Poland again slashes option losses estimates

* Option exposure halves to 2.2 bln zlotys ($742.7 mln)

* 40 percent of options seen expiring by end-2009

* Share of options in new deals halves to 45 pct

WARSAW, Aug 17 (Reuters) - Poland's financial and markets regulator slashed for the second time its estimate of corporate losses from bad currency bets that shook the Polish financial system earlier this year.

KNF's new estimate is 2.2 billion zlotys in currency option losses, a far cry from the 9 billion zlotys forecast in March, when some officials feared such huge losses that would bankrupt many importers and pull down the banks that sold the toxic instruments.

Companies bought billions of zlotys in derivatives, often betting on the currency instead of simply hedging foreign currency exposure. They then watched as the zloty dropped by as much as a third to the euro from an all-time high a year ago.

Analysts have estimated that Polish lenders so far have taken some 2.5 billion zlotys in charges related to clients' option losses.

"The trend is easing and it looks like the worst is behind for the financial sector," said Marek Juras, head of research at BZ WBK brokerage in Warsaw.

The battered zloty, boosted by improved investor sentiment towards the EU's largest ex-communist state and other emerging markets, has gained nearly a fifth since hitting a low in February.

KNF said 40 percent of open currency positions would expire this year and 63 percent would be closed by the middle of 2010.

When it last counted in April, the financial watchdog put corporate currency option exposure at 4.5 billion zlotys.

In the latest count, KNF said exposure related to forward instruments fell 39 percent to 2.24 billion zlotys and to swaps by 7 percent to 1.06 billion.

Several small Polish companies have collapsed because of bad currency bets, prompting Deputy Prime Minister Waldemar Pawlak to call for drastic measures that would allow companies to walk away from loss-making derivatives.

The government rejected his plan, and most companies survived with their exposure renegotiated and converted into bank loans that will weigh on their results for some time.

Burned by the crisis, Polish banks and their corporate clients have adapted a much more careful approach to currency derivatives, with options accounting for 45 percent of all transactions, or nearly half the earlier figure, KNF said. ($1=2.962 Zloty) (Reporting by Chris Borowski; editing by Karen Foster)