Reuters: US Dollar Report: UPDATE 2-Swiss to help Poles avert franc home loan crisis

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

UPDATE 2-Swiss to help Poles avert franc home loan crisis Jun 25th 2012, 13:45 Mon Jun 25, 2012 9:45am EDT * Central banks don't expect swaps to be called upon * Deal would ensure banks in Poland can get enough francs * SNB has used similar swap deals before to ease market tensions ZURICH, June 25 (Reuters) - Poland moved to shield its banking sector against a possible European liquidity crunch on Monday with a plan to help its lenders keep access to the Swiss francs that back more than half the country's home loans. In an echo of deals arranged after the 2008 collapse of Lehman Brothers all but paralysed interbank markets, Poland's central bank agreed with its Swiss counterpart to swap zlotys for francs if its lenders were unable to obtain them otherwise. About half of Polish home loans are denominated in francs, an option that Switzerland's low interest rates made very attractive during the global credit boom when the franc was relatively cheap and easy to obtain. The Swiss National Bank has agreed such deals before with other central banks when crises have sent investors flocking to the Swiss currency as a safe haven and made banks wary of lending to each other. Poland cooperated in a similar fashion from November 2008 to January 2010 at the height of the global economic crisis. At the time, Polish banks had complained they were short of francs, which they need to service the debt they use to fund mortgages, and analysts said the new swap deal was a good backstop against any freeze in liquidity caused by the euro zone's debt and banking woes. Rafal Benecki, chief economist at ING Bank Slaski in Warsaw, said western European banks were more willing to lend euros and francs at the moment, following a flood of long-term loans from the European Central Bank. "Still, it is good that the Polish banks will be able to use this instrument in case of market turbulence in the euro zone, for example in case of a disappointment after the European Union summit (at the end of) this week," he added. The SNB and the National Bank of Poland said their swaps - which would last a week and would require prior approval by the SNB - were not immediately needed and were intended chiefly as a safeguard if market tensions spiked further. "The two central banks do not anticipate that this agreement, which has been concluded as a precautionary measure, will need to be called upon," the SNB said in a statement. The zloty has plummeted 44 percent against the Swiss currency since the global financial crisis escalated in 2008 to 3.56 per franc, making mortgage payments more expensive for Poles. The Polish government has also issued bonds denominated in Swiss francs, raising foreign demand for francs. Hungary, where Swiss franc mortgages are popular too due to the country's high official borrowing costs, also conducted swap options with the SNB after the Lehman crisis. As investors chased francs as a haven from the euro zone debt crisis, the SNB set a cap of 1.20 per euro on its currency last September to help keep exporters and tourism competitive and to avert recession. The SNB's benchmark lending rate has been at rock-bottom since early 2009. That did not stop the franc from shooting up nearly 20 percent versus the euro in just a few months, nearly reaching parity in early August. Investors say the franc could strengthen further against emerging European currencies if the euro zone crisis intensifies. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions