UPDATE 2-EU’s top court says national courts should decide on FX loans

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WARSAW, April 29 (Reuters) – The European Union’s top court said on Thursday that national courts should decide whether a foreign currency mortgage contract containing an unfair clause should be annulled or not, setting the scene for a Polish Supreme Court sitting in May.

Thousands of borrowers in Poland took out Swiss franc mortgages more than a decade ago to take advantage of low Swiss interest rates but then faced ballooning repayments when the zloty weakened sharply against the franc.

Those mortgages are now a major risk factor for the Polish lenders. The ruling by the Court of Justice of the European Union (CJEU) kicks off a fortnight which may determine how courts treat such cases and whether banks sign up to a plan for out-of-court settlements.

“The effects of a finding by a court of the existence of an unfair clause in a contract concluded between a business and a consumer are governed by national law, and the continuation of such a contract should be assessed… by the national court,” the CJEU said in a statement.

The CJEU also said it was the responsibility of national courts to inform holders of foreign currency mortgages of all the possible legal consequences of annulling a mortgage contract.

Warsaw’s WIG bank share index was up 4.6% at 1026 GMT, also lifted by positive earnings reports.

“Today’s judgement…was perceived as positive, as it clearly does not exacerbate the problem of Swiss franc loans for banks,” said Maciej Marcinowski, Deputy Head of Research at Trigon.

The deputy head of Polish lender mBank, Marek Lusztyn, called the verdict “encouraging”, while Tadeusz Bialek, deputy head of the Polish Bank Association, said the main message was that contracts could not be cancelled “without reflection, automatically or at the customer’s request”.

However, Kamil Chwiedosik, founder of the Life Without Credit organisation which helps mortgage holders in legal proceedings with banks said the ruling was positive for clients.

“It’s all about the customer, the Polish court can’t change anything if the consumer doesn’t want this.” (Reporting by Alan Charlish, Anna Wlodarczak-Semczuk, Anna Koper and Pawel Florkiewicz in Warsaw and Karol Badohal in Gdansk; Editing by Gareth Jones, Kirsten Donovan)

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