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Covid-19 coronavirus: Polish regulator proposes stabilisation measures to support the banking sector

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The Polish Financial Supervision Authority (the PFSA) has announced the so-called SIP (the Supervisory Impulses Package for the security and development of banks) aimed at supporting the banking sector facing the Covid-19 coronavirus outbreak. The solutions that the PFSA proposed are focused on maintaining a balance between ensuring the correct financial system stability ration and upholding and supporting business activity, in particular maintaining the availability of loans for businesses.

Activities in the area of reserves and credit exposures classification

As far as the banks drawing up their financial statements under the Accounting Act are concerned, the PFSA suggest excluding from the obligation to reclassify credit exposures towards micro, small and medium enterprises and natural persons in the case of with amending the repayment schedule would be triggered by the change of their financial standing due to the coronavirus epidemic. The decision on implementing the proposed solution shall be made by the management boards of the individual banks.

Limiting the costs related to the assets quality reduction

The PFSA shall adopt a flexible approach to the application of the EBA guidelines on the management of non-performing and forborne exposures. The PFSA is ready to delay the implementation of Recommendation R which shall allow banks to act with greater flexibility in determining the accounting principles, including the principles of estimating the provisions for the expected credit losses. As far as the banks applying the Polish Accountings Standards are concerned, the PFSA shall recommend amending the provisions concerning the recognition of the collateral securing the repayment of credit facilities in the dedicated reserve account. This amendment would consist of extending the period of recognition of the collateral securing the repayment of credit facilities for the purpose of reducing the basis of creating the dedicated reserves.

Activities in the area of capital buffers

The PFSA supported reducing the systemic risk buffer. The draft regulation repealing the Regulation of the Minister of Development and Finance on the systemic risk buffer dated 1 September 2017 under which the banks were obliged to establish the buffer of 3% of their risk exposures is being opined on now. The National Bank of Poland estimates that this should release approximately PLN 30 billion of funds i.e. approximately PLN 40 billion in loans. The PFSA shall also consider reducing the Other Systemically Important Institutions (O-SII) buffer and changing the structure of the add-on as well as the possibility of covering this add-on to a smaller extent with CET1.

Activities in the area of liquidity standards

The PFSA shall adopt an individual approach to the level of the liquidity buffer by duly adjusting its supervisory reaction in the event a bank’s Liquidity Coverage Ratio (LCR) falls below the regulatory levels.

Possibility to amend the terms of credit facilities

The PFSA shall propose the regulation allowing banks to extend the maturities or otherwise modify in favour of a client the terms of credit facilities, and such decisions will be made on the review of the client’s financial and economic standing previously conducted by the bank.

Activities in the area of ongoing supervision

Furthermore the PFSA intends to:

  • defer for 6 months the time limit for its banks to adjust to EBA’s guidelines on outsourcing
  • minimise or delay selected supervisory obligations
  • take into account specific circumstances when deciding whether to postpone the updating of the remedial plan and other obligations

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