A few remarks on the expediency of maintaining the institution of resolution of cooperative savings and credit unions in the Polish legal system

Abstract

The paper reflects on mutual relationship between the restructuring of Polish cooperative savings and credit unions (the “credit unions” or SKOK, as the Polish abbreviation of the entities reads) regulated primarily by the Act of 5 November, 2009 on Cooperative Savings and Credit Unions (the „Credit Union Act”), which sets out the supervisory powers of the Polish Financial Supervision Authority in that respect, and the legal institution of credit union resolution, as governed by the Act of 10 June, 2016 on the Bank Guarantee Fund (the “BGF Act”), with the powers of the Bank Guarantee Fund outlined in it. Introduced in 2013 into the Credit Union Act, the legal architecture of a take-over of a credit union or its selected right and liabilities by another credit union or bank following a decision of the Polish Financial Supervision Authority (the main legal form of credit union restructuring), derives from the legislation on (orderly) resolution, developed at the European level and implemented into the Polish legal system by means of the BGF Act, in 2016. In carrying out this transformation, the Polish legislator decided to apply the legal institution of resolution to the country’ s credit unions even though the latter are exempt from the implemented Directive establishing a framework for the recovery and resolution of credit institutions and investment firms. An analysis of the compared pieces of legislation leads to the conclusion that the power to decide on a take-over of a credit union or its selected rights and liabilities by another credit union or bank, granted to the Polish Financial Supervision Authority by the legislator, makes it always possible to PFSA, with regard to credit unions, to achieve the objectives of orderly resolution through the use of that very supervisory measure. The irreversibility of the decision, which can be appealed against only under a special procedure highly limiting the applicants’ rights, and its financial consequences including the allocation of the acquired entity’s own funds for covering losses, all that gives the decision the air of the decisions made in the context of the orderly resolution process. Meanwhile, the BGF Act provides that resolution instruments may only be applied only if the intended objective cannot be achieved by means of supervisory measures. Such a situation casts doubts, even in theoretical terms, as to the applicability of resolution instruments to credit unions. The doubts are further exacerbated by practical experience. The latter shows that BFG transferred funds to support credit union restructuring as early as in 2014, under the government’s credit union orderly resolution programme accepted by successive decisions of the European Commission, precisely in the cases where the Polish Financial Supervision Authority decided on credit unions’ take-over by banks pursuant to Article 74c of the Credit Union Act.