The Polish banking sector has evolved significantly since the fall of communism in 1989. With the transformation into a market-oriented economy, the country’s financial landscape witnessed a major overhaul. The process of privatization, coupled with the entry of foreign banks and the establishment of new domestic banks, reshaped Poland’s banking industry. Consequently, the Polish government and the National Bank of Poland (NBP) introduced a series of banking laws and regulations to ensure financial stability and protect both domestic and international stakeholders.

The principles of banking in Poland are centered around maintaining financial stability, safeguarding deposits, and promoting transparency. Polish banks are required to comply with the European Union’s directives and the domestic laws that govern the sector. However, risks such as credit risk, liquidity risk, and operational risk remain persistent concerns for investors and account holders.

Banking regulation in Poland is crucial for maintaining stability and fostering growth in the financial sector. The primary regulatory bodies overseeing the banking industry include the NBP, the Polish Financial Supervision Authority (PFSA), and the Bank Guarantee Fund (BGF). These institutions play a vital role in ensuring the proper functioning of banks and protecting stakeholders’ interests.

Despite its progress, the Polish banking sector has its weaknesses, such as the prevalence of foreign currency loans, particularly Swiss Franc mortgages. The sector also faces challenges due to its high exposure to the commercial real estate market and the potential vulnerability to economic downturns. These weaknesses could potentially impact account holders and other creditors in the event of bank failures.

Polish Banking Law

The Banking Law Act (1997) – This act provides a comprehensive legal framework for the functioning of the banking sector. It covers licensing, supervision, and bank resolutions, among other aspects.

Act on the Bank Guarantee Fund (1994) – This act establishes the BGF, a mandatory deposit insurance system that protects depositors in the event of bank failures.

Act on Macroprudential Supervision over the Financial System and Crisis Management (2015) – This act focuses on macroprudential supervision and financial stability, outlining the roles and responsibilities of various institutions in crisis management.

Act on the National Bank of Poland (1997) – This act outlines the NBP’s role as the central bank and the chief authority responsible for maintaining monetary stability.

Act on Public Offerings and Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies (2005) – This act governs the issuance of securities and ensures transparency in public companies.

The PFSA plays a critical role in imposing administrative sanctions on banks that fail to comply with regulations. The sanctions can include fines, restrictions on business activities, or even revocation of banking licenses. Internationally, Polish banks must adhere to EU directives and are subject to sanctions imposed by European regulatory bodies, such as the European Central Bank (ECB) and the European Banking Authority (EBA).

Bank Resolution Procedures in Poland

Bank resolution procedures in Poland are primarily governed by the Banking Law Act and the Act on the Bank Guarantee Fund. The PFSA and the BGF play crucial roles in the resolution process. The key steps include early intervention measures, resolution planning, and the implementation of resolution tools, such as the bail-in mechanism, asset separation, and bridge institution.

In the event of bank insolvency in Poland, the insolvency procedures are initiated under the provisions of the Banking Law Act and the Bankruptcy Law. The process entails the appointment of a court-appointed receiver, the liquidation of bank assets, and the distribution of proceeds among the creditors. The creditor hierarchy in Poland is as follows: Secured claims, such as mortgage-backed loans or claims secured by a pledge. Claims of employees for unpaid wages and other benefitsClaims of the BGF for compensation paid to depositors. Unsecured claims, which include corporate bonds, unsecured loans, and trade payables. Subordinated claims, which typically involve subordinated debt instruments.

Historic Events: Failed Polish Financial Institutions

The collapse of Bank Polska Kasa Opieki (Bank Pekao) serves as a significant example of the application of Polish banking law and resolution procedures. The government’s intervention and subsequent sale of the bank to UniCredit Group, an Italian banking conglomerate, helped protect account holders and maintain financial stability.

Another noteworthy case is the resolution of Bank SKOK Wołomin in 2014. The PFSA and the BGF stepped in to protect depositors and minimize the impact on the financial system. The bank’s assets were sold off, and depositors were compensated using the BGF’s funds.

Utilizing the Legal Framework for Creditors in Bank Failures

Creditors affected by bank failures in Poland can rely on the legal framework to recover their investments. The regulatory bodies, such as the PFSA and the BGF, ensure that banks follow proper insolvency procedures and distribute assets according to the established creditor hierarchy.

Additionally, international creditors can seek recourse through the EU’s legal framework, which governs cross-border insolvency matters and provides protection for creditors in the event of bank failures.