I INTRODUCTION

The Polish economy, just as those of other central and eastern European countries, continues to be characterised by a low level of financial intermediation. The assets of the financial sector in Poland amount to only 122.8 per cent of GDP, compared with 463 per cent in the eurozone. The Polish financial sector is at the same time heavily dominated by banks, which hold 72.8 per cent of all financial assets. According to information from the Polish Financial Supervision Authority (PFSA), in January 2017, there were 36 commercial banks operating in Poland, 27 branches of EU credit institutions and 558 cooperative banks. The total assets of the banking sector in Poland amount to approximately 1.71 billion zlotys, and the sector employs approximately 169,000 people. Generally, Polish banks remained well capitalised, with capital ratios comfortably above the Basel III requirements (with an average capital adequacy ratio at the level of 17.6 per cent). However, it should be noted that in the past year there was one case of a failed cooperative bank. This was the second case of bankruptcy in the Polish banking sector since 2001.

In 2016, the ownership structure of the Polish banking sector changed. Due to the M&A transactions described further below, the state gained influence over new entities. The importance of Polish investments grew in the banking industry. However, foreign investors still controlled the significant part of the assets of the Polish banking sector, including 25 commercial banks and all branches of EU credit institutions. The main investments came from Germany, France, the Netherlands and Spain. The Polish State Treasury holds control over five commercial banks.

The concentration level of the Polish banking sector (i.e., the market share in assets of the five largest banks) was 48.28 per cent, which was slightly lower than in the previous year. The largest Polish bank was state-controlled PKO BP, with a total balance sheet of approximately 285 billion zlotys, followed by Bank Pekao (controlled by the largest Polish insurer, PZU), with a total balance sheet of about 171 billion zlotys, Bank Zachodni WBK (Santander Group), with a total balance sheet of around 131 billion zlotys, mBank (formerly BRE Bank, a subsidiary of Germany’s Commerzbank), with a total balance sheet of approximately 128 billion zlotys, and ING Bank Śląski (ING Group), with a total balance sheet of approximately 117 billion zlotys.

There were significant M&A deals in the Polish banking sector in 2016. The most important of these were the acquisition by PZU and Polski Fundusz Rozwoju of one-third of the shares of Bank Pekao from Italy’s Unicredit, and the takeover of Bank BPH (which used to be part of General Electric Group) by Alior Bank (controlled by PZU). These transactions may significantly influence the shape of the Polish banking sector. In addition, they fit in with the concept of the ‘domestication’ of the Polish banking sector, which has many supporters in Poland. Moreover, it is worth mentioning that the merger of two Polish banks owned by France’s BNP Paribas – Sygma Bank Polska and Bank BGŻ BNP Paribas – also took place in 2016.

Notwithstanding the above, in 2016 some activity was still focused on the consummation of transactions commenced in the previous year. For instance, in November 2016 French BNP Paribas Bank Polska finalised an operational merger with Bank BGŻ. The PFSA considers the market to be structured optimally, and the regulator will likely not support its further consolidation. However, the PFSA may still make some exceptions for Polish-owned financial institutions due to its support for the previously-mentioned concept of the domestication of the Polish banking sector.

II THE REGULATORY REGIME APPLICABLE TO BANKS

Pursuant to the legal definition, a bank is a legal person established in accordance with the applicable laws, and operating under an authorisation to perform banking transactions involving any risk for the funds entrusted to the bank and repayable in any way. Under Polish law, banks can be established either as state banks (by the government) or as private banks in the form of a joint-stock company or a cooperative.

Alongside the commercial banks, there are about 50 credit unions operating in Poland. The number of credit unions is continually decreasing due to the intensive restructuring process in this sector. Credit unions merge or are acquired by other credit unions or banks. In general, the situation of the credit unions sector is difficult and requires intensive remedial actions.

Credit institutions from other EU Member States may provide cross-border financial services in Poland on the basis of the single banking passport or they can operate in Poland via a branch. Foreign banks may operate in Poland via a subsidiary (which is formally a separate bank licensed by the Polish regulator) or a branch (establishment of a branch by a non-EU institution requires an authorisation from the PFSA). Branches of foreign non-EU banks must accede to the Polish deposit insurance system to the extent that the guarantee system in the country of origin does not ensure the disbursement of guaranteed funds within the limits stipulated by Polish law (i.e., the equivalent of €100,000).

Foreign banks and EU credit institutions can also open their representative offices in Poland. The scope of activities of a representative office of a foreign bank or an EU credit institution may consist exclusively of advertising and marketing for the foreign bank or the EU credit institution within the limits specified in the authorisation.

Polish law provides for a list of activities that can be performed exclusively by banks. Those exclusive banking operations comprise:

a taking of deposits payable on demand or at a specified maturity, and maintenance of such deposit accounts;

b maintenance of other bank accounts;

c extension of credit;

d extension and confirmation of bank guarantees, issuance and confirmation of letters
of credit;

e issuance of bank securities; and

f bank monetary settlements.

Banks may also engage in other activities that can be performed not only by banks, such as:

a extension of cash loans;

b operations involving cheques and promissory notes, and operations relating to warrants;

c providing payment services and issuance of electronic money;

d forward transactions;

e purchasing and selling of debts;

f safekeeping of assets and securities, and provision of safe deposit facilities;

g purchasing and selling foreign currencies;

h extension and confirmation of endorsements;

i intermediation in money transfers and foreign exchange settlements;

j receiving or acquiring shares and rights attached thereto, shares of other legal persons and participation units in investment;

k assuming commitments relating to the issuance of securities;

l trading in securities;

m swapping debt for debtor’s assets on terms agreed with the debtor;

n purchasing and selling real property;

o providing financial consulting and advisory services;

p providing certification services within the meaning of the regulations on electronic signatures, except for issuance of qualified certificates used by banks in activities to which they are parties;

q providing other financial services; and

r performing other activities, if permitted by other laws.

Polish law does not provide for the separation of commercial and investment banking. Banks may provide services under provisional underwriting agreements and firm commitment underwriting agreements, or under the execution and performance of other similar agreements on financial instruments, and may (subject to authorisation by the PFSA) also perform other brokerage services such as:

a acceptance and transfer of orders to purchase or sell financial instruments;

b execution of purchase and sell orders of financial instruments for the account of the customer;

c acquisition or disposal, for the bank’s account, of financial instruments;

d management of portfolios including one or more financial instruments;

e investment advice; and

f offering financial instruments.

The activities of banks, their branches and representative offices are supervised by the PFSA. The supervision of activities of a branch or representative offices of foreign non-EU banks in Poland, including the scope of examinations and procedures for their performance, may be performed to the extent laid down in an agreement between the PFSA and the supervisory authorities in their home countries. The PFSA is a consolidated supervisor created in 2006 as a result of a merger of the securities, insurance, pension system and banking supervisors. The PFSA is in charge of banking, capital markets, insurance and pension scheme supervision, as well as supervision of payment institutions and credit unions. Despite the consolidation, however, the supervisor serves as an umbrella under which the cross-regulatory functions are housed and under which traditional sectoral supervisory units are maintained as separate operating divisions that focus on traditional sectors such as banking, insurance and securities.

The president of the PFSA, the president of the National Bank of Poland, the president of the Bank Guarantee Fund, and the Ministry of Finance coordinate their actions in the Financial Stability Committee. The Financial Stability Committee is also the competent body for the macroprudential supervision of the financial system and crisis management. In performing its tasks, the Financial Stability Committee cooperates with the European Systemic Risk Board. The Financial Stability Committee is responsible for, inter alia, identifying financial institutions posing material risks to the financial system and the execution of macroprudential instruments, including presenting opinions and issuing recommendations on limiting systemic risk.

A public discussion on the reorganisation of the structure of financial supervision in Poland is currently taking place. It appears that the most important part of the reform would be re-entrusting financial supervision to the National Bank of Poland. However, another idea assumes only some form of subordination of the PFSA to the National Bank of Poland. It remains to be seen what the final shape of financial and banking supervision will be in Poland.

III PRUDENTIAL REGULATION

i Relationship with the prudential regulator

The objective of banking supervision is to ensure the safety of funds held in banks and the compliance by the banks with the provisions of the law, statutes and their banking licences.

Since 2007, the PFSA has been implementing a risk-based approach to supervision. The goal of the regulator is to develop a harmonised methodology for supervision that would use risk as the major factor in determining priorities and the frequency of supervisory actions. Every department of the PFSA is expected to follow a standardised approach for supervisory assessment based on a listed set of criteria, which specify the risks associated with the activities of supervised entities and provide for more accurate quantification of risks associated with activities of various capital groups on the Polish market. The harmonised methodology encompasses the method of assessment of the risk management and control mechanisms of supervised entities, the compliance of activities of supervised entities with the law and the method for the identification of irregularities in business conduct.

Banks are required to submit audited financial statements to the PFSA, on a consolidated and unconsolidated basis, together with an auditor’s opinion and report. Banks, branches and representative offices of non-EU banks in Poland are also required to:

a notify the PFSA of the commencement and cessation of a business activity; and

b enable the authorised PFSA staff to perform their supervisory functions, in particular by:

• making books of account, balance sheets, records, plans, reports and other documents available to them;

• allowing them, on receipt of a written request, to make copies of such documents and other information media; and

• providing explanations to any questions raised.

Furthermore, banks must provide to the central bank, at the request of the National Bank of Poland, data necessary to assess their financial standing and the risks to the banking system, and those banks that participate in monetary clearing and interbank settlements must additionally provide data necessary for assessing monetary clearing and interbank settlements.

In recent years, the major focus of the PFSA has continued to be the regulation of the retail markets and the marketing of bank products to retail clients. The PFSA has issued specific recommendations with regard to the marketing of structured investment products by banks as well as the distribution of insurance products (bancassurance) and the selling of long-term deposits formally structured as insurance to avoid capital gains tax.

The past year was also dominated by a discussion concerning the restructuring of mortgage loans denominated in Swiss francs. Before the financial crisis, most long-term credits (in particular mortgage loans) extended by banks in Poland were denominated in foreign currencies (Swiss francs or euros) to take advantage of lower interest rates and thus reduce the total cost of credit; however, as most retail clients earn their wages in the Polish currency, they are confronted with foreign-exchange volatility with almost no possibility of hedging against that risk. To eliminate the foreign exchange risk, apart from the capital adequacy measures, the PFSA requests that banks inform their clients about the currency spread and the associated risks, both prior to and during the credit relationship; set the exchange rate for the repayment of the loans at the same level as for other customers of the bank; and enable the repayment of the loan directly in the foreign currency acquired from a different source than the lending bank. In the autumn of 2011, the parliament allowed consumers to repay loans and credits denominated in foreign currencies directly in cash in such currencies, and thus limited the additional source of income for banks resulting from currency spreads. However, this issue has become very acute following the sudden rise of the Swiss franc in mid-January 2015 due to the monetary policy decisions of the Swiss National Bank, and the resulting substantial increase of the value of loans and credits denominated in Swiss francs. The issue of mortgage loans denominated in Swiss francs was vigorously debated throughout 2015 and 2016. Banks and lenders have presented their own ideas for resolving the crisis. However, there were so many discrepancies between these parties, in particular regarding bearing costs of the planned operation, that they have not managed to reach a compromise. In January 2016, a draft law aimed at regulating the issue of mortgage loans denominated in Swiss francs and other currencies was presented by the Chancellery of the President of Poland (Chancellery). The draft involved the possibility of conversion of mortgage loans denominated in Swiss francs and other foreign currencies into Polish zlotys at a ‘fair’ exchange rate, which was to be calculated individually in relation to each mortgage loan agreement as well as the reimbursement of borrowers for bank spreads. However, calculations made by the PFSA proved that the proposed law could jeopardise the financial stability of certain banks and would adversely affect the entire Polish banking sector. Therefore, in August 2016 the Chancellery presented another draft law aimed at regulating the issue of mortgage loans denominated in Swiss francs and other currencies concentrated primarily on the reimbursement of borrowers for bank spreads. It remains to be seen what the final shape of this law will be and how it will influence the financial situation of Polish banks. In this context, it should also be noted that the Financial Stability Committee established a working group focused on developing the regulatory mechanisms supporting the conversion of loans denominated in foreign currencies as an alternative for resolving that matter by statutory law. The Financial Stability Committee assumed that the implementation of those mechanisms should induce banks and creditors to make joint, voluntary decisions on the restructuring of such loans.

ii Management of banks

Following the implementation of the CRD IV Directive, which entered into force in November 2015, Polish law provides for specific corporate governance requirements for banks. Banks that operate as joint-stock companies are governed by general corporate law with modifications originating from the Banking Law. The supervisory board of a bank must comprise at least five persons, and the management board must comprise at least three. Banks must inform the PFSA of the composition and any changes in the supervisory or management boards. The chair of the management board of a bank is in charge of internal audit. It should also be indicated which member or members of the management board are responsible for supervising material risks for the bank’s activity. Such member or members of the bank’s management board may not supervise the area of the bank’s activity generating that risk. Moreover, it is not permissible to combine the positions of the president of the management board and the member of the management board in charge of supervising material risk. Further, the division of responsibilities between the members of the management board of a bank should indicate persons responsible for supervising compliance with laws, internal regulations and market standards as well as accounting and financial reporting, including financial control.

The members of the management and supervisory board of a bank should have knowledge, skills and experience relevant to their functions and duties as well as give adequate guarantee of due performance of their duties. In general, the number of functions permitted to members of the management and supervisory board depends on individual circumstances and the character, scale and degree of complexity of the bank’s activity. In the case of significant banks,2 a member of the management and supervisory board may at the same time perform the duties of a member of no more than (1) one management board and two supervisory boards, or (2) four supervisory boards. In certain situations, the PFSA may consent to such member performing duties on one additional supervisory board.

Certain members of the management board of a bank, i.e. the chair and the member or members of the management board in charge of supervising material risk in the bank’s activity, must be approved by the PFSA. Consent may be refused, inter alia, if the candidate:

a has been convicted of an intentional or fiscal offence;

b does not have knowledge, skills and experience relevant to his or her functions and duties;

c does not give an adequate guarantee of due performance of his or her duties; or

d cannot prove sufficient knowledge of the Polish language (this last requirement can be waived if knowledge of the Polish language is not necessary for prudential supervision, taking into account in particular the level of permissible risk or the scope of the bank’s activity).

This language requirement has always prevented foreign nationals without sufficient command of Polish from serving as board members of Polish banks; remarkably, in 2010 the PFSA for the first time permitted two foreign nationals who did not speak Polish to assume responsibility for a bank’s management.

The consent of the PFSA is also necessary for the appointment of the manager and deputy manager of a branch of a non-EU bank. The PFSA uses the same criteria as previously described to evaluate candidates. There are no such requirements with respect to the managing personnel of a branch of an EU credit institution or a representative office.

The PFSA may ask the relevant bank authorities (i.e., the meeting of shareholders or the supervisory board) to dismiss a member of its management or supervisory board who does not fulfil the requirements imposed by law. Moreover, the PFSA is also entitled to suspend a member of the management or supervisory board of a bank until the relevant bank authorities adopt a resolution on his or her dismissal. The PFSA is obliged to dismiss a member of the management board of a bank in the event of a final conviction of an intentional or fiscal offence, with the exception of offences prosecuted by private prosecution, as well as in the event of a failure to inform the PFSA of charges of an intentional or fiscal offence, with exception of offences prosecuted by private prosecution within 30 days of the presentation of charges.

The articles of association of a bank shall specify the management system, which is a set of principles and mechanisms relating to the decision-making processes and to evaluating banking activities. The management system comprises the risk management system and internal control system. The management system must include a procedure for anonymous reporting of violations of the laws, internal regulations and ethical standards applicable to the bank (whistleblowing). The procedure shall provide protection for whistleblowers against retaliation, discrimination and other possible cases of unfair treatment.

Except for the general duties imposed on bank managers by corporate law, such as the duty of care and the duty of loyalty, the Polish Banking Law provides for specific legal and regulatory duties of bank managers. Members of the management and supervisory board of a bank are obliged to perform their functions honestly and fairly, and to be driven by independent judgements, to provide efficient assessment and verification of making and enforcing decisions connected with the current management of the bank. General corporate law also governs the decision-making process within the bank – as a default rule, the management board of a bank has broad discretion with respect to the conduct of the bank’s business. However, the internal regulations (in particular the articles of association) can impose restraints and provide that, for example, certain credit commitments need to be authorised by the supervisory board or the shareholders.

With the exception of state-owned banks, Polish law does not contain any restrictions on bonus payments to management and employees of banking groups, and this issue has never been subject to closer scrutiny by the regulator. Unlike in the United Kingdom and the eurozone countries, the topic of bonus payments in the financial industry was absent from the Polish public discourse, and the remuneration of high-level bankers was also not subject to public scrutiny. This may be explained by the fact that during the financial crisis, no Polish financial institutions needed to be bailed out by the government, and at no time was there a risk of collapse of the financial sector. As of March 2017, except for state-controlled banks, Polish law also does not provide any limitations on the amount of remuneration that the managers of a Polish bank can receive. However, it should be noted that following the implementation of the CRD IV Directive, banks are obliged to draw up and implement remuneration policies for the categories of persons whose professional activities have significant impact on the risk profile of a bank. The remuneration policy applies to a bank’s subsidiaries, and should be in line with the remuneration policy adopted by the dominant entity of the bank. Every year, banks shall provide the PFSA with information about persons whose professional activities have significant impact on the risk profile of a bank, and whose total remuneration for the previous year amounted to at least the equivalent of €1 million. A remuneration committee composed of members of the supervisory board should be established in significant banks. The tasks of the remuneration committee are assessing and monitoring the remuneration policy, and supporting bodies of a bank in shaping and implementing these.

In 2013, the PFSA began to scrutinise the corporate governance of banks. Notwithstanding the corporate governance code of the Warsaw Stock Exchange, on which the major Polish banks are listed, in January 2014 the PFSA issued its own corporate governance rules for financial institutions, and requested compliance therewith by the end of 2014. Failure to comply with the PFSA’s rules is taken into account by the PFSA in the regulatory assessment of supervised entities. Although this initiative has faced significant criticism from market participants, generally the supervised entities decided to comply with the PFSA’s rules (in whole or with some exceptions).

iii Regulatory capital and liquidity

The CRD IV package entered into force on 1 January 2014. The CRR Regulation is directly applicable in Poland, whereas the CRD IV Directive needed to be implemented into Polish law, which occurred in November 2015. Following the implementation of the CRD IV Directive, relevant provisions of the Banking Law regarding banks’ own funds, internal capital and capital adequacy have been amended. It is still necessary to repeal the PFSA resolutions, which became obsolete as a result of the direct application of the CRR Regulation and the implementation of the CRD IV Directive. To complete the establishment of new legal frameworks, the Minister of Finance still needs to issue several ordinances specifying particular questions relating to the regulatory capital (e.g., regarding the detailed way of assessing internal capital by banks).

The entry into force of the CRR Regulation and the implementation of the CRD IV Directive resulted in material changes in the structure of banks’ own funds, which were previously regulated solely by provisions of the Polish Banking Law. Banks must currently maintain own funds defined as the sum of Tier I and Tier II capital adjusted to the size of conducted business. Capital instruments and subordinated loans may be qualified as additional instruments in Tier I or instruments in Tier II after obtaining the consent of the PFSA.

Banks are required to maintain a sum of own funds at a level not lower than the higher of the amount resulting from the fulfilment of requirements regarding own funds specified in the provisions of the CRR Regulation,3 and the amount estimated by banks to be necessary to cover all identified material risks appearing in such bank’s activity and changes in the economic environment, taking into account the expected level of risk (the internal capital). Banks are obliged to draw up and implement strategies and procedures for estimating and constantly maintaining their internal capital. On the demand of the PFSA, banks are required to provide information regarding the structure of own funds, and the fulfilment of requirements and norms specified in the Banking Law and the CRR Regulation. In addition, banks are obliged to maintain capital buffers, in particular the safeguarding and countercyclical capital buffer. Additional capital in the form of a countercyclical buffer is collected by banks during a period of economic growth, and is aimed at weakening the credit expansion of banks, which shall result in smoothing the cycle fluctuations. During an economic downturn, banks will be exempt from the requirement to maintain countercyclical buffer capital, and additional capital accumulated by them during a period of economic growth will be able to be used.

The PFSA may recommend that a bank comply with additional requirements relating to liquidity and own funds, and may also order a bank to withhold the payment of dividends until the restoration of liquidity or the achievement of other norms of risk permissible in the bank’s activity. The PFSA is also entitled to impose on a bank additional requirements relating to own funds, or to impose the application of higher factors than were previously adopted in the case of significant irregularities in identifying risk with the use of an internal method of calculating own funds. In December 2016, the PFSA issued recommendations relating to the payment of dividends by, inter alia, banks, pursuant to which only banks meeting supervisory expectations regarding the minimum level of total capital ratio and security capital shall be entitled to pay a dividend in the full amount.

Generally, Polish banks were well capitalised in 2016. Own funds of Polish banks increased from 159.1 billion zlotys at the end of 2015 to 172.7 billion zlotys at the end of Q3 2016. The increase resulted, inter alia, from the suspension of the payment of dividends. The total capital ratio of Polish banks increased from 16.3 per cent at the end of 2015 to 17.6 per cent at the end of Q3 2016.

Poland has not adopted any bank holding regulations that would restrict the permissible activities of bank holding companies. According to information from the European Commission, so far no financial conglomerates have been identified in Poland, thus the provisions regarding the supplementary supervision of financial conglomerates remain a paper exercise. If a Polish bank operates in a holding company, supervision over such entity is exercised on a consolidated basis. Polish banking law contains a set of default rules on the selection of the consolidated supervisor depending on the type of the holding and the home country of the parent company.

The PFSA was empowered to set liquidity and other permissible operating risk standards that are binding on banks. Resolution No. 386/2008 of the PFSA of 17 December 2008 on mandatory bank liquidity standards imposed minimum quantitative and qualitative requirements for the management of liquidity risk by banks. In particular, banks were required to:

a monitor the mismatch of the maturity dates;

b forecast the inflow and outflow of funds;

c determine the impact of their affiliates on their liquidity;

d analyse the possibilities of obtaining future financing and its costs; and

e implement short-term (unstable sources of funding cover liquid assets) and long-term (coverage of non-liquid assets and limited liquidity assets with stable sources of funding) liquidity measures.

In 2015, the above-mentioned national rules concerning liquidity requirements were replaced by the liquidity coverage ratio specified in the CRR Regulation and the Commission Delegated Regulation 2015/61 of 10 October 2014 to supplement the CRR Regulation with regard to the liquidity coverage requirement for credit institutions. Consequently, currently banks shall hold liquid assets, the sum of the values of which covers the liquidity outflows less the liquidity inflows under stressed conditions, so as to ensure that institutions maintain levels of liquidity buffers that are adequate to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions over a period of 30 days. During times of stress, banks may use their liquid assets to cover their net liquidity outflows. The liquidity coverage ratio shall be introduced gradually, and shall reach the target level of 100 per cent as from 1 January 2018.

iv Recovery and resolution

Following the implementation of the Bank Recovery and Resolution Directive (BRRD), which entered into force in October 2016, Polish law requires banks to draw up recovery plans. Each bank that is not operating in a holding (banks operating in holdings will be included in group recovery plans) must draw up a recovery plan, including actions to be taken in the event of a significant deterioration of the bank’s financial standing, a threat to the bank’s financial standing, a difficult economic situation, or other circumstances that may adversely affect the financial market or the bank’s situation. In cases of a breach or the threat of a breach of the provisions regarding the required level of own funds or liquidity measures, the bank’s management board is obliged to inform the PFSA and the Bank Guarantee Fund thereof and ensure the implementation of the recovery plan. The bank’s management board shall promptly notify the PFSA and the Bank Guarantee Fund of the above-mentioned violations, and ensure the implementation of the recovery plan in the event of a material deterioration of the bank’s financial standing, such as:

a the occurrence of a balance loss or a threat thereof;

b a danger of insolvency or loss of liquidity;

c an increasing level of leverage; or

d an increasing number of loans and credits that are at risk or an increasing concentration of exposures.

The PFSA is entitled, inter alia, to:

a impose on a bank’s management board the obligation to implement the recovery plan;

b restrict the granting of credits and cash loans to a bank’s shareholders, members of its management and supervisory board, and its employees;

c impose a reduction of the variable component of the remuneration of a bank’s senior management; and

d order implementing changes in a bank’s business strategy, or amendments to its statute or its organisational structure.

In the event of a breach or the threat of a breach of the legal provisions regarding the required level of own funds or liquidity measures, the PFSA may establish a curator in the bank to improve the bank’s standing or to ensure the effectiveness of the implementation of the recovery plan. The curator’s powers include participating in meetings of the bank’s authorities and opposing decisions thereof to the competent commercial court. If the implementation of the recovery plan proves ineffective, the PFSA may decide to establish a receivership administration. In such case, the right to adopt resolutions and make decisions in all matters vested by law or by statute with the bank’s authorities and governing bodies is transferred to the receivership administrators. However, the PFSA may stipulate that certain actions require its approval. Upon establishing the receivership administration, the supervisory board is suspended, members of the management board are automatically recalled, and previously established commercial proxies and powers of attorney expire. For the duration of the receivership administration, the rights of other bodies of the bank are also suspended. Receivership administrators may close the bank’s ledgers and prepare a financial statement of the bank for the day indicated by the PFSA, as well as adopt a resolution on the coverage of loss for the period ending on that day, and a loss from previous years.

Moreover, the new law introduced a compulsory restructuring mechanism. The body responsible for compulsory restructuring is the Bank Guarantee Fund. In performing its functions relating to compulsory restructuring, the Bank Guarantee Fund cooperates with the PFSA, the National Bank of Poland and the Minister of Finance. The aim of compulsory restructuring is, inter alia, maintaining financial stability, in particular by protecting confidence in the financial sector and ensuring market discipline, as well as protecting funds entrusted to banks by their clients. The Bank Guarantee Fund shall draft plans of compulsory restructuring for each bank that is not part of a group subject to consolidated supervision in a Member State conducted by an authority other than the PFSA (such banks will be included in group plans of compulsory restructuring). However, the banks are obliged to provide the Bank Guarantee Fund with assistance in drafting and updating the plans if the Bank Guarantee Fund requests them to do so. If a bank refuses to provide such assistance, the Bank Guarantee Fund is entitled to impose on the bank a penalty in an amount up to 10 per cent of the projected annual turnover of the bank (however, not exceeding 100 million zlotys). It should be noted that following the implementation of BRRD, banks are obliged to maintain the level of own funds and liabilities subject to redemption or conversion as determined by the Bank Guarantee Fund.

Compulsory restructuring proceedings will be conducted by the Bank Guarantee Fund after receiving information of the threat of insolvency of a bank from the PFSA. In the course of compulsory restructuring proceedings, the Bank Guarantee Fund is entitled to use the following instruments:

a the acquisition of an enterprise (i.e., the Bank Guarantee Fund is entitled to issue a decision on the acquisition of a bank’s enterprise or its organised part by another entity);

b a bridge institution: the Bank Guarantee Fund is entitled to set up a bridge institution in the form of a capital company. The aim of the bridge institution’s activity would be managing the acquired share rights in a bank under restructuring and exercising rights thereof, or continuing the activity of the acquired enterprise of the bank under restructuring or its organised part until the disposal to a third party or liquidation thereof;

c the redemption or conversion of liabilities: the Bank Guarantee Fund is entitled to:

• redeem or convert liabilities to recapitalise the bank under restructuring;

• redeem or convert liabilities transferred to a bridge institution to equip it with own funds;

• redeem or convert liabilities transferred under the instrument of the separation of property rights; or

• redeem liabilities under the instrument of the acquisition of an enterprise); and

d the separation of property rights: the Bank Guarantee Fund is entitled to set up an entity in the form of a capital company and transfer to that newly established entity separated property rights and liabilities of a bank under restructuring or a bridge institution. The separation of property rights is permissible if the liquidation thereof could adversely affect the market situation; the transfer thereof is necessary for continuing the activity of a bank under restructuring or a bridge institution; or the transfer of property rights shall increase the revenues from those property rights.

If the application of the above-mentioned instruments of restructuring does not lead to the disposal of the bank under restructuring or the application of those instruments is not possible, the bank under restructuring shall be subject to liquidation through insolvency proceedings. It should be noted that during compulsory restructuring proceedings, the right to adopt resolutions and make decisions in all matters vested by law or by the statute with the bank’s authorities and governing bodies is transferred to the Bank Guarantee Fund. The Bank Guarantee Fund is entitled to appoint an administrator of the bank under restructuring who exercises those powers in its name.

Banks are required to pay contributions to a compulsory restructuring fund, with which the actions of the Bank Guarantee Fund under compulsory restructuring proceedings will be financed.

The legal framework for ‘bail-in’ powers of the government in a crisis situation is provided in the Act on recapitalisation of certain institutions and government instruments of financial stabilisation. The Act, which is applicable to, inter alia, banks, allows the government to guarantee the increase of own funds by a financial institution or to use government instruments of financial stabilisation, which include the public instrument of capital support and the temporary takeover of an institution by the State Treasury. A guarantee issued by the state is triggered when the shares or bonds issued by a bank are not acquired by the existing shareholders or third parties, and can only be extended if a bank is not threatened by bankruptcy. The government’s financial stabilisation instruments may be used in the event of a financial crisis to avoid the liquidation of a bank subject to compulsory restructuring proceedings if the application of the compulsory restructuring instruments would be insufficient to avoid adverse consequences for Poland’s financial stability or public interest. The use of the capital support public instrument involves the State Treasury acquiring or purchasing instruments in a bank’s Tier I or Tier II capital, or the issuance by the State Treasury of a guarantee by a bank of increasing its own funds. The temporary takeover of a bank by the State Treasury consists of the transfer of all shares in the bank to a state legal person or a company in which the State Treasury has a dominant position. That said, as of March 2017, Polish banks remain well capitalised, and the Act on recapitalisation of certain institutions and government instruments of financial stabilisation has never been tested in practice.

IV CONDUCT OF BUSINESS

Banks in Poland have to follow consumer protection rules with regard to consumer credit and the distance marketing of consumer financial services, as provided in the laws implementing the EU directives. With respect to usury laws, the Polish Civil Code introduces a cap on the maximum amount of interest that can result from a legal act: the interest rate cannot exceed twice the sum of the reference interest rate of the National Bank of Poland and 3.50 per cent. The reference rate is currently set at 1.5 per cent, so the maximum interest charged by banks cannot exceed 10 per cent annually. Any agreements to the contrary, or attempts to circumvent the usury law, are null and void. In 2016, legislation setting limits on costs other than interest charged on consumers, which is applicable to banks, came into force. The costs shall not exceed 25 per cent of the amount of borrowed cash, and shall not exceed 30 per cent of the amount of borrowed cash per year. Furthermore, non-interest costs throughout the whole crediting period shall not exceed the total amount of a consumer loan (which also refers to consumer credits advised by banks). However, it should be noted that at the very end of 2016, the Ministry of Justice announced a draft of a law aimed at further reducing the permissible amount of interest rates. It remains to be seen what the final shape of that law will be.

As far as investment services provided by banks are concerned, banks in Poland must comply with specific provisions resulting from the implementation of the Markets in Financial Instruments Directive (MiFID) imposing certain pre-contractual disclosure requirements and requirements regarding the suitability of financial products. Banks providing investment services are obliged to, inter alia, provide certain information to clients or potential clients, such as information on their services, on financial instruments, and on costs and charges, as well as obtain the necessary information regarding a client’s knowledge and experience to assess the suitability of a financial service or product.

Banks, bank staff and other persons involved in the performance of banking operations are subject to far-reaching banking secrecy requirements. As a rule of thumb, information that is subject to banking secrecy may be disclosed when, due to the nature of a banking operation or the regulations in force, proper performance of the agreement under which the banking operation is performed, or proper execution of activities related to the conclusion and execution of the agreement, are not possible without the disclosure of information that is subject to the secrecy obligation. The Banking Law further provides for a detailed, illegible and poorly drafted catalogue of circumstances in which banking secrets may be divulged to other financial institutions and public authorities. Depending on the circumstances, alongside banking secrecy, banks may also be required to follow general data protection laws that impose restrictions on the disclosure of personal data of retail clients. It should be noted that a regulation imposing an obligation on banks to provide institutions established to collect, process and provide information subject to the obligation of banking secrecy (the most important of which is Biuro Informacji Kredytowej, established by leading Polish banks, and the Association of Polish Banks) with information on their clients’ liabilities in the scope needed to extend loans, cash advances, bank guarantees and other guarantees, as well as to assess the creditworthiness of customers, came into force in 2016. The aim of the regulation is to increase the possibility of assessing the creditworthiness of banks’ clients. However, the performance of this obligation is burdensome for banks, as it refers to all liabilities without any exclusions.

Banks are subject to general liability rules in tort and in contract. When assessing the non-performance of obligations by banks, the courts employ a high standard of review and demand that banks act with the standard of care expected from a professional body. This high standard of care is particularly imposed in the growing number of judicial decisions concerning the defective performance of wire transfers, where the courts regularly hold that the professional character of banks requires that they cross-check the wire instructions of the client with the recipient’s data. Further, activities of the Polish Office of Competition and Consumer Protection need to be noted: banks are subject to increased scrutiny on antitrust grounds, inter alia, with respect to interchange fees, spreads on foreign currencies and misselling practices.

Moreover, it should be noted that due to the provisions of the Act on reviewing complaints by financial market entities and the Financial Spokesman, banks are obliged to review client complaints within 30 days. Only complaints in especially complicated cases may be reviewed within 60 days. In cases of failure to comply with provisions relating to reviewing complaints, the Financial Spokesman may impose a penalty of up to 100,000 zlotys on a bank.

V FUNDING

Banks participating in SORBNET 2 – a real-time gross settlement system operated by the National Bank of Poland – may cover their liquidity shortages with an intraday credit extended by the central bank. A significant number of commercial banks also participate in the TARGET2 system, either directly or as indirect participants. In 2012, Krajowa Izba Rozliczeniowa, a payment and settlement intermediary created in 1991 on the initiative of the major Polish commercial banks, the National Bank of Poland and the Association of Polish Banks, launched a new payment and settlement system – Express ELIXIR – which provides for an immediate processing of wire transfers 24/7 between the participating banks.

During the financial crisis, interbank lending was heavily disrupted, and it still continues to stagnate. To limit the liquidity risk of banks, the National Bank of Poland adopted a package of measures aimed at facilitating its requirements for open market operations. In particular, repo transactions between commercial banks and the National Bank of Poland may be entered into for longer periods (six months instead of three), and the list of eligible collateral has been extended to include debentures issued by local authorities, mortgage-backed debentures and treasury papers denominated in euros. The National Bank of Poland also lowered the mandatory reserve requirements for banks and agreed to repurchase its own debentures prior to their maturity date. Those instruments proved to be sufficient during the crisis, as no bank was forced to ask the National Bank of Poland for individual liquidity assistance.

VI CONTROL OF BANKS AND TRANSFERS OF BANKING BUSINESS

i Control regime

The regime for approval of qualifying holdings in Polish banks is fully compliant with the CRD IV Directive. The Banking Law states that an entity that intends to directly or indirectly take up or acquire shares or rights on shares in a domestic bank in an amount that would result in that party being entitled to more than 10 per cent, 20 per cent, one-third or 50 per cent of the total number of votes at a general meeting or of the share capital of a bank, is required to notify the PFSA each time of its intention of taking up or acquiring such shares. Moreover, each time an entity intends to directly or indirectly become a dominant entity of a bank in a way other than by taking up or acquiring shares, or rights on shares, in a domestic bank in an amount guaranteeing the majority of votes at the general meeting, it is required to notify the PFSA of such intention. The notifying entity may accomplish the intention expressed in the notification when the PFSA does not deliver an objection within 60 working days from the date of receipt of the notification and all required information and documents, or if the PFSA issues a decision on the lack of grounds for filing an objection.

The PFSA shall file an objection, by way of an administrative decision, against the taking up or acquisition of shares or rights on shares, or becoming a domestic bank’s dominant entity, if the notifying entity has not remedied defects in the notification or in the documents or information enclosed thereto; the notifying entity did not submit in time additional information or documents required by the PFSA; or this is justified by the requirement of cautious and stable management of a domestic bank, or due to an assessment of the notifying entity’s financial standing.

As far as assessing notifying entities’ financial standing is concerned, the PFSA’s representatives have made it clear in public statements that an entity that needs to improve its solvency ratios in its home jurisdiction to meet the Basel III requirements would not be considered favourably by the regulator as a potential acquirer of a Polish bank.

When assessing whether the filing of an objection is justified by the requirement of cautious and stable management of a domestic bank or due to the assessment of the notifying entity’s financial standing, the PFSA takes into consideration, in particular, commitments regarding the domestic bank, and the prudential and stable management of the bank undertaken by the notifying entity in connection with the conducted procedure. The commitments may vary. For example, they may refer to the positioning of a domestic bank in the structure of a multinational financial group, or to the dual listing of the shares of the bank’s dominant entity on the Warsaw Stock Exchange. Although the commitments are formally made voluntarily, in practice the PFSA often expresses its expectations and suggestions relating thereto. For instance, in 2012, during assessments of the following acquisitions, the PFSA requested notifications from the purchasers that they undertook to dual list their shares on the Warsaw Stock Exchange. Such commitments were made by Santander in the acquisition of Kredyt Bank, and by Raiffeissen in the acquisition of Polbank. According to the PFSA, the owners of the key financial institutions in Poland should also be subject to increased transparency and capital market information requirements in Poland.

Voting rights on shares may not be exercised where such shares or rights on shares are taken up or acquired:

a in breach of the obligation of notifying the PFSA;

b despite an objection having been filed by the PFSA;

c before the end of the period authorising the PFSA to file an objection; or

d after the end of the time limit set by the PFSA for the taking up or acquisition of shares or rights on shares.

In the case of the exercising powers of a dominant entity of a domestic bank in the aforementioned manner, members of the management board of the domestic bank appointed by the dominant entity, or members of the management board, proxies or persons performing managerial functions at a dominant entity, are not allowed to participate in actions considered as representation of a domestic bank; where it is impossible to establish the board members who have been appointed by a dominant entity, the appointment of the management board shall be ineffective from the day of obtaining the powers of a dominant entity of that domestic bank. In particularly justified cases, inter alia, if the interests of a domestic bank’s customers so require, the PFSA may, by way of a decision issued at the request of a shareholder or a dominant entity of a domestic bank, remove the above-mentioned prohibitions.

It should be noted that in certain cases the PFSA may, by decision, prohibit the execution of voting rights on shares of a domestic bank or the execution of the powers of a dominant entity of a domestic bank. This may happen, inter alia, in the event of a failure to respect the commitments made in the proceedings regarding taking up or acquiring shares or rights on shares in a domestic bank, or of becoming its dominant entity. The aforementioned decision may be followed by a decision of the PFSA ordering the disposal of shares of a domestic bank within a fixed time period. If the shareholder does not fulfil the obligation to dispose of the shares within prescribed the time, the PFSA is entitled to impose on a domestic bank’s shareholder that is a natural person a fine of up to 20 million zlotys, and on a shareholder that is a legal person a fine of up to 10 per cent of its annual turnover. These regulations have not been used in practice for a long time. However, in 2014 the PFSA for the first time prohibited a private equity fund, Abris Capital Partners, from executing its voting rights on shares in FM Bank PBP, and ordered the disposal of the shares due to the failure to respect the investor’s commitments. It remains to be seen whether the PFSA will use this tool more readily.

ii Transfers of banking business

Pursuant to the Banking Law, subject to an authorisation from the PFSA, banks may divide by transfer some assets of a bank to an existing or a newly formed domestic bank or an EU credit institution (spin-off or division by separation). The PFSA shall refuse its authorisation if the division may turn out to be detrimental to the sound and prudent management of the bank being divided or the banks to which the assets of the bank being divided are transferred, or if the division may cause substantial loss to the national economy or to the national interest. The division of a bank is considered to be effected as a universal succession and does not require the consent of consumers.

Banks may also use other techniques to transfer part of their business. The acquisition of a banking enterprise or an organised part thereof by a bank requires authorisation from the PFSA. In this case, there is assignment of the entire contract, and customers’ consent may be necessary. Banks may also employ other techniques to achieve capital relief on assets, such as true sale securitisation (i.e., assignment of the individualised claims on a special purpose vehicle. Assignment of a claim does not require the consent of the debtor, unless the contract provides otherwise) and synthetic transfer (such agreement may, however, only be effected with a mutual fund that constitutes a securitisation fund or with a securitisation fund. There is no legal transfer of the underlying assets, so the consent of clients is not necessary). Moreover, Polish law allows for the sale of non-performing loans in a public tender process where the banks can publicly disclose to the potential acquirers certain information that is normally subject to banking secrecy rules.

A bank may only merge with another bank or an EU credit institution upon an authorisation from the PFSA. The PFSA shall refuse its authorisation if the merger would lead to a violation of the law or the interests of customers of the bank participating in the merger, or if it would jeopardise the safety of funds held in that bank.

VII THE YEAR IN REVIEW

The financial results of the Polish banks in Q1–Q3 2016 were marginally higher than those in the same period of 2015 (the net results of the Polish banks in Q1–Q3 2016 amounted 11.454 billion zlotys, which was 49 million more than in Q1–Q3 2015). The slight improvement in the financial results of the Polish banking sector was caused mainly by an increase of net interest income, an increase of other income from banking activities due to the settlement of the sale by some banks of shares in VISA Europe Limited, and an increase in the balance of other operating income and expenses.

In 2016, BRRD and the Deposit Guarantee Schemes Directive (DGSD) came into force, which have significantly influenced the conditions of conducting banking business in Poland. In particular, following the implementation of DGSD, the method of calculating bank contributions to the deposit guarantee scheme has changed. The amount of contribution to be paid by a bank is no longer calculated on the basis of such bank’s assets, but rather depends on the amount of guaranteed funds (i.e., mainly deposits).

The past year witnessed continuing development in the area of consumer protection. The PFSA reported a large number of complaints filed by consumers against financial intermediaries. These complaints were about the quality of service and products offered by the banks, in particular consumer loans and mortgages. The problems reported concerned the lack of or inadequate information about products and services, inappropriate servicing of products, lack of adequate communication with consumers and seizure of accounts during enforcement proceedings. As regards the cross-selling of insurance products by banks, the PFSA has addressed the issue of proper bancassurance practice in a formal recommendation, Recommendation U. Recommendation U was to be implemented by banks by the end of March 2015. It extensively addresses conflicts of interest, and forbids banks from gaining profits from the marketing of insurance protection when such bank also enjoys insurance coverage that is financed by its consumer. The entry into force of Recommendation U curbed the profits derived by the banks from the sale of credit coupled with insurance products, and increased consumer protection. In this context, it should be noted that following the entry into force of the Act on insurance and reinsurance activity in January 2016, the limitation of banks’ profits from bancassurance results also directly from provisions of that legal act.

The level of consumer protection was also increased by the entry into force of new rules for financial institutions when reviewing client complaints and the appointment of the Financial Spokesman. The Financial Spokesman actively supports clients of financial institutions by, inter alia, presenting its opinions in court proceedings against financial institutions.

In 2016, new rules of the Polish Office of Competition and Consumer Protection pronouncing provisions for standard form contracts to prevent illicit activities and a prohibition on misselling of financial services entered into force. Moreover, the Office of Competition and Consumer Protection may use a mystery shopper in its consumer protection activities.

The increased number of consumer complaints has also resulted in increased litigation, often in the form of class action litigation. In particular, mortgage loans denominated in foreign currencies have become the subject of increasing class actions against banks. In the first such proceedings, the Regional Court in Łódź ruled against BRE Bank (a subsidiary of Commerzbank, currently operating under the business name mBank), finding that its general terms and conditions regarding currency spreads were abusive. The judgment was upheld by the Appellate Court in Łódź. However, the Supreme Court shared one of the procedural nature arguments presented in the cassation appeal filed by the bank, and remanded the case to re-examination by the Appellate Court. Consequently, the final outcome of this case remains open.

Other banks have also been threatened with similar proceedings. Worth mentioning is the judgment issued by the Regional Court in Wrocław against one of the Polish banks in which the Court stated that changes of interest on credit cannot be in the bank’s absolute discretion. Moreover, in several cases the courts have ruled that indexation clauses in mortgage loans denominated in foreign currencies were null and void. Another area of litigation concerns the practices of banks in the area of insurance.

The past year also witnessed increased activity by the Office of Competition and Consumer Protection, which issued several decisions against banks claiming that the structure of their banking products was abusive and infringes collective consumers’ interests. The latest of such decisions was issued in January 2017 against Raiffeisen Bank Polska for an infringement of collective consumers’ interests by way of disregarding the negative LIBOR. The penalty imposed on Raiffeisen Bank Polska amounted 3.5 million zlotys. As of March 2017, the decision was not final.

In February 2016, the Act on tax on certain financial institutions came into force pursuant to which, inter alia, domestic banks, branches of foreign banks and branches of EU credit institutions are obliged to pay additional tax amounting to 0.0366 per cent of their assets exceeding 4 billion zlotys. This additional financial burden influenced the profitability and rate of return of the Polish banking sector and resulted in higher costs of conducting banking activity.

In 2016, some Polish banks continued their intensive cooperation with telecommunication companies with the aim of developing mobile banking and offering certain bank services through mobile devices. Such cooperation seems to be a permanent trend.

The unexpected decision of January 2015 of the Swiss National Bank to abandon its currency ceiling against the euro resulted in the significant and sudden rise in the value of the Swiss franc. This in turn resulted in a substantial increase in the instalments of loans denominated in the Swiss currency. As a result, many borrowers found themselves in a difficult situation. As already mentioned, the issue of finding the best way of helping them was vigorously discussed in 2015 and 2016. However, so far the expectations of banks and borrowers have been so divergent that it has been impossible to find a solution acceptable to all parties. A second draft of the law aimed at regulating the issue of mortgage loans denominated in Swiss francs has been prepared under the auspices of the Chancellery. However, the final shape of this law remains to be seen, and how the recommendations of the Financial Stability Committee regarding the issue of loans denominated in foreign currencies will be implemented. In this context, it should be noted that in 2016 the Act on support for borrowers in difficult financial situations, regarding borrowers who took out mortgage loans, came into force. Under this Act, banks with exposure on mortgage loans are obliged to make payments to a fund supporting borrowers. Such fund is administrated by Bank Gospodarstwa Krajowego, the only state bank in Poland. In general, each borrower (not only having mortgage loans denominated in Swiss francs) facing financial problems is entitled to receive financial support for 18 months in an amount of up to 1,500 zlotys per month. The support will have to be reimbursed by the borrower. The Act is targeted to borrowers having temporary problems with the repayment of mortgage loans, regardless of the currency in which such loan was incurred. The obligation to make payments to the fund supporting borrowers is yet another burden imposed on banking business in Poland.

Since the Constitutional Tribunal held in 2015 that banks conducting enforcement procedures by way of issuing bank enforcement orders was unconstitutional, banks may no longer use this quick and efficient method of collecting receivable debts. Because of the possibility of issuing bank enforcement orders on the basis of their books or other documents related to the performance of banking operations, to collect their receivables banks did not have to bring proceedings to the court. Bank enforcement orders could constitute the basis for an enforcement procedure conducted pursuant to the provisions of the Polish Code of Civil Procedure following a writ of execution issued by a court. However, the court was verifying only the formal correctness of bank enforcement orders, without examining the merits. Such procedure made the collection of receivables by banks relatively fast and easy. The Constitutional Tribunal found that banks conducting enforcement procedures by way of issuing bank enforcement orders was against the principle of equal treatment arising out of the Polish Constitution. As a result of the judgment, the provisions of the Banking Law regarding the issuing of bank enforcement orders have been repealed. Consequently, collecting receivables by banks without the possibility of issuing bank enforcement orders is currently more burdensome and time-consuming.

VIII OUTLOOK and CONCLUSIONS

A big challenge facing the Polish banking industry in 2017 will certainly once again be compliance with the new legislation that is already in force and that is yet to be implemented. The banking business legal and regulatory environment remains unstable. The conditions for conducting banking business have changed significantly, in particular due to the implementation of BRRD and DGSD, and the introduction of tax on certain financial institutions. It is expected that the implementation of MiFID II will take place in 2017, which shall influence the investment activity of banks. The expected implementation of the Payment Services Directive II shall affect the provision of payment services by banks. The changes will include, inter alia, introducing new payment services providers (account information service providers and payment initiation service providers), strengthening customer authentication, reducing customer’s liability for unauthorised transactions and a prohibition on card sub charges.

In February 2017, the Payment Accounts Directive came into force. The new law introduces a basic payment account designed for consumers that have no other account allowing for payment-making transactions. The basic payment account must give consumers access to certain basic services, such as making payments into the account and withdrawing cash from ATMs. Moreover, the new legislation also introduces a standard procedure of account switching, and rules on the functioning of websites comparing payment account offers.

It is expected that the Act on mortgage credit and supervision of mortgage credit intermediaries and agents implementing the directive on credit agreements for consumers relating to residential immoveable property will enter into force in 2017. This bill shall comprehensively regulate the issue of granting mortgage credits. The most important changes shall be as follows. Generally, in the case of mortgage credits, cross-selling will be banned, with the exception of free-of-charge bank accounts intended for accruing funds for the repayment of a mortgage credit or the handling of a mortgage credit. A bank lending a mortgage credit will be obliged to facilitate the restructuring of a consumer’s debt if it is justified by an assessment of the consumer’s financial standing. The consumer will be entitled at any time to repay the mortgage credit in whole or in part before the date specified in the mortgage credit agreement. All marketing and advertising materials regarding mortgage credits will have to be clear, reliable, understandable and not misleading. According to the draft of the new law, conducting the activity of a mortgage credit intermediary will require an authorisation granted by the PFSA.

Conclusive decisions on the final shape of the law aimed at regulating the issue of mortgage loans denominated in Swiss francs can be probably expected in 2017. This will be important for the profitability of banking businesses in Poland.

The structure of the Polish banking sector has changed recently due to a series of M&A transactions involving entities controlled by the state. Some multinational financial groups withdrew from the Polish market, and the state currently controls a significant part of the Polish banking sector. It remains to be seen what the consequences of such state of affairs will be.

In 2017, more information on the possible reform of the structure of financial supervision in Poland should emerge. The most important questions are whether banking supervision would somehow be re-entrusted to the National Bank of Poland, and what new powers the authority responsible for banking supervision would have.


1 Tomasz Gizbert-Studnicki is a senior partner, Tomasz Spyra is a partner and Michał Torończak is an associate at T Studnicki, K Płeszka, Z Ćwiąkalski, J Górski Spk.

2 Significant banks are banks significant in terms of size, internal organisation, or type, scope and complexity of conducted business, which fulfil one of the following conditions: its shares are admitted to trading on a regulated market, or its share in assets, deposits or own funds of the banking sector is not less than 2 per cent; or other banks deemed as significant by the PFSA.

3 Subject to Article 92 of the CRR Regulation, banks shall at all times satisfy the following own funds requirements: a common equity Tier I capital ratio of 4.5 per cent, a Tier I capital ratio of 6 per cent and a total capital ratio of 8 per cent.