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Poland: Law Passed on Recapitalization of Financial Institutions

(Feb. 26, 2009) POLAND Law Passed on Recapitalization of Financial Institutions. It was reported on February 11, 2009, that the Polish Cabinet had passed a draft law on recapitalization of financial institutions. The law stipulates that the State Treasury will be permitted to offer guarantees to financial institutions that are "in danger of liquidity shortages (in the form of shares, bonds etc.) or even to take over such entities at market prices." (Government Passes Draft Law on Financial Institutions' Recapitalization, EUROMONEY POLSKA SA, Feb. 11, 2009 [via Emerging Markets Information Service (EMIS) database], available at http://site.securities.com/doc.html?pc=PL&doc_id=208195767&auto=1&query=
Financial%3AInstitutions%3ARecapitalization%3A&db=en_1y_d&hlc=pl&range=365&
sort_by=Date
.)

Under the new legislation, a Poland-based bank or insurer (but not a mutual insurer) could be recapitalized if the country's Financial Supervision Commission (KNF) ordered an institution's capital to be raised for a scheme of repair. Upon the failure of an institution's shares or bonds to find buyers among current or new shareholders, a guarantee agreement would be executed, with the Finance Minister, after receiving an opinion from the KNF and the President of the National Bank of Poland, issuing a guarantee. In extreme cases, if the given institution fails to meet the provisions of the guarantee agreement or becomes insolvent, the State Treasury may ask the KNF to arrange for court-appointed management or request the institution to amortize shares or buy back bonds. The government might also assume control of the institution "by means of obligatory purchase of shares from its current shareholders at a price based on the current market evaluation," but the Finance Minister would have to sell those holdings within three to five years. (Id.; When Going Gets Tough, State Gets the Bank, POLISH NEWS BULLETIN, Feb. 11, 2009 [via EMIS database], available at http://site.securities.com/doc.html?pc=PL&doc_id=208147485&auto=1&query=
Financial%3AInstitutions%3ARecapitalization%3A&db=en_1y_d&hlc=pl&range=365&
sort_by=Date
.)

A survey by pollster GfK Polonia, commissioned by the daily newspaper RZECZPOSPOLITA, indicated that 75% of Poles believe the government should assist only those financial institutions controlled by Polish capital. At present, three banks and one insurer are directly or indirectly state-controlled, while private Polish capital controls such institutions as Getin Bank and Noble Bank. In addition, some 83% of those surveyed "deemed that state institutions should purchase goods primarily from Polish enterprises." (EUROMONEY POLSKA SA, supra).