IMF Note Assesses Cooperative Bank and Credit Union Sectors in Poland
IMF published, under the Financial Sector Assessment Program (FSAP), a technical note on cooperative banks and credit unions in the Republic of Poland. The technical note reviews the situation in cooperative bank and credit union sectors, both of which are in states of transition; the regulatory and supervisory arrangements; and the safety net and resolution regime within the context of the crisis management framework. The note also offers perspectives on the sustainability of institutional models and these sectors within a modernizing and competitive banking sector.
The note highlights that most cooperative banks and credit unions are stable, but each sector has its own issues. The FSAP is broadly supportive of the policy direction for cooperatives, while it questions whether the credit union sector should remain standalone. Combined, cooperative banks and credit unions represent less than 8% of deposit takers, though more importantly they serve about 18% of the population. The overall situation of most cooperative banks is that they remain well-capitalized, with moderate levels of non-performing loans (NPLs) largely in line with the overall banking system, though with weak profitability. The NPLs are noted to be higher among larger cooperative banks, which represent about 65% of the cooperative bank sector assets. A vast majority of cooperative banks meet the regulatory capital requirements but raising capital from members or external sources, when needed, is complicated by applicable regulations and the dividend policies of cooperative banks.
Despite improvements in recent years, the performance of credit unions and the quality of their financial information is not yet satisfactory. Since coming under the supervision by Polish Financial Supervision Authority (PFSA), there has been some improvement in the credit union sector mainly due to the resolution of nonviable credit unions and better performance of the remaining entities. These improvements, however, are not sufficient to reverse the deterioration in the system thus far. The capital adequacy of the credit union sector at the end of January 2018 remains below the regulatory minimum of 5%, reflecting the troubled situation of larger credit unions. The source of low capital adequacy has been losses from poor loan underwriting and a series of past mergers that were allowed without addressing viability issues.
The technical note contains a table that summarizes several key recommendations to authorities in Poland. These recommendations relate to supervision and reforms in the cooperative bank and credit union sectors. The key recommendations with respect to supervision are as follows:
- Strengthen the supervisory capacity of PFSA by increasing (at least during a transition period) the available resources to oversee the cooperative banks and credit union sectors.
- Strengthen the quality of the Institutional Protection Scheme internal control and audit practices to align with PFSA supervisory requirements. Moreover, each affiliating bank should meet higher capital requirements.
- Revise the reporting requirements and supervision methodologies for cooperative banks and credit unions to ensure proportionality as far as feasible under applicable EU regulations.
- Evaluate the definition of criteria for auditors of the different institutions; if feasible, establish a short list of qualified auditors for the different types of entities, considering their complexity.
- Further enhance the monitoring by the Institutional Protection Scheme, align methodologies with PFSA.
- Further enhance the monitoring of all cooperative banks—including through a shortening in the supervisory inspection cycle—until relevant capacity is established in the Institutional Protection Schemes.
- Identify additional cooperative bank capital instruments that are compatible within the EU Capital Requirements Regulation or CRR.
- Unify accounting standards among sectors and institutions.
Related Link: Technical Note
Keywords: Europe, EU, Poland, Banking, FSAP, Technical Note, Credit Unions, Cooperative Banks, PFSA, Proportionality, CRR, IMF
Previous Article
EIOPA Consults on Draft Opinion on Sustainability Within Solvency IIRelated Articles
|
News
US Agencies Consult on Capital Treatment of Land Development LoansUS Agencies (FDIC, FED, and OCC) issued a proposed rule on the treatment of loans that finance the development of land for purposes of the one- to four-family residential properties exclusion in the definition of high volatility commercial real estate (HVCRE) exposure in the regulatory capital rule.
July 12, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: Second Update for July 2019Under the Single Rulebook question and answer (Q&A) updates for this week, EBA published answers to five questions related to supervisory reporting.
July 12, 2019
WebPage
Regulatory News
|
|
News
ESMA Updates Manual for European Single Electronic Format in EUESMA updated the reporting manual for European Single Electronic Format (ESEF).
July 12, 2019
WebPage
Regulatory News
|
|
News
FED Updates Supplemental Instructions for Reporting Form FR Y-9CFED updated the supplemental instructions for FR Y-9C reporting.
July 12, 2019
WebPage
Regulatory News
|
|
News
EBA Publishes Report on Monitoring Implementation of LCR in EUEBA published its first report on the monitoring of the implementation of liquidity coverage ratio (LCR) in EU.
July 12, 2019
WebPage
Regulatory News
|
|
News
EIOPA Consults on Reporting and Disclosures Under Solvency II ReviewEIOPA launched a consultation package on supervisory reporting and public disclosure in the context of its work linked with the 2020 Solvency II review.
July 12, 2019
WebPage
Regulatory News
|
|
News
APRA Applies Additional Capital Requirements to Three Australian BanksAPRA is applying additional capital requirements to three major banks in Australia to reflect higher operational risk identified in their risk governance self-assessments.
July 11, 2019
WebPage
Regulatory News
|
|
News
IMF Report on 2019 Article IV Consultation on Euro Area PoliciesIMF published its staff report in context of the 2019 Article IV consultation on euro area policies with member countries.
July 11, 2019
WebPage
Regulatory News
|
|
News
FSB to Survey Practices on Cyber Incident Response and RecoveryFSB launched a survey on the industry practices on cyber incident response and recovery.
July 11, 2019
WebPage
Regulatory News
|
|
News
ECB Appoints New Members of Supervisory BoardThe Governing Council of ECB appointed Edouard Fernandez-Bollo, Kerstin af Jochnick, and Elizabeth McCaul as representatives to the Supervisory Board of ECB Banking Supervision, for a five-year non-renewable term.
July 11, 2019
WebPage
Regulatory News
|
