According to a front page article in Polish daily Parkiet, the newly introduced Recommendation S (concerning qualitative requirements for granting FX mortgage loans) has resulted, in many cases, in lower loan values being available. The intention of the regulation is that, for an average client, there should be a 20% difference in the maximum loan available between PLN and FX. Citing data from financial advisor Expander, the loan values available for an average client, before and after Recommendation S, have changed from -42% to +14%, depending on the bank. The study included Bank BPH -28%, PKO BP -26%, Millennium Bank -21%, mBank +9%, and Multibank +14%.
Our view: We wouldn't read too much into the quantitative data presented. Nevertheless, the implementation of Recommendation S has clearly been subject to varying interpretations by different banks, as might have been expected with qualitative rules. We would also expect, given competition in the sector, that interpretations will evolve over time. In as much as the growth of FX-mortgages has been demand-driven, banks will be encouraged loosen requirements again to win new business. Initially, there may be some pick-up PLN-denominated mortgages, to the benefit of PLN-only lenders such as Bank Pekao, BZ WBK, and ING BSK, but we would not expect more than a minor shift in demand, as long as the interest rate differential continues to favour FX. Lenders of FX, such as BRE Bank and Millennium Bank, are expected to continue to win market share.