Banks may not pursue claims for the use of capital in loan contracts which are deemed invalid because they contained unfair terms, an adviser to the European Union's top court said on Thursday.

The opinion was issued in a case crucial for the Polish banking sector which could face a 100 billion zlotys ($22.4 billion) hit in case of an unfavourable ruling, according to the country's KNF financial watchdog.

While the advocate general's opinion is not binding, the Luxembourg-based European Court of Justice (CJEU) usually follows it when making a final ruling, which could be handed down before the summer judicial recess.

"After a mortgage contract is declared invalid due to unfair terms, consumers can pursue claims against banks beyond the reimbursement of monetary benefits; banks do not have this right," Advocate General Anthony Michael Collins said in a statement.

Poland's WIG Banks index fell 3% folowing the announcement of the opinion.

Hundreds of thousands of Poles took out mortgages in foreign currencies, mainly in Swiss francs, attracted by lower interest rates. They are now paying far bigger instalments than expected after the Swiss franc soared against the zloty and following interest rate hikes in Switzerland.

The total stock of foreign currency mortgages in Poland stood at almost 79 billion zloty in December based on the latest available KNF data, with Swiss franc mortgages accounting for over 52 billion zloty.

The total value of zloty mortgages exceeded 391 billion, their share having increased to some 83% of the total from just 30% at the height of a foreign currency lending bonanza in 2008. (Reporting by Anna Koper, additional reporting by Alan Charlish, Anna Wlodarczak-Semczuk; editing by Jason Neely and Emelia Sithole-Matarise)


Reuters