Opinion of the European Central Bank of 23 July 2008 at the request of the Polish Minister for Finance on a draft law amending the Law on the Bank Guarantee Fund (CON/2008/32)
Date: 2008-07-23
Institutions: European Central Bank
Subjects: Poland, bank deposit, financial stability, guarantee, national law, public institution

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 23 July 2008 

at the request of the Polish Minister for Finance  

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

(CON/2008/32) 

Introduction and legal basis 

On  23  May  2008  the  European  Central  Bank  (ECB)  received  a  request  from  the  Polish  Minister  for 

Finance for an opinion on a draft law (hereinafter the ‘draft law’) amending the Law of 14 December 1994 
on the Bank Guarantee Fund1 (hereinafter the ‘Law on the Bank Guarantee Fund’).  

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  proposes  certain  amendments  to  the  regulation  of  the  national  deposit  insurance 
scheme, managed by the Bank Guarantee Fund (hereinafter the ‘Fund’)3. The ECB has already been 

consulted  on  two  earlier  versions  of  the  amendments,  as  described  in  detail  in  ECB  Opinions 
CON/2007/26 and CON/2008/54.  

1.2  The  draft  law  introduces  inter  alia  the  following  amendments  to  the  Law  on  the  Bank  Guarantee 

Fund:  

1  
2  
3  

4  

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 Polish 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). The scheme is compulsory 
for  branches  of  non-EU  banks  and  optional for branches  of EU  credit  institutions  to  the  extent  that  their  home  country 
schemes  do  not  ensure  the  level  of  deposit  guarantees  provided  by  Polish  law  (Articles  2(3)  and  2b  of  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  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 and ECB Opinion CON/2008/5 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. 

 
 
 
 
 
                                                 
(i) 

it abolishes NBP’s non-repayable annual subsidies for the Fund5. NBP’s right to extend credit 

facilities  to  the  Fund  will  be  restricted  to  short-term  credit  facilities  extended  at  NBP’s 

discretion  to  enable  the  Fund  to  repay  guaranteed  deposits,  only  insofar  as  the  Fund’s  own 
resources are insufficient and only where the stability of the banking system is threatened6; 

(ii)  

it  introduces  new  rules  for  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 insolvency7;  

(iii)  

it  modifies  the  rules  for  the  Fund’s  governance,  regulation  and  supervision.  Most  of  the 

NBP’s  governance  and  regulation  powers  over  the  Fund  will  be  eliminated  or  limited,  as 
further specified in paragraph 3.18. 

2. 

2.1 

Compatibility with the monetary financing prohibition 

In line with its previous recommendations, the ECB welcomes the draft law insofar as it continues 
to propose abolishment of NBP’s annual subsidies of the Fund9.  

2.2  As regards the possibility of NBP extending credit facilities to the Fund, the ECB repeats its stance 

on  the  prohibition  on  monetary  financing,  as  most  recently  expressed  in  its 2008  Convergence 

Report. In the Convergence Report, the ECB states 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’10.  The  ECB  further  notes  that  Article  43  of  the 
Law on Narodowy Bank Polski11 and Articles 15(6) and 34(3) of the Law on the Bank Guarantee 

Fund, which empower NBP to grant credit to the Fund, are incompatible with the Treaty prohibition 
on monetary financing12. 

5  

6  
7  

8  

9  

10  

11  

12  

At the same time, the method for calculating the commercial banks’ financial contributions to the Fund is modified (see 
Article 13 of the Law on the Bank Guarantee Fund, as amended by Article 1(9) of the draft law). 
See Article 16(2) to (2b) of the Law on the Bank Guarantee Fund, as amended by Article 1(13) of the draft law. 
See Article 1(13) of the draft law. The statutory application of the Fund’s various resources is regulated in paragraphs 28 
to  31  of  the  Bank  Guarantee  Fund  Statute  (see  the  Annex  to  the  Regulation  of  the  Council  of  Ministers  of 
28 February 1995  on  the  adoption  of  the  Bank  Guarantee  Fund  Statute,  Dz.U.  of  6  March  1995  No  21,  Item  113,  as 
amended (hereinafter the ‘Fund Statute’)).  
See  Article  1(4),  (5),  (8)  and  (17)  of  the  draft  law.  Among  other  things  these  amendments  increase  the  Minister  for 
Finance’s  regulatory  and  supervisory  powers  over  the  Fund.  Auditing  powers  exercised  by  the  Supreme  Chamber  of 
Auditing are also strengthened (Article 3 of the draft law). 
See  the  ECB  Convergence  Report,  May  2008,  p.  244  (Section  6.7.3  ‘Monetary  financing  and  privileged  access’). 
Available on the ECB’s website at www.ecb.europa.eu. See also paragraph 2.2 of ECB Opinion CON/2007/26. 
See  the  ECB  Convergence  Report,  May  2008,  p.  24  (under  ‘Financial  support  for  deposit  insurance  and  investor 
compensation schemes’). 
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, May 2008, p. 244. 

2 

 
                                                 
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  if:  (i)  the  total  amount  of  claims  submitted  for  the 

repayment of guaranteed deposits exceeds the Fund’s accumulated resources; and (ii) the stability of 
the banking system is threatened13. 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 Law14. At the same time, the draft law amends Article 43 of the Law on 

NBP so that it will now provide: ‘In the event referred to in Article 34(3) of the Law on the Bank 

Guarantee  Fund,  Narodowy  Bank  Polski  may  extend  a  short-term  credit  facility  to  the  Bank 
Guarantee Fund’15. 

2.4   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 Treaty16. The 

ECB welcomes this intention, but points to the remaining incompatibility. The Convergence Report 

states  that  central  bank  credit  extended  to  a  national  deposit  insurance  scheme  may  only  address 

urgent  situations  is  not  incorporated.  To  this  effect,  the  amended  Article  34(3)  of  the  Law  on  the 

Bank Guarantee Fund needs to specify that credit facilities may only be granted for urgent needs of 
the Fund17.  

2.5  Other related comments in ECB Opinion CON/2008/5 remain valid, as in particular referring to the 

classification  of  the  Fund  as  a  ‘body  governed  by  public  law’,  the  priority  of  commercial  banks’ 

contributions  over  possible  NBP  credit  facilities  among  the  sources  of  Fund’s  funding  and  the 

possible  enhancement  of  the  regulation  of  the  NBP’s  crediting  of  the  Fund  by  way  of  including 
express references to adequate collateral and to compliance with Article 101 of the Treaty18.  

2.6   Moreover, the ECB notes the stronger emphasis by the draft law on the Fund’s assistance activity 

constituting  financial  support  for  the  reorganisation  and  consolidation  of  commercial  banks 
threatened  with  insolvency19,  which  is  differentiated  from  the  Fund’s  operations  related  to 

13  

14  

15  
16  

17  
18  
19  

The proposed wording of Article 34(3) of the Law on the Bank Guarantee Fund, as amended by Article 1(17) of the draft 
law. 
The proposed wording of Article 15(6) of the Law on the Bank Guarantee Fund, as amended by Article 1(12) 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. The related provisions of the Law on the Bank Guarantee Fund specifying the mode of application 
and repayment of NBP’s credits are not affected.  
Article 43 of the Law on NBP, as amended by Article 4 of the draft law. 
See the third paragraph of the general part of the explanatory memorandum accompanying the draft law (p. 12 of the joint 
document  containing  the  draft  law  and  the  explanatory  memorandum)  as  well  as  specific  remarks  in  point  15  of  the 
explanatory memorandum (p. 17 of the joint document). 
See paragraph 2.5(ii) of ECB Opinion CON/2008/5. 
See paragraphs 2.4 and 2.6 to 2.7 of ECB Opinion CON/2008/5. 
See Article 1(13) of the draft law amending Article 16 of the Law on the Bank Guarantee Fund, as commented in point 19 
of  the  specific  remarks  in  the  explanatory  memorandum  (p.  16  of  the  joint  document  containing  the  draft  law  and  the 
explanatory memorandum). The assistance activity constitutes providing repayable financial assistance, under statutorily 
defined  conditions,  to  commercial  banks  threatened  with  insolvency  by,  among  other  things,  issuing  credit  facilities, 
guarantees  and  endorsements  to  such  commercial  banks,  acquiring  specified  types  of  their  loan  portfolios  and  other 
receivables, or crediting the acquisition of bank shares or stocks. See also Article 4(2) of the Law on the Bank Guarantee 
Fund,  as  partly  amended  by  Article  1(5)  of  the  draft  law.  See  also  paragraph  4  of  the  Regulation  of  the  Council  of 

3 

                                                 
repayment of guaranteed deposits held by insolvent banks. In this respect, the ECB notes that the 

Law on the Bank Guarantee Fund stipulates that NBP’s credit facilities may only be used to fulfil 

the  Fund’s  task  of  protecting  guaranteed  deposits,  hence  excluding  the  use  of  NBP’s  credits  to 
finance  any  of  the  Fund’s  other  operations20.  From  a  Community  law  perspective,  as  consistently 

held by the ECB, any financing by the central bank of the tasks of a deposit guarantee fund which is 

a public sector body will be compatible with the monetary financing prohibition only subject to the 

introduction  of  the  necessary  safeguards  related  to  solvency  of  the  recipient  institution,  as  most 
recently stated in the ECB Convergence Report of May 200821. 

3.   Governance of the Fund and coordination with the central bank’s financial stability role  

3.1  The  draft  law  will  make  certain  changes  to  the  current  institutional  and  regulatory  regime  for  the 

Fund which, as regards the powers of NBP’s President exercised in relation to the Fund: (i) reduces 

the number of Fund Council members appointed by NBP’s President from four to two, and limits 
the role of NBP’s President in selecting the Fund Council’s Chair22; (ii) NBP’s President will only 

submit a non-binding opinion on draft regulations proposed by the Minister for Finance relating to 
the Fund, instead of being a co-regulator of the Fund operations23; (iii) NBP’s President will lose his 
current powers related to the selection of the Fund’s auditors24; and, on the other hand, (iv) NBP’s 

President will obtain a new right to receive, together with the Minister for Finance, quarterly reports 
on the activities and finances of the Fund25. 

3.2   The  ECB  repeats  its  earlier  observation  that  deposit  insurance  schemes  are  a  key  element  of  the 

financial safety net and that effective coordination of their important functions with the overall role 

of  central  banks  in  safeguarding  financial  stability  should  be  ensured.  This  aim  may  be  achieved 

Ministers  of  22  September  1999  on  the  trade  by  the  Bank  Guarantee  Fund  in  the  receivables  acquired  from  banks 
threatened with insolvency (Dz.U. of 8 October 1999 No 80, Item 904). 
Article 16(1)(2) in conjunction with Article 15(6) of the Law on the Bank Guarantee Fund.  
See  the  ECB  Convergence  Report,  May  2008,  p.  244  (Section  6.7.3  ‘Monetary  financing  and  privileged  access’)  and 
paragraph 2.2 of ECB Opinion CON/2007/26. 
Currently the Prime Minister appoints the Fund Council’s Chair on a joint recommendation by the Minister for Finance 
and NBP’s President; the draft law provides for appointment by the Minister for Finance after consulting NBP’s President, 
the  Chair  of  the  Financial  Supervision  Commission  and  the  Polish  Banking  Association  (Article  1(6)  of  the  draft  law, 
amending Article 6(3) and (4) of the Law on the Bank Guarantee Fund). 
Currently, proposals for regulations in the following areas must be agreed between the Minister for Finance and NBP’s 
President: (1) the adoption of the Fund’s Statute; (2) setting the conditions for the Fund’s trading in the loans acquired 
from  commercial  banks  threatened  with  insolvency;  and  (3)  any  additional  Fund  tasks  concerning  the  provision  of 
assistance  to  commercial  banks.  Further,  NBP’s  President  adopts  the  regulation  regarding  remuneration  of  the  Fund 
Council’s members in consultation with the Minister for Finance. These powers of NBP’s President will be replaced with 
the right to issue a non-binding opinion on the proposals submitted by the Minster for Finance (see Articles 3(4), 4(2a), 
4(3) and 6(6) of the Law on the Bank Guarantee Fund, as amended by Article 1(4)(a), (5)(d) and (6) of the draft law). 
Additionally, NBP’s President will also obtain the right to issue a non-binding opinion on draft regulations by the Minister 
for  Finance  relating  to  special  accounting  rules  for  the  Bank  Guarantee  Fund  (see  Article  81(2)(11)  of  the  Law  of 
29 September 1994 on accounting (consolidated text: Dz.U. 2002 No 76, Item 694, as amended) as added by Article 2 of 
the draft law). 
See Article 17(2) of the Law on the Bank Guarantee Fund, as amended by Article 1(14) of the draft law, which provides 
that auditors are selected through a tender announced by the Fund Council (and no longer by NBP’s President). 
See Article 7(2)(3a) of the Law on the Bank Guarantee Fund, as added by Article 1(7) of the draft law. 

20  
21  

22  

23  

24  

25  

4 

 
                                                                                                                                                              
through,  among  other  things,  maintaining  an  adequate  level  of  central  bank  involvement  in  the 
governance and regulation of the national deposit insurance scheme26.  

3.3  Moreover, the ECB notes that as a result of the supervisory reform completed on 1 January 2008, 

banking  supervision  responsibilities  have  been  transferred  from  the  defunct  Banking  Supervision 

Commission,  a  body  closely  associated  with  NBP,  to  the  newly  created  Financial  Supervision 
Commission,  which  is  largely  disconnected  from  NBP27.  In  this  new  institutional  setting,  it  is 

important to maintain channels for timely central bank access to information concerning financial 

market participants, relating in particular to crisis situations. Such meaningful access to prudential 

information, as possessed inter alia by the Fund, will allow NBP to properly perform its financial 

stability role. The ECB further notes that the financial stability role, as expressly introduced by the 
draft  law  in  relation  to  the  Fund28,  should  also  be  expressed  more  explicitly  in  relation  to  NBP. 

Specifically,  the  ECB  refers  to  paragraph  4.2  of  ECB  Opinion  CON/2006/39:  ‘Assuming  the 

implementation  of  a  supervisory  reform  weakening  the  existing  institutional  relationship  between 

NBP and the banking supervisory authority, the ECB recommends amending the Law on NBP, so 

as  to  specify  that  NBP  has  a  formal  responsibility  for  contributing  to  financial  stability  by 

monitoring  and  assessing  the  financial  system  as  a  whole,  as  a  separate  function  from  hands-on 
supervision and financial regulation’29. 

3.4  Finally, the ECB notes the introduction by the draft law of a procedure under which the members of 

the  Fund’s  governing  bodies  will  be  automatically dismissed  if  the  Council of  Ministers  does  not 
endorse the Fund’s financial report30. This procedure is described by the explanatory memorandum 

to the draft law as ‘similar’ to the procedure for endorsement of the NBP’s financial report by the 
Council  of  Ministers31.  For  clarification  purposes,  the  ECB  understands  that  in  the  context  of 

submission  of  NBP’s  financial  report  for  endorsement  by  the  Council  of  Ministers  no  dismissal 

sanction of any kind may be applied to members of the NBP’s governing bodies. 

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

Done at Frankfurt am Main, 23 July 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

26  
27  

28  

29  

30  

31  

See paragraph 3.3 of ECB Opinion CON/2007/26. 
As described in paragraph 1.1 of ECB Opinion CON/2007/31 of 9 October 2007 at the request of the Polish Minister for 
Finance on a draft law amending the Law on the supervision of financial markets. 
See  Article  1(5)(e)  of  the  draft  law,  adding  Article  4(4)  in  the  Law  on  the  Bank  Guarantee  Fund,  as  commented  in 
point 10 of the specific remarks in the explanatory memorandum (p. 15 of the joint document containing the draft law and 
the explanatory memorandum). 
ECB Opinion CON/2006/39 of 2 August 2006 at the request of Poland’s Sejm Marshall on a draft law amending the Law 
on Narodowy Bank Polski. 
See Article 1(14) of the draft law amending Article 17(5) of the Law on the Bank Guarantee Fund, as commented in point 
12 of the specific remarks in the explanatory memorandum (p. 16 of the joint document containing the draft law and the 
explanatory memorandum). 
Article 69(3) of the Law on NBP. 

5