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Higher risk weighting for exposures secured by mortgages on residential properties

A new regulation increases the capital requirements for Polish banks with exposures to residential mortgage-backed non-Polish currency (PLN) denominated credit facilities. The new requirements are an additional burden on banks, which might become more acute with the possible adoption of further measures aimed at decreasing the number of mortgage-backed exposures denominated in currencies other than PLN.

The new regulation1 (Regulation) came into force on 1 December 2017, and has increased the risk weighting for exposures arising from non-PLN credit facilities secured by mortgages on residential properties from 100% to 150%. The higher risk weighting for these exposures has been introduced in line with financial stability criteria in Art. 124(2) of the EU Capital Requirements Regulation.

The most significant consequence of this new Regulation could be the increase in capital requirements for certain banks with mortgage-backed CHF denominated credit facilities. This increase in capital requirements is likely to be a major challenge for the banking sector in Poland, and is also likely to affect the banks’ shareholders, who may receive lower (or no) dividends in the coming years. The new Regulation may also affect the number and value of new credit facilities granted in the future and, as a consequence, the banks’ growth potential.

The Regulation is part of a strategy by the Polish authorities to “assist” banks in converting foreign currency denominated credit facilities to PLN. This strategy is motivated by recent difficulties in repaying credit facilities denominated mainly in CHF in 2015 and related litigation against the banks.


1 The Regulation of the Minister of Development and Finance on higher risk weighting for exposures secured by mortgages on real properties dated 25 May 2017; official text available at this link:

Legal and Regulatory Risk Note