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Poland’s banking sector: Facts & Figures

Updated December 2021 – For earlier editions of Facts & Figures click here

The situation of the Polish banking sector in 2020 was mainly influenced by the Covid-19 pandemic. Instead of the normal running of banking business, a lot of attention was paid by banks to extraordinary activities aimed at supporting banking customers, both with their own funds and by intermediating in aid provided to them by the state. In these conditions, the most important thing was that Polish financial institutions once again proved operational effectiveness, also in extraordinary conditions, and did not spare their resources and funds to help the economy, entrepreneurs and individual clients. It should be mentioned that the banks immediately launched credit moratoria as soon as the pandemic hit Poland. It was an action much ahead of the decisions taken by the EU regulator.

The Polish banking system characterizes by high stability and safety. 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 authority responsible for macro-prudential supervision is the Financial Stability Committee (Komitet Stabilności Finansowej – KSF), comprising representatives of the Polish National Central Bank (NBP), the Ministry of Finance, the KNF  and the BFG.

At the end of 2020 the Polish financial landscape was made up of 30 commercial banks, 530 cooperative banks and 36 branches of credit institutions. In 2020, the ownership structure of the Polish banking sector did not change. The number of commercial banks controlled by the State Treasury was still 8, whose assets are equal to 44.2% of the sector’s total assets, while 43.6% were controlled by foreign capital (2.7% less than in 2019).

Due to the requirements of the CRD IV package, and in reference to national regulations, the most of cooperative banks are members of the two Institutional Protection Schemes. Only 10 is conducting business independently. Despite the large number of these institutions, their market share remains stable at the level of 7.1% of the sector’s total assets.

In 2020, the Polish banking sector’s assets totalled €509.25 billion. The value of the total balance sheet increased by 17.5% comparing to the previous year. However the size of banking sector, relative to GDP, remains quite low in comparison to other EU economies (98.9% at the end of 2020).

The credit portfolio plays dominant position in total assets (55%). Last year, the growth rate of  receivables from non-financial entities amounted 1% and it was visibly slower than the growth rate of banks’ liabilities of this category of customers (13%). In general a faster growth rate of banks’ claims on households (2.5%) than on enterprises (with negative dynamics) was noted. However this situation was caused by a decrease in corporate demand for bank financing due to government financial support in the context of the Covid-19 pandemic. In case of receivables from households the problem of mortgages denominated in foreign currency is still under discussion but this portfolio is diminishing every year. The prudent credit policy have allowed banks to maintain the NPL ratio at a stable level (7%).

As mentioned, the year 2020 was characterised by rapid growth of household deposits, which represent 75,6% of all non-financial sector deposits. The ratio of non-financial sector deposits to GDP was estimated at around 62%. However, the share of long-term deposits is limited and term mismatch on the credit and deposit side is significant.

Polish banks registered in 2020 return on equity (ROE) of 0.3% and return on assets (ROA) of 0.04%.  The declining level of profitability in the banking sector in 2020 resulted, inter alia, from the three-fold reduction in the reference rate by NBP and from the encumbrance of the net profit with provisions related to the Covid-19 pandemic, as well as from the legal risk related to foreign currency mortgage loans.

The key challenges banks have to face are excessive regulatory and fiscal burdens. E.g. the Polish banking tax which 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 (with total assets above €0.9 billion). The tax base comprises the assets of financial institutions. The rate applied to the taxable base is 0.44% annually. In 2020 financial institutions paid around €0.9 billion as banking tax. The fees paid to the deposit guarantee scheme and to resolution fund are also big burden for banks. Both banking tax and above mentioned fees are not deductible for income tax calculation purpose. Banking tax and fees on the BFG account for more than 40% of the operating costs.

The average TCR in the domestic banking sector remained at the stable level. At the end of 2020 the ratio was 20.7%, and the Common Equity Tier 1 and Tier 1 capital ratios were estimated above 18.5%.

At the end of 2020, 38.2 million clients had access to online banking services. The number of active users of banking mobile applications increased in last year by over 4% and amounted to 14 million. The Polish banking sector is very modern, one among the most modern in economy. Banks played very active role in distribution of public support to enterprises and individuals thanks to their modern infrastructure. During the pandemic time the share of non-cash transaction raised significantly.

Contributor: Katarzyna Pawlik KATARZYNA.PAWLIK@zbp.pl