Assistance Fund

Principles of providing assistance

The Bank Guarantee Fund provides returnable financial assistance to banks in the form of loans, guarantees and suretyships, as well as the acquisition of receivables, intended for:

Principles of providing assistance

The Bank Guarantee Fund provides returnable financial assistance to banks in the form of loans, guarantees and suretyships, as well as the acquisition of receivables, intended for:

• eliminating the threat of insolvency,
• merging a bank with another bank if the threat of insolvency has arisen in the acquired bank,
• taking over a bank (understood as acquiring an enterprise or part of an enterprise run by a bank facing the threat of insolvency), and also over the acquisition of a bank by another bank pursuant to a decision of the Polish Financial Supervision Authority,
• the acquisition of stock or shares of a bank facing the threat of insolvency, by new stockholders or shareholders.

BFG may extend assistance when applied for by a bank. Part of the assessment of an application involves evaluating a bank’s situation in terms of the capacity of such assistance to remove the threat of insolvency. The ability of a bank to repay a loan along with accrued interest within a fixed timeframe is also assessed. Applications from banks meeting the statutory and economic conditions for receiving assistance are then subject to consideration by the Fund’s Management Board.

As stipulated in the Act on the Bank Guarantee Fund, in order for assistance to be granted, an applicant bank must submit the following documents:

• the results of an assessment of a financial report on its operations, and in the event that assistance for a takeover, merger or purchase of stock (shares) of another bank is being applied for, then assessments of the financial reports of both banks,
• a positive opinion of the Polish Financial Supervision Authority (PFSA) with respect to the reorganisation programme, takeover, merger or purchase of stock (shares) of another bank,
• documentation proving that the amount of assistance being applied for is not greater than the amount of guaranteed deposits in the bank, and in case of application for assistance for a takeover, merger or the purchase of stock (shares) of another bank, that the figure is not greater than the amount of guaranteed deposits in the bank being taken over,
• documentation confirming that the own funds of an applicant bank or the bank being taken over have been depleted to cover losses.

The detailed terms and conditions of financial assistance provided by the Bank Guarantee Fund, along with a list of documents and information that should be submitted in conjunction with the application have been stipulated by the BFG Council in Resolution nr 35/97 of 20 November 1997, as amended.

The effects of BFG assistance activity

From its inception to the end of 2012, the Bank Guarantee Fund has provided financial assistance to banks in the amount of PLN 3,790.30 m., the allocation of which is as follows:

• independent reorganisation programmes by commercial and cooperative banks (PLN 2,249.00 m.),
• M&A operations consisting in cooperative banks taking over or merging with other cooperative banks as well as M&A operations involving commercial banks taking over or merging with cooperative or commercial banks (PLN 1,306.30 m.),
• purchase of shares of commercial banks (PLN 235.00 m.).

An assessment of the effects of assistance granted to banks by BFG is based on the assumption that if these banks had not been granted assistance, the relevant M&A operations might not have taken place, and thus banks carrying out rehabilitation proceedings independently would have had limited chances to continue operating.

Assessment was carried out in two aspects:

• estimation of financial effects
• estimation of non-financial effects

Financial effects

Factors taken into account in measuring the effectiveness of assistance granted by BFG:

• the amount of guaranteed funds that BFG would have been obliged to pay out in the event of fulfilment of the guarantee condition,

• the value of deposits held in the name of non-financial entities and gmina (Polish administrative district, approximately equivalent to a borough) budgets over and above the amount guaranteed by the Fund, as well as funds held in the name of banks and the State Treasury that are not covered by BFG and that could be lost in the event of bankruptcy.

In its assistance activity, the Bank Guarantee Fund applies the statutory principle that, with respect to a given bank, the value of assistance granted may not exceed the amount of guaranteed deposits held in that bank. The Fund’s assistance activity in 1996-2012 took this principle into account. The total amount of assistance granted was lower than the amount of guaranteed funds held in assisted banks by PLN 58,828.30 m. The amount of deposits not covered by the Fund’s guarantee, which in the event of a bankruptcy might not have been recovered, amounted to PLN 20,803.04 m.

Non-financial effects

Additionally, BFG assistance contributed to the following:

• prevention of closures of branches of assisted banks,
• preservation of jobs,
• uninterrupted access to banking services,
• improvement of banking services,
• improvement of banking operations.

In 1996-2012, BFG assistance activity contributed to the preservation of 1980 bank branches and 64,270 jobs.