Q: The protection of deposits is one of the main tasks of the Bank Guarantee Fund (BFG). In November 2008 the limit on deposit guarantees was raised to EUR50,000. Why was it raised to this particular amount?

A: Limits on deposit guarantees in European Union countries are regulated by Directive 94/19/EC. For many years the minimum guaranteed amount was set at EUR 20,000 and member states had the right to limit it to 90% of aggregate deposits. The Polish deposit guarantee system met this requirement: amounts up to EUR1,000 were guaranteed in full and there was a limit of 90% on amounts above EUR1,000 to EUR22,500. This means that depositors could recover up to EUR20,350.

The turmoil on global financial markets has prompted the EU to seek ways to stabilise the situation. One of them has been the decision to raise the limit on deposit guarantees by 2.5 times. Under an amendment to the directive, the limit has been raised to EUR50,000 guaranteed in full. Therefore, the limit in the Polish deposit guarantee system has been increased as a consequence of the EU decision. The move has mainly had a stabilising effect because only 2% of Polish people have savings higher than EUR22,500.



Q: Where would money come from for the repayment of the deposits guaranteed?

A: The BFG has access to many sources of funding, including assets recovered from bankrupts’ estates, the fund for the protection of guaranteed assets and the assistance fund. Additionally, the BFG has the right to raise loans from the national budget and the National Bank of Poland. Under the law on the Bank Guarantee Fund, the list of sources of funding is not closed, which means the BFG has access to unlimited funding. Therefore, depositors can rest assured that their savings covered by BFG guarantees are safe.



Q: Is it important for depositors whether their bank is in Polish or foreign hands?

A: At the end of March 2009 there were 53 commercial banks operating in Poland, including 37 banks with majority stakes held by foreign owners. Their share in the balance sheet total of the commercial bank sector was 72%.

From the point of view of the depositor, it is important whether their bank is an independent organisation operating under Polish law or whether it is a credit institution with headquarters in another EU country operating in Poland through its branch. Money deposited in domestic banks is covered by BFG guarantees while deposits in branches of foreign credit institutions are protected by the deposit guarantee scheme of the country where the institution has its headquarters. And if a Polish bank opens its branch in another EU country deposits in this branch are covered by BFG guarantees.



Q: There has been talk about establishing an EU financial supervision authority. Has the establishment of an EU guarantee fund also been considered?

A: Discussions on this topic have been held for a long time. They intensified after September 15, 2008 when the Lehman Brothers bank went bankrupt. The issue is discussed within the European Forum of Deposit Insurers (EFDI) and the International Association of Deposit Insurers (IADI), of which the BFG is a member. But these are sideline discussions. As long as the EU does not have a common financial supervision authority I do not expect the establishment of a single EU deposit guarantee institution. The deposit guarantee directive amended this year imposes an obligation on member states to ensure cooperation among each other’s guarantee schemes from July 2009.



Q: If a bank goes bankrupt how long does it takes for its clients to be able to withdraw their savings?

A: The Polish system operates under EU legislation. The existing regulations specify that it must not take longer than three months. Under the procedure in force in Poland, the Polish Financial Supervision Authority first suspends the bank’s operations and files a petition for bankruptcy. The court has to declare bankruptcy within 30 days. Then, the official receiver has one month for drawing up the list of depositors, that is determining who is entitled to compensation from the BFG and to what amount. Only then the BFG checks the list and starts paying out money to the depositors.

The amended directive, which Poland has to implement by the end of 2010, shortens the time when depositors have no access to their money to a maximum of 20 working days. Adjusting to this requirement will mean the need to restructure the Polish deposit guarantee scheme.



Q: Is it at all possible to shorten this time?

A: Britain plans to shorten this time to seven working days. And in the United States, depositors have to wait for their money no longer than three days. Of course, the Polish Financial Supervision Authority and the BFG have to receive new powers, and the banks’ IT systems have to be able to generate a list of depositors instantly.

Since banks carry out extensive operations, every banking product when offered to a client has to be identified from the point of view of whether or not it is covered by BFG guarantees. And from July 1 this year banks are required to inform clients explicitly if BFG guarantees do not apply to the product offered to the client.



Q: How do you assess the situation of Polish banks?

A: Data for the end of 2008 and the end of the first quarter this year show that the situation in the Polish banking sector was stable. The net profit for 2008 was by almost 17% higher than for 2007. Although the profit for the first quarter this year was by 50% lower compared to a year before, it still amounted to PLN2 billion, which is quite an impressive figure.

The stability of the Polish banking sector is also confirmed by the size of its solvency ratio, which is at around 11%, or 3 percentage points above the threshold regarded as safe.

The fact that no large bank has gone bankrupt in Poland since 2000 – one small cooperative bank went bankrupt in 2001- and that no bank asked the BFG for financial assistance in 2007 and 2008, at the time of global financial turmoil, also proves that the situation of the Polish banking sector is good.