Polish Banks Face Pressure With Another Credit Union Bankruptcy

  • Regulator plans to file for bankruptcy of SKOK Kujawiak
  • Banks' payouts for failed credit unions totaled $800 million

The bankruptcy of a third credit union in the last two years is likely to further strain the earnings of Polish banks, already facing a new tax this year as well as higher capital requirements amid record low interest rates.

The country’s financial market regulator will file for the bankruptcy of SKOK Kujawiak union after restructuring attempts, including potential takeover by a bank, failed, it said on its website on Friday. The bankruptcy will follow that of two other unions, SKOK Wolomin and SKOK Wspolnota, which already triggered $800 million payouts to their clients from the banking guarantee fund.

The bankruptcy of Spoldzielczy Bank Rzemiosla i Rolnictwa in Wolomin, the country’s biggest cooperative lender, last year and the government’s plan to impose a new levy on the industry have erased 24 percent of banks’ value in 2015. Banks’ combined profit fell 30 percent to 10.8 billion zloty ($2.7 billion) in the January-November period, according to the country’s central bank data.

“This is not a positive signal and the situation of other credit unions remains unclear,” Marcin Materna, an analyst at Bank Millennium SA in Warsaw, said on Friday. “The banking industry suffers from constant negative news flow, with no sign of positive one.”

‘Last resort’

The regulator is dealing with another troubled credit union. It is looking for a buyer by Jan. 18 for SKOK Wyszynski in a final resort to save the company. Six other unions have been placed under administration, according to the regulator’s spokesman Maciej Krzysztoszek. This adds to uncertainty around the industry, which will pay 4.4 billion zloty in new tax this year and also needs to shore up capitals to meet stricter requirements, Materna added.

The threat of more defaults made the guarantee fund, which covers deposits of as much as 100,000 euros, keep the fee banks need to set aside for such cases in 2016 at an unchanged level of 0.55 percent of cash deposits, rather than cut the levy as expected earlier. Lenders annual contributions to the fund total more than 5 billion zloty.

The WIG-Bank Index declined 0.8 percent at 12:37 p.m. in Warsaw, the lowest since Dec. 9, led by Alior Bank SA and MBank SA.

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