Opinion of the European Central Bank of 17 January 2008 at the request of the Polish Minister for Finance on a draft law amending the Law on the Bank Guarantee Fund (CON/2008/5)
Date: 2008-01-17
Institutions: European Central Bank
Subjects: Poland, bank deposit, financial stability, guarantee, national law, public institution

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 January 2008 

at the request of the Polish Minister for Finance  

on a draft law amending the Law on the Bank Guarantee Fund 

(CON/2008/5) 

Introduction and legal basis 

On 22 October 2007 the European Central Bank (ECB) received a request from the Polish Minister for 

Finance for an opinion on a draft law amending the Law of 14 December 1994 on the Bank Guarantee 
Fund (hereinafter the ‘draft law’)1.  

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and the third and sixth indents 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 provisions2, as the draft law relates to Narodowy Bank Polski (NBP) and to rules applicable to 

financial institutions insofar as they materially influence the stability of financial institutions 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  constitutes  an  updated  version  of  amendments  to  the  national  deposit-guarantee 
scheme in Poland, as managed by the Bank Guarantee Fund (hereinafter the ‘Fund’)3. The ECB has 

already  been  consulted  on  an  earlier  version  of  such  amendments,  relating  to  the  method  of 

financing,  governance  and  supervision  of  the  Fund,  as  described  in  detail  in  an  earlier  ECB 
opinion4.  

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Consolidated text: Dz.U. of 19 April 2007 No 70, Item 474. 
OJ L 189, 3.7.1998, p. 42. 
Participation  in  the  deposit-guarantee  scheme  operated  by  the  Fund  is  mandatory  for  all  banks  established  in  Poland, 
including  cooperative  banks,  but  not  for  the  Polish  variety  of  credit  unions  operating  on  the  basis  of  the  Law  of 
14 December 1995 on cooperative savings and loan associations (Dz.U. of 4 January 1996 No 1, Item 2, as amended). 
Branches of non-EU banks must, and branches of EU credit institutions may, be covered by the scheme to the extent that 
their home country schemes do not ensure deposit guarantees at the level established in Polish law (Articles 2(3) and 2b 
of the Law of 14 December 1994 on the Bank Guarantee Fund (hereinafter the ‘Law on the Bank Guarantee Fund’)). For 
ease of reference, the entities covered by the mandatory deposit-guarantee scheme operated by the Fund are referred to in 
this opinion as ‘commercial banks’. 
See  paragraphs  1.1  to  1.2  of  ECB  Opinion  CON/2007/26  of  27  August  2007  at  the  request  of  the  Polish  Minister  for 
Finance on a draft law amending the Law on the Bank Guarantee Fund. 

 
 
 
 
 
                                                 
1.2  Compared with the original version of the draft law, the current version introduces the following 

new elements:  

(i)  NBP’s right to extend credit facilities to the Fund is restricted to short-term credit facilities 

extended at NBP’s discretion to enable the Fund to repay guaranteed deposits, only in so far 

as  the  Fund’s  own  resources  are  not  sufficient  and  only  where  the  stability  of  the  banking 
system is threatened5. 

(ii)   New rules are introduced on the Fund’s management of its financial resources. In particular, 

any balance sheet surplus of the Fund should, as a rule, be allocated to its ‘assistance fund’ 

supporting  the  Fund’s  operations  to  the  benefit  of  distressed  but  still  solvent  commercial 

banks,  rather  than  to  the  Fund’s  core  resources  securing  the  repayment  of  guaranteed 
deposits  in  the  event  of  a  bank  insolvency6.  Wider  powers  are  also  given  to  the  Fund  as 

regards  the  offering  of  financial  support  for  the  consolidation  and  modernisation  of 
cooperative banks7. 

(iii)   The draft law, similarly to the previously consulted provisions, contains proposals to amend 

the Fund’s governance, regulation and supervision. However, amendments in this area now 

ensure that NBP’s existing powers as regards the governance and regulation of the Fund are 
largely maintained8. 

2. 

The ECB’s comments 

2.1  General comments 

The  ECB  welcomes  the  draft  law  in  so  far  as  it  continues  to  propose  abolishment  of  the  annual 

subsidies  contributed  by  NBP  to  the  financing  of  the  Fund  and  incorporates  earlier  ECB 

recommendations  related  to  the  need  to  maintain  effective  coordination  of  the  deposit-guarantee 
scheme with the overall role of the central bank in safeguarding financial stability9. In particular, 

the ECB welcomes the general aim of the draft law to preserve or strengthen the specific regulatory 
functions exercised in relation to the Fund by the President of NBP10.  

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See  Article  1(9)  and  (12)  of  the  draft  law.  At  the  same  time,  the  draft  amendments  related  to  abolishing  NBP’s  non-
repayable annual subsidies for the Fund, as well as the changed method for calculating the commercial banks’ financial 
contributions, are maintained (see Article 1(1) and (8) of the draft law). 
See Article 1(10) of the draft law. The statutory application of the Fund’s various resources is regulated in paragraphs 28 
to  31  of  the  Statute  of  the  Bank  Guarantee  Fund  (see  the  Annex  to  the  Regulation  of  the  Council  of  Ministers  of 
28 February 1995 on the adoption of the Statute of the Bank Guarantee Fund, Dz.U. of 6 March 1995 No 21, Item 113, as 
amended (hereinafter the ‘Fund Statute’)).  
See Article 2 of the draft law. 
See  Articles  1(2)  to  (7),  (11),  (12)  and  (15)  of  the  draft  law.  Among  other  things  these  amendments  increase  the 
regulatory  and  supervisory  powers  exercised  in  relation  to  the  Fund  by  the  Minister  for  Finance.  Auditing  powers 
exercised by the Supreme Chamber of Control, a state audit body, are also strengthened (Article 3 of the draft law). 
See paragraphs 2.2 and 3.3 of ECB Opinion CON/2007/26.  
Under the provisions of the Law on the Bank Guarantee Fund, as amended by the current version of the draft law, the 
President of NBP will: (1) agree with the Minister for Finance on the regulatory proposals submitted to the Council of 
Ministers for: (i) changes to the Fund Statute, (ii) additional tasks of the Fund concerning the provision of assistance to 
commercial banks, and (iii) emergency rates for commercial banks’ financial contributions to the Fund; (2) submit a non-

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2.2  Compatibility  of  NBP’s  extension  of  credit  facilities  to  the  Fund  with  the  monetary  financing 

prohibition 

The  ECB  recalls  its  stance  on  the  prohibition  on  monetary  financing,  as  expressed  in 

its Convergence Report of December 2006. In the Report, the ECB stated that national legislation 

which  provides  for  the  ‘financing  by  NCBs  [national  central  banks]  of  a  public  sector  national 

deposit  insurance  scheme  for  credit  institutions  …  would  not  be  compatible  with  the  monetary 

financing prohibition, if it is not short term, does not address urgent situations, systemic stability 
aspects are not at stake, and decisions do not remain at the NCB’s discretion’11. In the Report, the 
ECB  further  noted  that  the  current  Article  43  of  the  Law  on  Narodowy  Bank  Polski12  and 

Article 15(6) of the Law on the Bank Guarantee Fund, which give NBP the power to grant credit to 
the Fund, are incompatible with the Treaty provision on monetary financing13. 

2.3  The draft law will amend the conditions under which NBP may grant credit facilities to the Fund. 

Under  the  amended  Article  34(3)  of  the  Law  on  the  Bank  Guarantee  Fund,  such  credit  facilities 

may  only  be  given  for  a  short  term,  and  only  when:  (i)  the  stability  of  the  banking  system  is 

threatened; and (ii) the total amount of claims submitted for the repayment of guaranteed deposits 
exceeds  the  Fund’s  accumulated  resources14.  Further,  Article  15(6)  of  the  Law  on  the  Bank 

Guarantee  Fund,  establishing  the  sources  of  finance  of  the  Fund,  is  amended  to  reflect  the 
amendments to Article 34(3) of the same Law15. Other related provisions of the Law on the Bank 

Guarantee  Fund,  specifying  the  mode  of  application  and  repayment  of  NBP’s  credits,  are  not 

affected; in particular, the Law continues to stipulate that NBP’s credit facilities may only be used 

to  fulfill  the  Fund’s  task  of  protecting  guaranteed  deposits,  hence  excluding  the  use  of  NBP’s 

credits to finance any of the Fund’s other operations (such as giving support to distressed but still 

binding opinion on draft regulations by the Minister for Finance relating to the conditions for the Fund’s trading in loans 
acquired from commercial banks threatened with insolvency; (3) set the remuneration of the Fund Council’s members in 
agreement  with  the  Minister  for  Finance;  and  (4)  establish  the  commercial  banks’  reporting  obligations  to  the  Fund 
(Article 3(4), Articles 4(2a) and 34(4) (as amended by Article 1(5) and (12) of the draft law) and Articles 4(3), 6(4) and 
38(7) of the Law on the Bank Guarantee Fund). At the same time, President of NBP will retain his current powers related 
to the appointment of the Fund Council’s members and the selection of the Fund’s auditors (Articles 6(3) and 17(2) of the 
Law on the Bank Guarantee Fund). The President of NBP will also have a new right to receive, together with the Minister 
for  Finance,  quarterly  reports  on  the  activities  and  finances  of  the  Fund  (Article  7(2)(3a)  of  the  Law  on  the  Bank 
Guarantee Fund, as added by Article 1(6) of the draft law). 
See the ECB Convergence Report, December 2006, ‘Introduction and executive summary’, Section 2 (Compatibility of 
national legislation with the Treaty), Subsection 2.4 (Prohibition on monetary financing and privileged access), under the 
heading ‘Financial support for deposit insurance and investor compensation schemes’, p. 30. 
Law on Narodowy Bank Polski of 29 August 1997 (consolidated text: Dz.U. of 1 April 2005 No 1, Item 2, as amended 
(hereinafter the ‘Law on NBP’)). 
See  the  ECB  Convergence  Report,  December  2006,  Chapter  2  (Compatibility  of  national  legislation  with  the  Treaty), 
Section 7 (Poland), Subsection 7.3 (Monetary financing and privileged access), p. 229. 
The proposed wording of Article 34(3) of the Law on the Bank Guarantee Fund, as amended by Article 1(12) of the draft 
law. 
The proposed wording of Article 15(6) of the Law on the Bank Guarantee Fund, as amended by Article 1(9) of the draft 
law, specifies ‘short-term credit facility extended by NBP pursuant to Article 34(3) [of the Law]’ as one of the sources of 
finance of the Fund. 

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solvent commercial banks)16. At the same time, the draft law amends Article 43 of the Law on NBP 

so  that  it  will  now  only  provide  that  ‘Narodowy  Bank  Polski  may  extend  credit  facilities  to  the 

Bank  Guarantee  Fund’,  without  referring  to  any  conditions  that  must  be  agreed  with  the  Fund’s 
management before such lending may take place17. According to the consulting authority, the new 

regulation  of  conditions  under  which  NBP’s  credit  facilities  may  be  extended  to  the  Fund  is 

intended  to  ensure  full  compliance  of  the  Law  on  the  Bank  Guarantee  Fund  with  the  monetary 
financing prohibition under Article 101(1) of the Treaty18. 

2.4   The ECB reiterates its position that the granting of a credit facility by NBP to the Fund falls under 

the prohibition contained in Article 101(1) of the Treaty. The Fund qualifies as a ‘body governed 

by  public  law’  covered  by  Article  101(1)  of  the  Treaty,  since  it  has  been  established  as  a  legal 

person by the Law on the Bank Guarantee Fund, while its organisation and the exercise of its public 

functions and powers in relation to commercial banks is based on the provisions of this Law and of 
relevant secondary legislation19. The Fund is also subject to public supervisory and auditing powers 

exercised by the Minister for Finance and NBP, as well as, in line with amendments introduced by 
the  draft  law,  by  the  Supreme  Chamber  of  Control20.  The  characterisation  of  the  Fund  as  a  body 

covered by the Treaty prohibition on monetary financing is unaffected by the provisions of the draft 

law which, from the point of view of the Polish administrative and budgetary regime, classify the 
Fund as a non-state body outside the scope of the public finance sector21.  

2.5  While,  subject  to  the  conditions  specified  above,  the  provision  of  credit  to  funds  vested  with  a 
deposit guarantee function may be justified22, it needs to be ensured that the proposed amendments 

to the Law on the Bank Guarantee Fund incorporate all such specified conditions. In this regard, the 

following needs to be noted. 

(i) 

The conditions that: (1) the NCB crediting of the deposit guarantee scheme has a short-term 

character;  and  (2)  the  crediting  decision  remains  at  the  discretion  of  the  NCB,  are  both 
already incorporated in the amended provisions of the Law on the Bank Guarantee Fund23. 

16  

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Articles 16(1)(2)  together  with  Article  15(6)  and  Article  4(1)  and  (2)  of  the  Law  on  the  Bank  Guarantee  Fund.  Any 
amounts  recovered  by  the  Fund  from  the  insolvent  estates  of  liquidated  commercial  banks  must  be  applied  in  the  first 
place  to  the  repayment  of  money  paid  out  under  NBP’s  credit  facility  and  to  the  restoration  of  the  Fund’s  original 
statutory assets (Article 35(2) of the Law on the Bank Guarantee Fund). 
Article 43 of the Law on NBP as amended by Article 4 of the draft law. 
See the second paragraph of the letter of Minister for Finance of 15 October 2007 requesting the ECB’s opinion. 
See Article 3(1) to (4) of the Law on the Bank Guarantee Fund and paragraph 1 of the Fund Statute. See also the relevant 
secondary legislation adopted on basis of the provisions referred to in footnote 10 above. 
See footnotes 8 and 10 above. 
The proposed wording of Article 44 of the Law on the Bank Guarantee Fund, as amended by Article 1(13) of the draft 
law. 
See  paragraph  2.2  of  this  Opinion  and  paragraphs  10  to  14  of  ECB  Opinion  CON/2001/32  of  11  October  2001  at  the 
request of the Portuguese Ministry of Finance on a draft decree law amending the legal framework of credit institutions 
and financial companies. 
See amendments introduced by Article 1(9) and (12) and Article 4 of the draft law. 

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(ii)  The  condition  that  the  NCB  credit  addresses  urgent  situations  is  not  incorporated.  To  this 

effect,  the  wording  of  the  amended  Article 34(3)  of  the  Law  on  the  Bank  Guarantee  Fund 

needs to specify that credit facilities should only be granted for urgent needs of the Fund.  

2.6.  As regards the condition that credit may only be extended if systemic stability aspects are at stake, 

the  ECB  notes  that  NBP’s  credit  facilities  may  only  be  extended  to  perform  the  Fund’s  task  of 

protecting guaranteed deposits. In this context, the ECB understands that the above-mentioned task 

in  principle  should  be  financed  by  way  of  increased  financial  contributions  from  commercial 
banks24 rather than by way of credit facilities extended by NBP. To this effect, the list of funding 

sources in Article 15 of the Law on the Bank Guarantee Fund could expressly provide that NBP 
credit facilities may only be extended in the absence of any other available sources25. 

2.7  Moreover, to rule out any breach of the monetary financing prohibition, it may be useful to specify 

explicitly in Article 34 of the Law of the Bank Guarantee Fund that the credit facilities extended by 

NBP to the Fund are based on adequate collateral and are granted without prejudice to Article 101 
of the Treaty26. 

2.8  Finally,  the  proposed  amendments  to  Article  43  of  the  Law  on the  NBP  are  not  fully  compatible 

with the monetary financing prohibition as long as they do not include an explicit cross-reference to 

the provisions of the Law on the Bank Guarantee Fund specifying the conditions that may justify 

the  extension  of  credit  to  the  Fund.  The  ECB  considers  that  such  an  explicit  cross-reference  is 

necessary  to  avoid  doubt  and  to  ensure  legal  interpretation  that  complies  with  the  monetary 
financing prohibition27. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 17 January 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

24  
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26  

27  

In a way specified in Article 34(4) of the Law on the Bank Guarantee Fund. 
Article 15(6) of the Law on the Bank Guarantee Fund lists credit facilities extended by NBP among financial resources of 
the  Fund.  Special  status  of  such  credit  facilities  as  the  ‘last  resort’  source  of  funding  currently  stems  from  systemic 
interpretation of the Article 34(3) in conjunction with Article 34(1)-(2) of the Law.  
See  paragraph  13  of  the  ECB  Opinion  CON/2001/32.  Under  current  Polish law, any  credit  facility agreement  must,  in 
particular,  specify  ‘the  mode  of  securing  the  repayment  of  the  credit’  (Article  69(2)(6)  of  the  Law  on  banking  of 
29 August  1997  (consolidated  text:  Dz.U.  of  12  June  2002  No  72,  Item  665,  as  amended,  hereinafter,  the  ‘Law  on 
banking’)).  The  provisions  of  the  Law  on  banking  cover  all  types  of  credit  facility  agreements,  including  agreements 
related to credit facilities extended by NBP to the Fund. 
The draft law will amend with the same effective date the respective provisions of both the Law on the Bank Guarantee 
Fund  and  the  Law  on  NBP,  which  may  facilitate  their  consistent  interpretation  (Article  1(9)  and  (12)  and  Article  4  in 
conjunction with Article 7 of the draft law). Nevertheless, introduction of an express cross-reference will ensure that any 
divergent application is excluded. 

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