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Poland’s banking sector: Facts & Figures

Poland is the largest economy in Central and Eastern Europe. According to Eurostat, its economy has been one of the fastest growing among the EU Member States. This trend, with rising credit demand, makes Poland a favourable destination for investment in the banking sector. It has a competitive landscape, focused on domestic business and playing an important role in financing private households, SMEs, big infrastructure projects, and project financing. Interest rates in Poland remain positive and the probability of their reduction is low.

The Polish banking system is showing resilience and avoiding serious problems during the financial crisis. The Polish Financial Supervision Authority (Komisja Nadzoru Finansowego – KNF) is responsible for state supervision of the national financial market. The institution responsible both for operating the deposit guarantee scheme and resolution processes is the Bank Guarantee Fund (Bankowy Fundusz Gwarancyjny – BFG). The competent authority responsible for macro-prudential supervision is the Financial Stability Committee (Komitet Stabilności Finansowej – KSF), comprising the Polish National Central Bank, the Ministry of Finance, the Financial Supervision Authority and the Bank Guarantee Fund.

At the end of 2016 the Polish financial landscape was made up of 36 commercial banks, 558 cooperative banks and 27 branches of credit institutions. The Polish banking sector is dominated by foreign-owned institutions: foreign owners hold majority stakes in most commercial banks, totalling 55% of the sector’s assets (52 institutions). The State Treasury controls five banks. Since 2015 the Polish government has established an active campaign aiming to increase the market share of national financial institutions.

Cooperative banks are members of two associated banks; despite the large number of these institutions, their market share is estimated at around 7% of the sector’s total assets. Due to preparations for the new requirements of the CRD IV package, cooperative banks established and are operating within two Institutional Protection Schemes (IPSs).

A new banking tax act came into force in February 2016. It applies to selected financial institutions such as domestic banks and insurance companies, branches of foreign banks and insurance companies operating in Poland and consumer lending institutions. The new tax does not cover investment funds, pension funds and small local credit institutions (total assets below PLN 4 billion). The tax base comprises the assets of financial institutions and only Polish treasury bonds in bank portfolio are excluded from taxation. The rate applied to the taxable base is 0.0366% per month (0.44% annually). This tax is not deductible for income tax calculation. This has imposed a substantial fiscal burden on Polish banks. In 2016 banks paid PLN 3.2 billion as banking tax for the period of 11 months.

In 2016, the Polish banking sector’s assets totalled €386.82 billion. In recent years, banks’ assets have been growing slightly faster than the overall economy. As a result, the size of the banking sector has increased, relative to GDP. However, this ratio (92.4% at the end of 2016) remains quite low in comparison to other EU economies. The share of credit portfolio in total assets was 56.9% in 2016. After a few years of stronger growth in retail banking, corporate banking has grown faster in the last two years. Solutions to the problem of mortgage credit portfolio in foreign are still under discussion.

The prudent credit policy and relatively good results of Polish economy has allowed banks to maintain the NPL at a relatively low level.

The year 2016 was characterised by rapid growth of household deposits, which represent 71% of all non-financial sector deposits. The ratio of non-financial sector deposits to GDP was estimated at around 55.5%. The total banking credit portfolio for economy was higher than non-financial sector deposits. However, the share of long-term deposits is limited and term mismatch on credit and deposit side is significant.

Polish banks registered a relatively higher level of profitability in comparison to 2015: in 2016 return on equity (ROE) stood at 9.0% and return on assets (ROA) equalled 0.84% (2015, ROE: 8.8%, ROA: 0.71%). However these results are significantly lower than those of 2014 (ROE: 12%, ROA: 1.08%) and the last year’s results were partly owing to one-time transactions.

The average total capital ratio (TCR) in the domestic banking sector increased slightly. At the end of 2016 the ratio was 17.7%, and the Common Equity Tier 1 and Tier 1 capital ratios were estimated around 16%. Only 2.1% of the sector did not meet the Financial Supervisory Authority (KNF) recommendations on the level of minimum capital requirements. This ratio is decreasing annually.

At the end of 2016, 33.2 million clients had access to online banking services, a 9.3% increase in comparison to the fourth quarter of 2015. Mobile payments are also increasing their share of transactions. In 2016, the number of transactions made with cards increased by 17% compared to 2015 and their value grew by 15%. The number and value of instant fund transfers increased by 112% and 62%, respectively, in 2016.