October 24, 2015 / 12:02 PM / 2 years ago

Polish regulator tells PKO, BZ WBK, mBank to set aside more capital

WARSAW, Oct 24 (Reuters) - Poland's financial regulator has recommended that three banks including the country's largest, PKO BP, set aside more capital as well as at least half of their 2014 profits to help them cope with their large Swiss-franc loan portfolios, the banks said.

About 550,000 Poles hold mortgages denominated in Swiss francs, mostly taken out before the financial crisis when the zloty was stronger against the franc. They were hit by a surge in the franc after Switzerland in January scrapped its policy of capping the currency against the euro.

Some Polish borrowers have struggled to make repayments on their mortgages.

The three banks told to pad out their capital cushions were No.1 Polish lender PKO BP, BZ WBK and mBank .

The regulator recommended that PKO BP set aside 12.76 percent of its total capital, or an extra 0.76 percentage point, the bank said in a statement late on Friday.

BZ WBK, a unit of Spain's Santander , was told to maintain 12.72 percent of its capital, or an extra 0.72 percentage point, it said in a separate statement.

For mBank, a unit of Germany's Commerzbank, the recommendation was to maintain funds to cover an additional 4.39 percentage points or 16.39 percent of its total capital, it said on Saturday. It already had more capital than that set aside, it said.

None of the banks gave figures in zloty for how much more they had been asked to set aside.

All three were told to hold the extra funds to hedge the risk stemming from their significant foreign currency-denominated mortgage portfolios.

At least three-quarters of the extra funds need to be composed of tier 1 capital, the regulator told the banks.

The lenders were also told to retain at least a half of the profits they generated last year. Earlier this year, all three decided to withhold dividends from their 2014 profit, following the regulator's earlier recommendation.

The regulator also recommended that from next January all banks keep their tier 1 capital ratio at 10.25 percent and their total capital ratio at 13.25 percent, PKO said.

Other banks with large portfolios of Swiss franc mortgages include Getin Noble Bank, BPH, Millennium and Raiffeisen's Polish unit. (Reporting by Wiktor Szary; Editing by Hugh Lawson)

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