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Komisja Nadzoru Finansowego

No. First of all we cannot agree that subsidiaries and branches could be treated in the draft Recommendation in the same way. This is because in case of branches the responsibility for protection of depositors’ means stays with the country which is home for the dominant (parent) entity, while in case of subsidiaries the whole responsibility is transferred to the local deposit guarantee scheme, in the jurisdiction where a subsidiary performs its activity. We believe, that when it comes to subsidiaries in both situations referred to in Q1 and Q2 for the subsidiaries which are of systemic importance for the local market, individual recovery plans should be in place. This is especially important for non-SSM countries which have no access to ECB’s support, and where whole responsibility remains at local level. Having in mind that in Poland the funding for banks comes mainly from deposits, in case of an adverse scenario, the burden for the DGS would be tremendous which could hardly accommodate the costs resulting from such an adverse scenario, and eventually the whole real economy as well as taxpayers would be affected. This is why the KNF, being responsible for stability of financial market in Poland, is of the opinion that both management of a parent and subsidiary to be assessed as fit and proper should ensure group and individual recovery plans consistent with, and complementary to each other to be in place. A group recovery plan should describe all actions which parent foresees to undertake towards subsidiary in case of problems at group level, whereas an individual recovery plan should fulfil all conditions stemming from the Article 5 of BRRD. Having in mind what has been said above, the KNF believes that the draft EBA Recommendation does not give enough consideration to the necessity of protecting stability of host countries’ financial markets.
No. First of all we cannot agree that subsidiaries and branches could be treated in the draft Recommendation in the same way. This is because in case of branches the responsibility for protection of depositors’ means stays with the country which is home for the dominant (parent) entity, while in case of subsidiaries the whole responsibility is transferred to the local deposit guarantee scheme, in the jurisdiction where a subsidiary performs its activity. We believe, that when it comes to subsidiaries in both situations referred to in Q1 and Q2 for the subsidiaries which are of systemic importance for the local market, individual recovery plans should be in place. This is especially important for non-SSM countries which have no access to ECB’s support, and where whole responsibility remains at local level. Having in mind that in Poland the funding for banks comes mainly from deposits, in case of an adverse scenario, the burden for the DGS would be tremendous which could hardly accommodate the costs resulting from such an adverse scenario, and eventually the whole real economy as well as taxpayers would be affected. This is why the KNF, being responsible for stability of financial market in Poland, is of the opinion that both management of a parent and subsidiary to be assessed as fit and proper should ensure group and individual recovery plans consistent with, and complementary to each other to be in place. A group recovery plan should describe all actions which parent foresees to undertake towards subsidiary in case of problems at group level, whereas an individual recovery plan should fulfil all conditions stemming from the Article 5 of BRRD. Having in mind what has been said above, the KNF believes that the draft EBA Recommendation does not give enough consideration to the necessity of protecting stability of host countries’ financial markets.
No. When it comes to not relevant subsidiary we are convinced that minimal set of information should be ensured in group recovery plan. The foregoing should include at least:

1. identification of core business lines and critical functions performed by the a given subsidiary, in particular, those in relation to the local market, as well as essential from the group’s point of view (e.g. customer service, the performance of settlements, collecting deposits – including identification of deposits guaranteed by the local deposit guarantee scheme);
2. list of services provided by the group to a local subsidiary (outsourcing). Description of procedures and measures that enable continuation of performance of operations provided by the group in favour of the local entity in the event of stress situation of service providers;
3. a group recovery plan should include recovery indicators defined at the level of the local subsidiary at least in the areas of capital and liquidity adequacy, efficiency/profitability and asset quality;
4. recovery options available in the event of stress situation of the local subsidiary, aimed at defining mitigation actions taken by the group vis-à-vis the subsidiary. Detailed options should indicate the amount of funds that are available to be engaged and maximum timeframe to implement the recovery options in the course of both the normal business of the entity, and in stressed conditions, as well as impact of recovery options on key indicators in the area of capital adequacy, liquidity and profitability;
5. internal communication plan, that should be circulated to the subsidiaries (it also refers to the principles for communication in a stress situation of the parent undertaking) as well as external communication, including exchange of information with competent supervisory authorities.
No. Transitional phase is not in line with BRRD which does not envisage this kind of limitation for requesting individual recovery plans for subsidiaries. Moreover, it needs to be highlighted that the process of addressing deficiencies in recovery plans is laid down in detail in the Article 6 of BRRD, and no parallel process should be introduced by means of a Recommendation.
Izabella Szaniawska
+48 22 2625156