The
The resolution process, coordinated by the Polish national resolution authority, as well as the related support measures, will enable an orderly sales process or wind-down of the bank, while preserving both financial stability and a level playing field in the Single Market.
Resolution plan of
The bank has been encountering difficulties since 2016 due to low profitability, which led to the depletion of its capital. In 2018, the bank experienced a bank run, when around
On
Following this decision, the BFG decided that it was in the public interest to put the bank into resolution, in line with the European Bank Recovery and Resolution Directive (BRRD), rather than to follow insolvency procedures under national law.
The resolution plan provides that, after the bank is resolved, its main assets and liabilities, except the equity and subordinated debt that will be fully written down to absorb losses, will be transferred to a newly created bridge bank. The purpose of this transfer is to ensure that the normal banking operations can continue.
In line with the possibilities foreseen by the BRRD, the bridge bank will serve as a temporary solution to prevent a sudden exit of
The BFG, which is responsible for both the resolution of banks and the guarantee of deposits in
In this respect, the BFG will provide the newly created bridge bank with direct support measures in the form of cash injections worth around
In addition, the Polish Commercial Banks' Protection System (System Ochrony Bankow Komercyjnych, '
The Commission's assessment
The intervention from the resolution fund funded by the contributions of the banking sector and managed by the BFG, qualify as State aid under EU rules. On the other hand, the commercial banks in the
The Commission assessed the aid measures, which have been designed and implemented by the BFG, under its rules on State aid to banks in the context of the financial crisis ('2013 Banking Communication'). It found that the measures are in line with the objective of preserving financial stability. Existing shareholders and subordinated debt holders contributed to the costs, reducing the need for intervention by the Polish resolution fund, in line with burden-sharing principles. Furthermore, in order to limit distortions of competition,
As part of its State aid decision, the Commission has also verified that the bail-in principles under the BRRD were respected. In particular, the Polish law transposing the BRRD requires the bank's losses to be covered by the bail-in of shareholders and creditors (covering at least 8% of the bank's liabilities). These rules ensure that the amount of State aid is minimised, while financial stability is preserved. In this case, the resolution fund and the deposit guarantee fund are funded by the contributions of the industry, therefore the resolution is financed entirely by the banking sector, without the recourse to taxpayer money. The deposits held by the bank remain intact and fully accessible throughout the procedure. The Commission therefore concluded that the resolution aid to
Background
The common EU rules on State support in favour of banks in the context of the financial crisis ('2013 Banking Communication') encourage the exit of non-viable players, while allowing for the exit process to take place in an orderly manner so as to preserve financial stability. Moreover, the rules ensure that the aid is limited to the minimum necessary and that the distortions of competition brought about by the subsidies, which give aided banks an advantage over their competitors, are mitigated.
The European Bank Recovery and Resolution Directive rules equip national authorities with the necessary tools and powers to mitigate and manage the distress or failure of banks or large investment firms. It allows national authorities to safeguard financial stability, while taking appropriate measures to limit the use of public funds and mitigate the distortions of competition resulting from the aid, including notably the sale of bridge banks.
For More Information
The non-confidential version of the decision will be made available under the case number SA.100687 in the
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