The Polish financial sector is facing significant legal changes.
The purpose of the draft act amending certain acts in connection with ensuring the development of the financial market in Poland and the protection of investors on this market of October 24, 2022 is to implement the Capital Market Development Strategy. The assumed changes are aimed at organizing and streamlining the functioning of financial market institutions. The draft includes a number of changes to the banking law, including the introduction of a uniform banking license, changes to the regulations on banking outsourcing (including those relating to the length of the outsourcing chain), dormant accounts, competences of the Polish Financial Supervision Authority and banking secrecy.
On November 25, 2022, the stage of issuing opinions on the draft act amending certain acts in connection with ensuring the development of the financial market and protecting investors on this market, in the version of October 24, 2022, ended. This project is a key element of the implementation of the Capital Market Development Strategy published in 2019. The assumed changes are aimed at streamlining and streamlining the functioning of financial market institutions, in particular in terms of eliminating barriers to access to the financial market, streamlining financial market supervision, protecting clients of financial institutions, protecting minority shareholders in public companies, increasing the level of digitization of the financial sector by the Supervisory Commission Financial Supervision Authority (KNF) of supervisory obligations and unification of legal solutions in the field of protection and access to legally protected secrets.
The following alert is dedicated to the key changes to the regulations contained in the draft, which may be important for banks.
1. Introduction of a single banking license
Pursuant to the draft, undertaking brokerage activities by the bank will not require obtaining an additional authorization to conduct this activity (brokerage licence). Trading in financial instruments may be carried out on the basis of authorizations to establish a bank and commence its activity. On the other hand, the extension of the bank's activity to include brokerage activities not covered by the existing permit will be made in the mode of permitting an amendment to the bank's articles of association.
This is a fundamental change in relation to the current legal situation based on regulatory duality, in which only some brokerage activities may be performed without additional authorization from the Polish Financial Supervision Authority (i.e. by amending the bank's articles of association), while other rights are subject to the requirement to obtain a license to perform brokerage activities. The new wording of the regulations will make it easier for banks to operate in new segments of the financial instruments market.
What is important, if the bank fails to undertake or ceases to perform the activity specified in the statute for a continuous period of 12 months, the bank will lose its authorization to perform it and will be obliged to apply for an amendment to the statute adapting the subject of the activity specified in the statute to the activity actually performed, which is a regulation analogous to the regulations applicable to investment firms.
2. Changes regarding banking outsourcing
The most extensive element of the discussed draft is a series of changes in the regulations on banking outsourcing, which are intended to simplify the procedures and harmonize them with the guidelines of the European Banking Authority on outsourcing. The key change in this matter is to be the release of the outsourcing chain, which is currently limited to one level of sub-outsourcing. The project assumes no restrictions as to the permissible number of levels of sub-outsourcing. Another fundamental reform is the introduction of notifications instead of obtaining permission from the Polish Financial Supervision Authority to entrust activities under banking outsourcing if they are to be performed by an entrepreneur from outside the EEA or are to be carried out outside the EEA, and also if they concern the outsourcing of the so-called "other activities" of domestic and foreign entrepreneurs. In addition, the draft assumes the extension of the possibility of entrusting activities in the field of intermediation in relation to contracts with payment instruments other than payment cards, and also extends the catalog of outsourced activities with electronic banking services.
The draft introduces the possibility of concluding certain contracts with all entrepreneurs constituting outsourcing activities, which currently can only be concluded with micro and small entrepreneurs. The draft abandons the absolute requirement of the form of an agency agreement in the case of some activities under outsourcing.
The planned changes include limiting the insourcer's liability and liberalizing the rules of interbank outsourcing.
The draft assumes the introduction of specific outsourcing rules in mortgage banks. From this point of view, it is crucial to enable mortgage banks to outsource bank management and internal audit to the parent company which is the bank and at the same time the sole shareholder of the mortgage bank.
The draft proposes to exclude the provisions of the Banking Law regulating the issue of banking outsourcing regarding activities performed by the associating bank for the benefit of the cooperative bank, including activities performed at the request of the cooperative bank in the event of termination of the association agreement.
3. Changes regarding the so-called dormant accounts
The draft includes changes to the regulations on the so-called dormant accounts, which implement the postulates of limiting to the necessary minimum the scope of information provided to communes as potential inheritors about these accounts. A fundamental change in this context is the repeal of the obligation imposed on banks to inform communes about bank accounts held by living persons, which expired due to inactivity on the account.
In addition, it is proposed to modify the information obligations towards the municipality in the event of the death of the account holder, by limiting the scope of information provided to the date of receipt by the bank of information about the death of the bank account holder, together with information about the possibility of purchasing funds.
In addition, the Bank will no longer be obliged to inform the municipality if the total amount of funds accumulated in the account or accounts is lower than or equal to 1/10 of the minimum remuneration for work. It is also proposed to extend the period of fulfillment of the information obligation by the bank to 2 years in order to enable the exercise of powers by persons whose rights to inheritance have been formally confirmed.
4. Changes regarding the powers of the KNF
The Polish Financial Supervision Authority will be able to recommend the bank to remedy the deficiencies found in the course of the proceedings for the authorization to use the internal method or the authorization to introduce extensions or changes to the internal methods within the prescribed period.
Another new power vested in the PFSA is the possibility of recommending the bank to remove deficiencies found in the course of the proceedings regarding authorizations for the classification of credit exposures based on internal credit risk models and to create specific provisions and write-downs of receivables related to these exposures.
5. Amendments to the provisions on bank secrecy
The draft extends the list of entities to which the provision of information covered by bank secrecy is to be kept secret (by adding the Military Police, the Border Force, the Head of the Central Anti-Corruption Bureau, the Head of the Internal Security Agency and the Internal Supervision Office).
The Border Force is to include the group of authorities upon whose request the bank is obliged to provide information constituting bank secrecy.
The bank is also to be obliged to provide the KNF with information constituting bank secrecy in the event that the KNF receives a request for such information from an insurance or pension market supervisory authority with which the national supervisory authority has entered into an appropriate agreement.
6. Other changes
The draft extends the obligation of the bank to inform about actions related to the recovery plan. According to the draft, not only the KNF, but also the Bank Guarantee Fund will be informed about such recovery plans.
The draft also adjusts the amount of fines that may be imposed by the Polish Financial Supervision Authority for failure to comply with investor obligations. Legal regulations in this respect are to be analogous to the provisions of the European Union law regarding the imposition of such penalties (10% of revenue for legal persons and PLN 21,312,000 for natural persons).
If we can help you with the above issues, please feel free to contact the Ebarhard Advisory team.
