National Bank of Poland (NBP) has signed CHF/PLN swap agreement with Swiss National Bank (SNB). The term of the swaps is 7 days. All swap transactions require the SNB’s approval. Both central banks consider this agreement as a precautionary measure and do not anticipate that this agreement will need to be called upon.
Our view:
As Polish banking sector is relatively highly exposed to the FXdenominated mortgage lending, largely denominated in CHF (22% of total loans,) providing liquidity in this currency to banks would be important in case of tension of the markets. We view this facility positively as a temporary solution in the event of tensions it would enable NBP to provide CHF liquidity to Polish banks. In the last wave of‘confidence’ crisis NBP has introduced ‘trust package’ including 3-month repo open-market operations, currency swaps, modifications in the operating system of Lombard credit, keeping the 7-day money bills as the main instrument to sterilise excessive liquidity and introducing, if required, higher frequency of open market operations, lower compulsory reserve rate. We expect the news to have a neutral trading impact.