proceedings until May 21 did not get the two thirds majority needed to pass.
Shareholders also accepted the management board's proposal not to vote on a 4.5 billion zloty share repurchase programme.