EN ECB-P UBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 5 July 2011 
on the conversion of foreign credit institutions’ branches into subsidiaries 
(CON/2011/57) 
 
Introduction and legal basis  
On 31 May 2011, the European Central Bank (ECB) re ceived a request from the Polish Minister for 
Finance for an opinion on a draft law amending the Law on banking and certain other laws (hereinafter 
the ‘draft law’). 
The ECB’s competence to de liver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth indent  of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to rules applicable  to financial institutions insofar as they 
materially influence the stability of financial ins titutions and markets. In accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion. 
 1.  Purpose of the draft law 1.1 The draft law amends, inter alia , the Law on banking of 29 August 1997
2 and the Law on the bank 
guarantee fund of 14 December 19943. 
1.2 The main purpose of the draft law is to enable the transformation of a Polish branch of a credit 
institution established in another Member Stat e and conducting its business in Poland under the 
single passport into a subsidiary of the same credit institution. Such a subsidiary would be 
established in Poland and operate as a domestic bank4 in the form of a joint-stock company and 
would therefore be subject to supervision by the Komisja Nadzoru Finansowego (KNF, Financial 
Supervision Commission). Furthermore, deposits rece ived by the subsidiary from the public would 
                                                 
1 OJ L 189, 3.7.1998, p. 42.  
2  As published in Dziennik Ustaw  (Dz. U.) of 2002 No 72, Item 665.  
3  As published in Dz. U of 2009 No 84, Item 711.  
4 Credit institutions registered in Poland are legally referred to as ‘domestic banks’. The term ‘credit institution’ under 
Polish law only relates to European Economic Area (EEA) credit institutions from outside Poland. Non-EEA credit 
institutions are referred to under Polish law as ‘foreign banks’ (A rticle 2, Article 4(3), Article 4(1)(1) and Article 4(1)(17)  
to (20) of the Law on banking).  
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2 be covered by the Bankowy Fundusz Gwarancyjny  (BFG, Deposit Guarantee Scheme), which, 
according to the explanatory memorandum to the draft law, ‘may be beneficial from the point of view of customers, and particularly of deposito rs who entrusted their money to the branch in 
question’
5.  
1.3 The draft law sets out the procedure to be followed when conducting the transformation, which 
comprises the following steps6: (a) application by the foreign credit institution concerned for an 
authorisation to establish, on the basis of an exis ting branch, a domestic bank in the form of a joint-
stock company; (b) audit by the KNF of the branch to be transformed, verifying its current financial condition; (c) grant by the KNF of aut horisation to establish a domestic bank on the basis 
of the branch
7; (d) contribution in kind by the foreign cr edit institution of the business of the branch 
to the newly established domestic bank, in exchange  for the bank’s shares; (e) registration of the 
new domestic bank in, and deletion of the transforme d branch from, the register of entrepreneurs. 
1.4 The following main consequences occur on registra tion of a new domestic bank in the register of 
entrepreneurs: (a) the new bank assumes all the fo reign credit institution’s rights and obligations 
stemming from the operation of the transformed branch (universal succession)8; (b) the KNF 
assumes responsibility for supervision of the operati ons of the new domestic bank; (c) deposits 
accumulated via operations of the transformed bran ch, and transferred to the new domestic bank, 
become covered by the Polish deposit-guarantee scheme. 
 2. General observations 
The appropriate time to consult the ECB The draft law was adopted by the lower chamber of the Polish Parliament on 10 June 2011. This 
was shortly after the ECB had been consulted, resulting in the draft law being adopted not only 
before the expiry of the time limit for the submissi on of an ECB opinion set by the legislator in its 
consultation request, but also before it c ould take the ECB’s views into account.  
The ECB reiterates that even in cases of extreme urgency national authorities are not relieved from 
the duty to consult the ECB and to allow sufficient ti me to take its views into account laid down in 
Articles 127(4) and 282(5) of the Treaty. The seco nd sentence of Article 4 of Decision 98/415/EC 
provides that the ECB must be consulted ‘at an ap propriate stage’ in the legislative process. This 
                                                 
5  See the explanatory memorandum  to the draft law, p. 3.  
6 See Articles 48p to 48u of the Law on banking as amended by th e draft law; see also the explanatory memorandum to the 
draft law, p. 7 to 11.  
7 In accordance with Article 48p(2) of th e Law on banking as amended by the draft law, standard provisions governing the 
establishment of banks in the form of joint-stock companie s apply to the establishment of banks on the basis of an 
existing branch, including in particular th e following: Article 30a, which requires that authorisation for the establishment 
of a bank is granted by the KNF; Article 30, which specifies th e criteria applied in the assessment of an application for 
the establishment of a bank; Article 37, which specifies  the grounds for the reject ion of such applications.  
8 See Article 48u(2) of the Law on banking, as amended by the draft law. As a result of the universal succession, the 
newly-established bank assumes, by opera tion of law, all relevant rights and obligations, including all liabilities, claims 
and related rights, as well as all author isations, licences and exemp tions, unless this is opposed by the relevant issuing 
authorities.  
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3 implies that the consultation should take place at a point in the legislativ e process that affords the 
ECB sufficient time to examine the draft legisla tive provisions and to adopt its opinion in all 
required language versions, and also enables the relevant national author ities to take the ECB’s 
opinion into account before the provisions are adopt ed. Article 3(4) of Decision 98/415/EC obliges 
Member States to suspend the process of adoption of draft legislative provisions pending receipt of the ECB’s opinion. On this occasion, the duty to consult the ECB at an a ppropriate stage in the 
legislative process has not been r espected by the Polish authorities. 
 3. Specific observations 3.1 The restructuring mechanism proposed by the draft law will allow banking groups that have a 
presence in Poland to transform their branches in to subsidiary companies. The ECB understands 
that such a mechanism will be triggered only up on request from a credit institution and will not 
impede Union credit institutions from exercising th eir right of establishment in Poland through the 
setting up and operation of either branches or subsidiaries. Opinion CON/2006/31
9 addressed 
similar draft legislation enabling the division of banks10. In this opinion, the ECB emphasised that, 
while there is no specific Union legislation on the supervisory aspects of such restructuring 
operations, Directive 2006/48/EC11 provides for specific requirements regarding supervisory 
approvals of banking activities, whic h must be continuously applied.  
3.2 In assessing applications for the establishment of a new bank on the basis of an existing branch, the 
KNF will apply standard pr udential assessment criteria12. The draft law adds an additional criterion 
for rejecting applications, according to which a transformation should not be ‘significantly 
detrimental to the national economy or to important interests of the State’13. The explanatory 
memorandum to the draft law justifies adding this crit erion in the draft law based on the fact that an 
identical criterion had been established as a ground for the rejection of a supervisory approval for 
the division of an existing bank14. The ECB notes that this broad additional criterion may be seen 
as a general public interest clause, in so far as it does not explicitly refer to any specific prudential 
consideration for the rejection of supervisory a pproval for the establishment of a bank. The ECB 
understands that the Polish authorities may have intended to introduce this criterion to address 
threats to financial stability or, more specifically , to the smooth functioning of the national deposit-
guarantee scheme. The introduction of such add itional criterion in the Law on banking has to 
respect the limits set out by Union law. 
                                                 
9  All ECB opinions are published on th e ECB’s website at  www.ecb.europa.eu.  
10  See Article 124c of the Law on banking added by the Law amending the Law on banking of 18 October 2006 (Dz. U. of 
2006 No 190, Item 1401).  
11  Directive 2006/48/EC of the European Parliament and of  the Council of 14 June 2006 relating to the taking up and 
pursuit of the business of credit instituti ons (recast) (OJ L 177, 30.6.2006, p. 1).  
12  See Articles 30 and 37 of the Law on banking.  
13  See Article 48s(2) of the Law on ba nking as amended by the draft law.  
14  See the explanatory memorandum to the draft law, p. 9. Th e relevant changes had been introduced in the amending law 
of 18 October 2006 after the adoption of Opinion CON/2006/31.  
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4 3.3 In particular, when considering the further sp ecification of that additional criterion, the Polish 
authorities should carefully take Directive 2006/48/EC into account. Directive 2006/48/EC provides that requirements laid down by Member States in respect of obtaining authorisation to 
carry on business as a credit institution should respect the minimum harmonised rules set out in Articles 7 to 12
15 of that Directive, and in particular th e rule prohibiting assessment of applications 
for the establishment of a credit institution in terms of the ‘economic needs of the market. 
Furthermore, the Polish authorities should take into account the judgments of the Court of Justice of the European Union regarding the right of est ablishment specified in Article 49 of the Treaty
16. 
The Court has stated, inter alia,  that ‘the right of establishment covers all measures which permit or 
even merely facilitate access to another Member State and the pursuit of an economic activity in 
that State’17 and that restrictions on the freedom of establishment, allowed under Article 52(1) of 
the Treaty, may only be introduced pursuant to a legitimate aim which is compatible with the 
Treaty, justified by the overriding principles of  public interest and achieved through measures 
proportionate to this aim18. In this last respect, the Court has taken the view that restrictions 
referring generally to ‘national in terest’ fail the proportionality test19. The Court has also rejected 
the possibility that Union secondary law provisions safeguarding freedom of establishment may be 
set aside by special rules related to the financial sector introduced in the national law in order to, 
inter alia , ensure the proper operation of the national economy20. 
3.4 In view of the above, the ECB invites the Po lish authorities to further specify the supervisory 
assessment criteria introduced by the draft law in connection with the transformations of foreign 
branches into subsidiaries, with the view to ensuring compliance with Union law. 
3.5 The ECB emphasises the need to en sure that a branch continues to meet its obligations relating to 
the calculation and holding of minimum reserves fo llowing its transformation into a subsidiary. It 
also reiterates the remarks made in the contex t of the proposal enabling the division of banks, 
particularly with regard to ensuring complianc e of the Polish minimum reserve framework with 
Eurosystem requirements21. 
 
                                                 
15  See Article 6 of Directive 2006/48/EC.  
16  See in particular Judgment of 13 December 2005 in Case C-411/03 Sevic  (ECR 2005, p. I-10805), Judgment of 13 May 
2003 in Case C-463/00 Commission v Spain (ECR 2003, p. I-4581), Judgment of 13 September 2007 in Case C-260/04 
Commission v Italy (ECR 2007, p. I-7083), Judgment of  22 March 2007 in Case C-383/05 Raffaele Talotta v Belgium 
ECR 2007, p. I-2555), Judgment of 11 December  2007 in Case C-438/05 International Transport Workers’ Federation 
and another v Viking Line and another  (ECR 2007, p. I-10779).  
17  See Judgment of 13 Decembe r 2005 in Case C-411/03 Sevic  (ECR 2005, p. I-10805, paragraph 18).  
18  See Judgment of 11 December 2007 in Case C-438/05 International Transport Wor kers’ Federation and another v 
Viking Line and another  (ECR 2007, p. I-10779, paragraph 75).  
19  See Judgment of 11 November 2010 in Case C-543/08 Commission v Portugal  (not yet reported), paragraphs 6 and 91 to 
92 (the case considered restrictions to freedom to provide services and freedom of establishmen t, see paragraph 98 to 99).  
20  See Judgment of 12 March 1996 in Case C-441/93 Panagis Pafitis and others v Trapeza Kentrikis Ellados (ECR 1996, I-
01347, paragraphs 12 and 46 to 52).  
21  See paragraph 2.1 of Opinion CON/2007/34.  
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5 This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 5 July 2011. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET