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Poland - Banking System

Until 1989, the Polish banking system was controlled by the State with business decisions subordinated to political priorities. The reform of the Polish banking system began in 1989 when the Parliament adopted the Banking Law and the NBP Act (both as defined below). As a result of these changes in legislation and administrative procedures, a relatively large number of new private banks were established, which later underwent a process of continuous consolidation.

In December 2008, there were 52 domestic commercial banks in Poland, of which 10 were banks with majority Polish held equity and 42 were banks with majority foreign held equity. As at the end of December 2008, 72.3 percent of the commercial banks' assets were held by foreign controlled banks (including branches of credit institutions). There were also 579 co-operative banks and 18 branches of credit institutions operating in Poland. Moreover, four domestic banks performed services abroad either through a subsidiary or a branch.

As the banking sector in Poland performs mostly commercial banking activities and has not had extensive involvement in investment banking or product structuring linked to subprime debt, it has not been directly affected by the current financial crisis. The sector is to an extent affected by the macroeconomic implications of the crisis. Pre-tax earnings of commercial banks in 2008 were approximately 2.9 percent higher compared to those in 2007, and net earnings were approximately 2.1 percent higher for the same comparative period. The spread between average Polish zloty lending and term deposit rates equaled 3.6 percent in December 2008, compared with 4.4 percent at the beginning of the year. Earnings expansion occurred mainly as a result of the further intensification of banks' activities in view of favorable macroeconomic conditions. The growth in net earnings was primarily driven by the expansion of the total income from interest, fees and commissions and accompanied by a moderate increase in costs of banking activities.

Since the beginning of 2005, all banks have been required to apply the effective interest rate method to their assets and liabilities valuations at their amortized costs. As at September 30, 2008, 34 domestic banks (most of them incorporated as public listed companies) and 10 branches of foreign credit institutions submit reports on a standalone basis in line with the International Financial Reporting Standards, or IFRS. At the end of December 2008, the irregular asset ratio (defined as the ratio of irregular claims to total claims on non-financial customers) in the banking sector was 4.4 percent, down 0.8 percent compared to 2007. Irregular claims refer to credit exposures where there is a delay in repayment that exceeds three months for corporations (six months for retail loans) and/or the circumstances of the borrower indicate that timely repayment may be unlikely.

During 2008, there has been a further increase in loans to households, especially foreign currency mortgage loans and consumer loans. Foreign currency mortgage loans increased 98.7 percent in 2008 as compared to 2007, with mortgages denominated in Swiss Francs comprising the largest proportion of foreign currency mortgages. There was also high growth in loans to commercial enterprises, mainly due to the growth in project and business development financing.

In June 2006, the legal process of implementation of the Credit Requirement Directive, or the CRD, into the Polish regulatory framework was officially launched by publishing the text of the CRD in Polish. The new legal rules implementing the CRD provisions (Basel II) in the banking sector were introduced on April 1, 2007. A transitional period applied until the end of 2007, during which time banks were allowed to apply existing capital adequacy standards; 46 commercial and all co-operative banks made use of the transition period. According to the results reported by banks up to late 2009, it is unlikely that the new principles will have had a material impact on the values of their capital adequacy ratios.

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Page last modified: 11-07-2011 03:04:18 ZULU