Polish bank forced into reconstruction and owner fined 20 million zloty

The Polish Bank Guarantee Fund (BFG) decided today to start the forced restructuring of Getin Noble Bank (GNB), the country’s tenth biggest bank, due to its poor financial situation and risk of bankruptcy.

That followed yesterday’s decision by the Financial Supervision Authority (KNF) to impose a fine of 20 million zloty (€4.12 million) on GNB’s owner, Leszek Czarnecki, formerly Poland’s richest man. The agency said he had failed to adequately address the bank’s situation, showing a “reprehensible” attitude that “can no longer be tolerated”.

GNB has around 300 branches and 2,800 employees. Last year, however, it recorded a loss of more than 1 billion zloty and, in its interim report published on 29 April this year, the bank noted it had informed the KNF about the possibility of bankruptcy

Under BFG’s decision, GNB has officially ceased to exist and its activities, including customer savings and loans, will be transferred as of Monday to a newly established bank co-owned by BFG and the Commercial Banks Protection System, created by the eight largest banks in Poland.

“For customers, nothing will change,” BFG said in a statement. They will continue to be served as before, having access to all their savings, being able to use cards and ATMs, and seeing no changes to bank account numbers, login details, and passwords.

Czarnecki had ambitions to create one of the largest banks in Poland, but an aggressive lending policy led GNB into financial trouble when the loans started to go sour.

When, in 2018, newspapers Gazeta Wyborcza and the Financial Times revealed that the then chairman of the KNF had allegedly requested payment from Czarnecki for preferential treatment of his struggling GNB, the public was made aware for the first time of the bank’s difficult situation.

The disclosure of the conversation, secretly recorded by Czarnecki, and the bank’s problems caused customers to rush to withdraw cash, severely undermining confidence in GNB. Later, the bank was hit by a wave of foreign-currency mortgage customers heading to court to challenge disputed indexation clauses.

While many banks in Poland had to deal with the issue, GNB was already in a difficult situation to begin with: it did not meet Polish capital requirements; it did not have any significant provisions for foreign-currency mortgages; and its portfolio of mortgages of this type was then almost four times larger than its equity.

In 2020, after the pandemic hit, interest rates were cut almost to zero, which brought down interest earnings, further exacerbating the bank’s situation. An additional blow was the introduction of so-called “credit holidays” this year, the negative impact of which GNB recently estimated at 165 million zloty.

The losses recorded by GNB, coupled with insufficient recapitalisation by the main shareholder, led to the draining of equity. Since the beginning of 2016, GNB has failed to meet Polish capital requirements, which are higher than those of the EU (which GNB has failed to meet since 2021), reports Business Insider Polska.

Leszek Czarnecki last recapitalised the bank in 2018 with less than 500 million zloty, not enough to significantly help the bank, whose capital gap was estimated to be at least 3.5 billion zloty before the mandatory restructuring was launched (this amount did not include potential losses on foreign-currency mortgages).

“Leszek Czarnecki is the dominant entity, holding directly and through subsidiaries the majority of shares in the bank’s share capital,” said the KNF in the statement yesterday explaining its fine. “He is therefore familiar with the bank’s financial situation, its capital needs.”

“In spite of this, he has not fulfilled his investor commitment and is not taking measures that would lead the bank to comply with regulatory capital requirements,” it added. “In the case of Getin Noble Bank S.A., the capital ratios grossly deviate from the required values.”

“It is Leszek Czarnecki’s responsibility in such a situation to ensure that the Bank’s capital is replenished,” continued the statement. “The passive attitude of Leszek Czarnecki is, in the commission’s view, highly reprehensible and could no longer be tolerated.”

Main image credit: PAWEL KOZIOL / AGENCJA GAZETA

Alicja Ptak

Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.