EC Approves Prolongation of Polish Resolution Scheme for Small Banks
EC approved the prolongation of the Polish resolution scheme for six months. The measure will continue to be available for cooperative banks and small commercial banks with total assets below EUR 3 billion, only if they are found to be in distress by the competent national authorities. The scheme, which was initially approved in December 2016, is intended to facilitate the work of the Polish resolution authorities, if needed.
In cases where a small bank is in serious difficulties, this type of scheme allows the prior authorization of aid, enabling the national authorities to carry out an orderly resolution of that bank. The scheme has been prolonged twice before, with the last prolongation being August 2018. This third prolongation also includes the possibility for the State to grant liquidity aid in resolution under certain conditions. EC found the prolongation of the scheme to be in line with the EU State aid rules, in particular the 2013 Banking Communication and EU banking rules. In July 2013, EC had adapted its temporary state aid rules for assessing public support to financial institutions during the crisis. The main changes were aimed to improve the restructuring process and the level playing field between banks. In principle, a bank needs to work out a restructuring plan, including a capital raising plan, convincingly demonstrating how it will become profitable in the long term before it can receive recapitalization measures. If the viability of the bank cannot be restored, an orderly winding down plan needs to be submitted instead.
Keywords: Europe, EU, Poland, Banking, Resolution Scheme, Resolution Planning, Crisis Management Framework, Orderly Resolution, EC
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