* Thousands hold mortgages denominated in Swiss franc
* No sign of widespread defaults since franc surged
* Loans become political issue in Poland, Croatia
* Facing elections, govts press banks to help borrowers
By Marcin Goclowski and Igor Ilic
WARSAW/ZAGREB, April 20 (Reuters) – When the Swiss franc
surged at the start of the year, there were dire predictions of
a wave of debt defaults by the hundreds of thousands of
borrowers in eastern Europe who had taken out mortgages in the
Three months on, there is no evidence of a widespread
increase in the level of non-performing Swiss franc loans,
according to checks by Reuters with banks in the worst-affected
countries in the region, and other data.
The pain for banks is coming instead from another source —
governments, worried about the political risks from the Swiss
franc loans, are pushing lenders to provide costly relief for
The pressure is greatest in Croatia and Poland, the two
countries with the biggest portfolios of Swiss franc mortgages
and whose governments face close-fought elections this year.
The political calendar is merciless, and this is why
politicians are raising the Swiss franc issue, said a Polish
bank executive, who spoke on condition of anonymity. They say
what people want to hear.
Many people in eastern Europe took out Swiss franc mortgages
because they were expected to be cheaper and more stable than
loans in local currencies. The Swiss central banks removal in
January of a cap on the franc turned those expectations on their
The data on the level of non-performing loans (NPLs) since
the surge in the Swiss franc is piecemeal. The data that is
available points to only very modest increases in NPL ratios.
Michal Sobolewski, analyst with Polands BOS Bank brokerage,
used central bank data to calculate the NPL ratio for Swiss
franc mortgages in Poland was 3.15 percent at the end of
February, up from 3.05 percent at the end of last year.
The NPL ratio for Swiss franc mortgages at Polands biggest
lender PKO BP, has stayed stable, said a source with
knowledge of the data.
In Croatia, the local unit of Austrias Erste bank
, told Reuters the surge in the franc in January had
not led to an increase in the NPL ratio for Swiss franc loans.
Raiffeisens local unit said NPL levels for Swiss
franc home loans had not changed significantly in the first
Even if most are managing to keep up with their repayments,
borrowers are feeling pain.
Jacek Sledzinski, who lives with his wife and 10-year-old
daughter in a two-bedroom apartment in Warsaw, said he had been
forced to curb spending on holidays, and was able to put aside
less in savings.
The biggest problem for him is the exchange rate
uncertainty. Right now I dont know how much money I should
pay. Its a bit like a debt to a loan shark or the mafia: you
never know how much its going to grow.
Viewed from the banks, the medicine being prescribed by
officials to treat the Swiss franc loans issue is worse than the
Andrzej Jakubiak, the head of Polands financial sector
regulator KNF, is pushing the idea of converting the loans into
zlotys at a historic exchange rate. Banks say that would
threaten their financial stability.
Uncertainty about what measures will be imposed has limited
the rise in shares of Polish banks to 0.8 percent this year,
while Warsaws WIG stock index is up almost 8 percent.
In Croatia, the government has capped interest rates for
Swiss franc mortgages and temporarily fixed the exchange rate
for repayments at a level from before the currency surged.
Those measures will this year cost Croatian lenders about
100 million euros ($107.1 million), said a senior banking source
who did not want to be identified.
More costly for banks, the government says it is considering
a mandatory conversion of Swiss franc loans into euros.
Bankers see a dose of politics in their governments
Croatia holds a parliamentary election around the end of
this year, and opinion polls show the governing coalition is
behind the opposition conservatives.
The government is therefore sensitive to pressure from Swiss
franc borrowers who have threatened mass protests.
The senior Croatian banking source said he expected the
government would time its decision on relief measures so they
are in place before the election.
Polands governing Civic Platform party also faces a
parliamentary election at the end of this year, and polls give
it a narrow lead over the opposition Law and Justice Party.
Jakubiak, the regulator who wants conversion of the
mortgages, used to work as an aide to Hanna Gronkiewicz-Waltz, a
deputy leader of Civic Platform.
A spokesman for the regulator denied Jakubiaks proposal on
Swiss franc loans was politically-motivated. He said the
regulator was concerned about the risks stemming from the
mortgages, and wanted a balanced solution.
($1 = 0.9334 euros)
(Additional reporting by Radu Marinas in Bucharest, Aleksander
Vasovic in Belgrade, Zoran Radosavljevic in Zagreb and Marja
Novak in Ljubljana; Writing by Christian Lowe; Editing by Keith