Poland is set to unveil a new policy proposal today for converting FX mortgage loans to local currency. The re-drafted proposal will be made public today, and then sent to the lower house for debate before the end of June. The Polish president's office will announce an amended proposal for tackling the country's Swiss franc loan problem at 1500 GMT on Tuesday.

The following changes are expected: 1) To convert Swiss Franc loans at their originally contracted CHF-PLN exchange rates (around 2.30 compared with current 3.95) ; 2) The scheme would be voluntary; 3) The resultant loss for banks may be, at least partly, filled by fresh capital subscribed by the government (in the form of 'silent stakes'); 4) Whatever the final version of the law becomes, the central bank is expected to supply FX for the conversion -- which means that banks will not purchase FX from the market in a disorderly manner, although the CB will lose reserves.

The president's team has been working on the new plan after its proposal in January spooked investors. The original draft was rejected because of large potential impact on banks and hence the new proposal is likely to have a smaller impact. And since the proposal is 'voluntary' only a modest impact is anticipated. Zloty is likely to remain edgy, is currently trading at 4.3501 against the euro and 3.8340 against the USD.