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Country Profile: Poland 1 Last Updated: September 2008

POLAND POLSKA Country Background

This section provides background information on the country, including key facts, recent economic performance, and information on its government.

Key Facts Capital other major cities Warsaw Lódz, Kraków, Wroclaw Area 312,685 km2 Languages Polish Currency PLN (Polish zloty) Country telephone code +48 National / bank holidays 2008 — 1, 11 Nov; 25-26 Dec

2009 — 1 Jan; 13 Apr; 1-3*, 21 May; 11 Jun; 15 Aug; 1, 11 Nov; 25-26 Dec

Business / banking hours 8.00–17.00/18.00 Monday to Friday Stock exchange Warsaw Stock Exchange Leading share index WIG20 Internet top-level domain .pl * Note it is usually impossible to do any business on 2 May as most government offices, banks, shops, etc are closed on this date. This extended holiday period is known as The Picnic (Majówka).

Economic Performance 2002 2003 2004 2005 2006 2007

Exchange rate – PLN/EUR1 3.8557 4.3978 4.5340 4.0254 3.1025 3.7845 Exchange rate – PLN/USD1 4.0795 3.8889 3.6540 3.2348 3.8951 2.7692 Money market rate (Wibor 1m) (%)1 9.4 5.8 6.0 5.3 4.1 4.627 Consumer inflation (%)2 1.9 0.8 3.5 2.1 0.9 2.3 Unemployment rate (%)3 19.9 19.6 19.0 17.7 14.0 11.4 GDP volume growth (%)2 1.4 3.8 5.3 3.4 5.0 4.5 GDP (PLN bn)4 807.9 842.1 923.3 980.9 1,049.2 1,119.4 GDP (USD bn)5 198.0 216.5 252.7 303.2 269.4 351.3 Population (mil)6 38.23 38.2 38.18 38.16 38.14 38.12 GDP per capita (USD) 5,180 5,669 6,617 7,946 8,655 9,214 Current account (% of GDP)7 -2.5 -2.1 -4.2 -1.4 -1.7 -1.9

1: Period average 2: Annual percentage change 3: Harmonized definition ILO (International Labour Organization) 4: GDP at market prices. Production-based approach. 5: Per exchange rate 6: End of period, recent figures may be IMF projections 7: Trade balance of goods and services + net income + net transfers

Sources: IMF, ECB, Polish Central Statistical Office

Government » Independent republic since 1918. » Legislature regime: bicameral parliament with members elected for 4-year terms via a system of proportional

representation. The lower chamber (Sejm) has 460 members, while the upper chamber (Senat) consists of 100 members. Based on the parliamentary elections held October 2007, the Civic Platform (PO) party won 209 of 460


seats, soundly defeating the ruling Law and Justice Party (PiS). The next lower house (Sejm) elections are due to be held by October 2011.

» Political leader: Prime Minister Donald Tusk, co-founder and chairman of Civic Platform, since November 16, 2007.

» Head of state: President Lech Kaczyński, of the Law and Justice Party (identical twin brother of the former Prime Minister Jarosław Kaczyński). The next presidential election will be held by October 2010.

» Member of the European Union: since 1 May 2004.

Legal and Regulatory Issues

This section provides information on the country’s legal and regulatory issues, including legislation, resident and non-resident status, account ownership, cash pooling regulations, account types and charges, FX controls, central bank reporting requirements, anti-money laundering, and electronic transactions.

Overview » Following Poland’s EU membership as of 1 May 2004 the country adheres to the principal of free movement of

capital, which prohibits all restrictions on movement of capital between Member States (and, to some extent, between Member States and third countries)1.

» However, the environment for cash pooling and optimal cash management is not fully in place due to the Central Bank’s reporting requirements still existing for transactions between residents and non-residents and some uncertainty with regards to the legal framework for cash pools and co-mingling of non-resident’s and residents’ funds.

Resident and Non-resident Status » A company is regarded as resident if it is incorporated in Poland

Account Ownership » PLN and foreign currency accounts can be held by residents as well as non-residents.

Account Types and Charges » Current accounts can be held in all exchangeable currencies and are offered with or without overdraft limits. » PLN accounts are convertible into foreign currency. » Interest rates can be either fixed using a bank’s basic rate or based on a market rate (e.g. WIBOR) less a spread. » Account maintenance fees will normally apply but are negotiable. » Lifting fees (per mille of transferred amount) do normally not apply, however. » A flat fee will be charged for domestic and international payments. » In accordance with EU rules (Regulation 2560/2001) on cross-border payments in euro, payments/transfers with

the EU and certain EFTA countries cost the same as their domestic equivalent. – EU standard transfers can only be undertaken exclusively in euro – The maximum amount of EUR 50,000 should not be exceeded – The payment must be credited to an account maintained in a EU state (or certain EFTA countries) – The IBAN and the BIC of the recipient must be correctly indicated – Transfer fees shall be divided between the sender and the recipient (each pays the fees incurred in her/his

corresponding country). – Note: orders not fulfilling these requirements will be carried out as foreign transfers and charged

accordingly. » IBAN implemented December 2003.

1 Free movement of capital covers payments and transfers of money over the borders and other transactions allowing transfer of ownership of assets and liabilities (restrictions still apply for real estate and certain other sectors). Source: The Polish Information and Foreign Investment Agency (PAIiIZ)


FX Controls » Under the Foreign Exchange law of October 2002, generally all current account and capital transactions were

liberalised. Transactions to and from EU, EEA and OECD countries are allowed, however some areas of capital flows still require a foreign exchange permit. – According to the central bank: “Poland is currently in the middle of a debate over modifications to its

foreign exchange law, which could be introduced in the course of its harmonisation with EU law. It may be a good time to consider the purpose of the current regulatory restrictions to capital movement, and, even more importantly, their effectiveness. In the author's opinion, many restrictions resulting from the current law are badly constructed. Therefore the basic functions of foreign exchange law - to protect the country's foreign exchange interest - is not fulfilled.”

» All payments between residents and non-residents (as well as all non-resident’s cash transactions) are subject to a control of payment title. In case of transactions exceeding EUR 10,000 the bank must be provided with either original documents confirming the above-mentioned title, or with the written obligation that missing documents shall be delivered within 3 months from the date of payment.

» In order to simplify the procedure and limit the manual handling of documents connected to each single transfer, some banks conclude overall agreements with their corporate clients regulating the FX procedure. Such an agreement may limit the circulation of original documents; however, the control as such cannot be avoided.

Central Bank Report ing Requirements » The National Bank of Poland maintains statistical records of the balance of payments, of indebtedness and

foreign liabilities on the basis of bank and non-bank reports. » Payment transactions between residents and non-residents above EUR 12,500 must be reported. » In September 2005, the European Central Bank asked the European Commission to raise the threshold for

balance of payments reporting (cross-border payments in euro) to EUR 50,000 as of 2008 since from 1 January 2006 the threshold for domestic charges on cross-border euro payments was raised to €50,000, whereas the threshold for CBR was not raised at the same time and maintain the current threshold of €12,500 in the meantime.

» Residents holding foreign exchange accounts abroad must also notify the NBP and provide the necessary documentation in addition to submitting balance reports on a quarterly basis.

» Natural persons who stay abroad temporarily are exempt as long as balances on these accounts at the end of a given quarter do not exceed EUR 10,000 and these accounts are maintained no more than two months after their return to Poland.

» Reporting on behalf of corporate clients is the bank’s responsibility (except in some specific cases, e.g. the resident holding an account abroad or Polish company participating in the intra-group netting).

» Banks normally report to the Central Bank on a monthly basis.

Anti -Money Laundering » The EC Money Laundering Directive (Council Directive 91/308/EEC of 10 June 1991 as amended by directive

2001/97/EC of 4 December 2001) is followed by Poland. » The Ministry of Finance is working intensively on amending the law of 16 November 2000 “On Counteracting the

Introduction of Property Values Originating from Illegal or Undisclosed Sources to Financial Transactions and on Counteracting the Financing of Terrorism, and Amending the Law – Penal Code”, in order to transpose the Third Directive into national law and in order to bring national law in line with the requirements Directive 2006/70/EC, regarding the definition of ”politically exposed person” and the technical criteria for simplified customer due diligence procedures and for exemption on the grounds of a financial activity conducted on an occasional or very limited basis. The Recommendations of the Financial Action Task Force (FATF) will also be taken into account in the amended law. Work is already underway on acts to implement the aforementioned law.

» Poland is a member of the Council of Europe’s MONEYVAL Select Committee, which is a member of the Financial Action Task Force (FATF) and has observer status of the Eurasian Regional Group on Combating Money Laundering and Financing of Terrorism (EAG).

» Poland has established a fi nancial intelligence unit (FIU), the General Inspectorate of Financial Information (GIFI), which is a member of the Egmont Group.

» Financial institutions in the broadest sense are required to record and report suspicious transactions to GIFI.


» All credit and financial institutions have to identify and record the details of a transaction or multiple inter-related transactions exceeding EUR 15,000.

» Individuals entering or exiting the European Community must declare currency of EUR 10,000 to Customs. » All records must be kept for a period of five years. » Account opening procedures do not require formal identifi cation of the account holder. Individuals must merely

be specifi ed and only the signatories for legal entities must be identifi ed, not the directors, major shareholders or beneficial owners.

» When recording transactions, however, fi nancial institutions are required to record in detail the identity of the party performing the transaction, the identity of the party on whose behalf and in whose favour the transaction is performed.

Electronic Transact ions » Electronic signatures are equivalent to handwritten signatures under Polish law. » Poland implemented the Electronic Signatures Directive 1999/93/EC in 2001 through the Act on Electronic

Signature. » Only electronic signatures that are secure and verified through a qualified certificate are considered to be equal to

a written signature.

The Banking Environment

This section includes an overview of the banking market, market dominant banks and background information regarding the central bank and it's tasks.

Overview » The banking environment in Poland has changed significantly over the past 10–15 years. » From 1989 to 1992, rather hectic competition flourished as nine commercial banks spun off from the National

Bank of Poland in 1989 to form a two-tier banking system, although lacking a suitable legal framework. » The persistently high proportion of bad loans forced legislators to repeatedly restructure the banking system in

the course of the 1990s, although this only served to alleviate the problem, not eliminate it. » In 2000, one seventh of all loans were still rated as bad, at the time a good position by eastern-European

standards. » Since the mid-1990s, the Polish banking market has experienced constant consolidation. » The total number of banks has dropped by almost 60% since 1995 due mainly to the structural change in the

cooperative sector. » As of June 2008 there are 644 banks in Poland with 5,813 branch offices. The share of each particular groups of

banks as a percentage of total assets is – Commerical banks: 88,6% of which 66% is under foreign control – Branches of credit institutions: 5,4% – Cooperative banks: 6%

» As of September 2008, there are approximately 55 domestic commercial banks, 23 branches of foreign banks, 20 representative offices of foreign banks, and more than 500 co-operative banks.

» 11 commercial banks are under state control, of which 4 banks were under the control of the State Treasury (2 directly and 2 in-directly).

» In 1998, the market was fully liberalised, which soon attracted strategic foreign investors. » In 2007, foreign investors (from 19 countries) hold a majority interest in 44 domestic commercial banks, in

contrast to say the Czech Republic and Slovakia where the vast majority of local banks are foreign owned. » Further consolidation in the banking market in Poland consequently depends on the situation between foreign

banks on a European and global scale. Mergers of Western European banks that control Polish banks subsequently force Polish banks to merge. A prime example of this situation is the case of UniCredit Group’s acquisition of HVB Group. UniCredit is the strategic investor in Peka and HVB controls Bank BPH, the second and third largest banks, respectively, in Poland.


– Despite the support of the Polish Supervisory Commission, EU Commission and the EU competition authority, the merger could not proceed as planned due to political roadblocking by the then Polish right wing government who were initially against the merger out of fear of job cuts, stifled competition within the banking industry, and increased foreign ownership.

– An agreement was struck between UniCredit and the then Polish government, which called for UniCredit to sell off 200 of BPH’s 485 branches, while moving the corporate banking, investment funds and stockbroking parts of BPH into Pekao. Pekao ended up taking about 1.3 million clients, leaving BPH with 650,000.

– What remained of BPH was sold to GE Money for €625m. GE and BPH will be one-fifth the size of Pekao. » Bad debts have increase substantially in the first half of 2008 as a result of lax mortgage lending standards by

one in three Polish banks. Thus the Polish banking sector may soon face a period of contraction. » The Basel II framework, based on EU directives adopted in June 2006 and numerous interpretation guidelines

issued by the Committee of European Banking Supervisors, entered into force in 2007. However, the framework will not be adopted simultaneously in all banks, as individual banks may choose not to introduce the new rules until the beginning of 2008.

Marke t Dominant Banks » The top five market dominant banks are Bank Pekao, PKO Bank Polski, ING Bank Slaski and Bank Handlowy w

Warszawie and GE Money Bank–all of which are majority owned by foreign banks, except PKO Bank Polski, which is a state-controlled bank.

» The market share concentration ratios of the 5 largest banks for assets, deposits and lending is 48.3%, 55.5% and 45.6% respectively. In spite of fears of stifled competition, the asset concentration level in the bank sector, measured both with the discrete concentration ratios of 5, 10, and 15 banks, and with the Herfindahl-Hirschman (HH) index3 decreased according the to the National Bank of Poland in 2006, due to a more rapid growth of small banks. These indices in Poland are relatively low compared to the majority of EU countries. The concentration level of banking services on the Polish market is in fact the lowest among countries that joined the EU together with Poland.

» In addition, many of the major international cash management banks have a presence in Poland. » Among the cooperative banks only one, Krakowski Bank Spółdzielczy, operates independently. The remaining

banks were associated in 3 structures: Mazowiecki Bank Regionalny SA, Gospodarczy Bank Wielkopolski SA, and the largest Bank Polskiej Spółdzielczości SA.

The Central Bank » The governing bodies of the central bank, National Bank of Poland (Narodowy Bank Polski, NBP), are the

President of the NBP, the Monetary Policy Council (MPC) and the Management Board of the NBP. The MPC determines monetary policy guidelines and the basic principles of their implementation as set out by law in 1997.

» The fundamental objective of the MPC is to maintain price stability“to stabilise the inflation rate at the level of 2.5% with a permissible fluctuation band of +/- 1 percentage point”.

» Poland islike any other EU countrya member of the European System of Central Banks (ESCB) and will join the European Monetary Union (the Euro) as quickly as possible. To adopt the Euro, the National Bank of Poland will strive to meet the Euro convergence criteria. The NBP further strives at achieving a position as a significant economic research centre, domestically as well as within the European System of Central Banks.

» The most important areas of activity of the NBP are: – monetary policy, – issue of currency, – banking supervision, – development and oversight of the payment system, – management of official (e.g. foreign exchange) reserves, – education and information, and – services to the State Treasury.

3 The Herfindahl-Hirschman index (HHI) is defined as the sum of squares of market shares of particular entities (e.g. the sum of squares of banks’ shares in the total banking sector assets); HHI = Σwi2, where wi is the market share of the i bank (i =1,2,3, …, n).


Financial Authorities

This section includes information on key financial authorities and the country’s banking association.

Ministry of F inance

» The Polish Ministry of Finance’s has the legislative responsibility within financial services, e.g., for money laundering regulations.

Ministry of Treasury

» The Ministry of Treasury is among other things responsible for the privatisation of state owned companies, e.g., state owned banks. Further responsibilities comprise corporate supervision, e.g., corporate governance, and treasury assets.

Polish Financial Supervision Authori ty

» The Polish Financial Supervisory Authority (PFSA) assumed responsibility for banking supervision in Poland from the National Bank of Poland’s Commission for Banking Supervision and its executive body the General Inspectorate of Banking Supervision (GINB) on 1 January 2008.

» Tasks of the Polish Financial Supervision Authority cover banking supervision, capital market supervision, insurance supervision, pension scheme supervision and supervision of electronic money institutions.

» Moreover, the tasks of the PFSA shall include the following: – undertaking measures aimed at ensuring regular operation of the financial market; – undertaking measures aimed at development of financial market and its competitiveness; – undertaking educational and information measures related to financial market operation; – participation in the drafting of legal acts related to financial market supervision; – creation the opportunities for amicable and conciliatory settlement of disputes which may arise between

financial market actors, in particular disputes resulting from contractual relations between entities covered by PFSA supervision and recipients of services provided by those entities;

– carrying out other activities provided for by acts of law. » The aim of financial market supervision is to ensure regular operation of this market, its stability, security and

transparency, confidence in the financial market, as well as to ensure that the interests of market actors are protected.

» PFSA activity shall be supervised by the President of the Council of Ministers.

The Pol ish Bank Associat ion

» The Polish Bank Association, (Związek Banków Polskich, ZBP) was created in 1991 on the initiative of the Chamber of Commerce Charter. All banks incorporated under Polish law can be a member (voluntary).

» Its member list currently counts 101 members and 8 associate members. » The ZBP is mainly tasked with:

– Representing and protecting the interests of its members vis-à-vis the public and the authorities; – Co-operating with the NBP, the government, and with ministries who produce regulations pertaining to the

banking industry; – Information sharing and ensuring promotion of general banking knowledge among its members; – Promoting best practice and standardising banking products and services; and – Creating an interbank infrastructure.

» ZBP has taken part in the creation of e.g. the National Clearing Chamber, the Credit Information Bureau and the Warsaw Institute of Banking.


Clearing Systems

This section provides an overview of the different clearing systems in operation and includes information about each system such as transaction types, operating hours and clearing cycle details.

Overview » There are three main interbank systems used in Poland — TARGET2, SORBNET and ELIXIR. » NBP is the cornerstone in the domestic clearing system. It owns and operates the SORBNET payment system,

where all inter-bank payments are settled through the commercial banks’ accounts with the NBP. This also includes payment instructions, which origin from the National Clearing House (KIR S.A.) or the National Depository for Securities.

» The National Bank of Poland (NBP) holds accounts for clearing members and provides settlement services related to the following systems: – The real-time gross settlement payment system, SORBNET/SORBNET-EURO (owned by NBP) – Paperless net settlement system ELIXIR/Euro-ELIXIR, operated by The Clearing House (KIR S.A)

» In March 2005, NBP introduced the new SORBNET-EURO system supporting the banks’ current accounts denominated in euro and catering for payments between Polish and European Union banks. The link to TARGET is established through a dedicated link with Banca d’Italia’s RTGS system BIREL. Communication between SORBNET-EURO and BIREL is based on SWIFT. As of March 7, 2005, 35 banks were members of SORBNET-EURO.

» The EuroELIXIR system was also activated in March 2005, enabling all banks operating in Poland to process EUR payments. The system allows both domestic as well as international payments in EUR through STEP 2.

» Money market, foreign exchange market and securities market transactions, the latter netted by the National Depository for Securities, KDPW (Krajowy Depozyt Papierów Wartościowych S.A.) before hitting the NBP, are settled directly through SORBNET.

H igh Value Clear ing – SORBNET » SORBNET commenced operations in March 1996. Prior to that, banks could only present their payment

instructions on paper or a floppy disk. » Participants: At year end 2006 there were 55 participants. The banks must have a settlement account with the

NBP and meet the following requirements: – Operational activity for at least 6 months – Financial stability considered appropriate – Additional technical requirements enabling electronic exchange of payment instructions

» Transaction types: Individual, urgent, same-day-value payments instructions in PLN with regards to money market, foreign exchange and securities market transactions, transactions between banks and the NBP (from other clearing systems) and high-value customer payments in excess of 1,000,000 PLN. Customer transactions for lower amounts are also allowed upon an individual request.

» Price indication: Narodowy Bank Polski charges fees for the maintenance and servicing of banks’ current accounts within the SORBNET system. According to this fee structure, banks pay a one-off admission fee of PLN 25,000 (EUR 6,525.71) to join the SORBNET system. A quarterly fee of PLN 4,000 (EUR 1,044.11) is charged for the maintenance of accounts. Fees for the performance of payment orders in the SORBNET system have been unified, and the current rate is PLN 5 (EUR 1.31) for the execution of a single order.

» Operating hours: Access to SORBNET is possible from 7.30 to 18.00. Customer payments can only be processed until 16.00 (under certain circumstances until 17.00).

» Clearing cycle details: – Payment instructions are cleared in priority: – KIR have the highest priority (settled through 3 daily clearing cycles) – Secondly, payment instructions presented by the NBP – Thirdly, KDPW instructions (settled through 5 daily clearing cycles) – Instructions by banks have the lowest priority

» The bank must have cover on its account, otherwise NBP can allow free intraday credit against collateral (treasury bills and treasury bonds)


» Electronic transmission of the payment instructions takes place within the network of the Bank Telecommunications Company (TELBANK SA) following the EDIFACT standard.

TARGET2 » The current pan-European RTGS system, TARGET, migrated to a single shared platform (SSP) called TARGET2

making the 16 decentralised RTGS systems of individual Eurosystem countries and the ECB’s payment mechanism (EPM) obsolete.

» The changeover took place in three migration waves, starting 19 November 2007 and ending 19 May 2008 (15 September 2008 is reserved for contingency needs).

» Poland will accede to TARGET2 in the 3rd wave on 19 May 2008 with Estonia, Denmark, the ECB, Greece and Italy.

» The Swedish Central Bank and the Bank of England will not migrate to TARGET2. » Participation: options include direct and indirect participation, “addressable BICs” and “multi-addressee access” to

the system, also known as “technical BIC access”. Direct participation criteria for TARGET2 is the same as for the current TARGET system. Only supervised credit institutions established within the EEA can become indirect participants.

» Transaction types: focus on large-value payments related to inter-bank operations » Price indication: between €0.125 and €0.80 depending on type of participation. » Operating hours: the operational day in TARGET2 will be longer than that of the current TARGET system.

TARGET2 will start the new business day on the evening of the previous day. The night-time window will be available from 19:30 to 6:45 the next day, with a technical maintenance period of three hours between 22:00–01:00. Daytime hours for customer payments 07:00–17:00 CET with the day ending at 18:00 + 30 minutes for the use of standing facilities on the last day of a minimum reserve period.

» Transaction details: – Direct participation: For the exchange of payments information, TARGET2 will use the SWIFTNet FIN

service, while the SWIFTNet services “InterAct”, “Browse” and “FileAct” will be used for information and control services.

Low Value Clear ing – KIR » The National Clearing House (KIR S.A.) has monopoly on clearing in Poland. The owners of KIR are the NBP, the

Polish Bankers Association and the biggest commercial banks. KIR is head-quartered in Warsaw and has 17 regional clearing houses (BRIRs). Every single branch of a participating bank is connected to a BRIR. KIR manages one main clearing system ELIXIR.

» The paper-based SYBIR system was closed in July 2004, while an optical scanning system, IMBIR, continues its operations. IMBIR is already running in all 17 BRIRs. More specifically, the IMBIR scanning system optically reads and converts paper settlement documents into electronic documents for further processing in ELIXIR.

» Participants: All banks in Poland participate directly in the clearing system » To participate a bank must meet the following requirements:

– Polish banking license – Approval by KIR’s Supervisory Board, subject to certain financial criterion – Bank account agreement with the National Bank of Poland – A number of technical requirements

ELIXIR (and EuroELIXIR) » Transaction types: since 2001 the electronic clearing system, ELIXIR, has processed credit transfers, direct

debits and cheques. » Pricing indication: The structure of fees charged for transactions in the SORBNET-EURO system corresponds to

that applied in the SORBNET system. Three basic categories of fees are charged in the system: a one-off fee for joining the system (PLN 25,000), a flat fee (charged on a quarterly basis) for maintaining the account (PLN 4,000), and a fee (charged on a monthly basis) for the execution of payment orders (in respect of both domestic and foreign payments). Domestic payment orders cost PLN 4 per transaction, while foreign euro payment orders range from EUR 0.80 to EUR 1.75 depending on volume.

» Operating hours: see clearing cycle details


» Clearing cycle details: The principles of conducting the EuroELIXIR settlement sessions for euro domestic payments are identical to those applicable to settling zloty payments, cleared in the ELIXIR system – Means of communication: normally via electronic communication through post BPT TELBANK SA. – Credit transfers:

Banks deliver individual transactions to ELIXIR Clearing cycles: final settlement is provided in three settlement sessions (10.30, 14.30 and 16.30) Banks have real-time access to their ELIXIR positions reducing the risk of uncovered exposures

– Debit transfers: Debit transfers include direct debits and cheques Beneficiary’s bank deliver direct debits to the KIR via a special message on the first daily session. Debtor’s branch can reject the payment until 16.00 Transaction is settled on a net basis during the evening clearing (third session) Cheques from saving accounts are truncated in the branch of the bank, in which they are

presented Issuing banks only receive electronic messages through ELIXIR

SWIFT Service Bureau » Since 2005 the SWIFT Service Bureau has enabled KIR to be an intermediate stage in statement transfer

between KIR client location and SWIFTNet via KIR infrastructure. » New, as well as existing SWIFT users to have a primary or backup means of accessing the SWIFTNet.

Payments, Collection Methods and Instruments

This section provides an overview of the payment methods employed in the country, including statistics and more detailed qualitative information about such methods.

Overview » The holding of a bank account, especially among older people, is not common: hence, a large number of

pensions and disability allowances are paid in cash. The situation on the cards acceptance market has been improving steadily, owing to the strong growth in the number of POS terminals. Nevertheless, a large number of shops and services outlets, particularly those outside the big cities, still do not accept non-cash forms of payment.

» In other segments of the market, plastic card providers are expected to continue growing rapidly in the coming years.

» Non-cash payment instructions are dominated by 4 payment methods: payment cards, standard credit transfers, direct debits, and settlement cheques (used rarely).

» Banks can set out their own rules for float as the Banking Law does not specify regulations for value dates for the performance of customers’ instructions.

» Banks in Poland have been implementing SEPA (Single Euro Payments Area) standards for EUR-denominated payments. The country’s banks now only issue SEPA-compliant debit cards (since 1 January 2008) and also now offer pan-European SEPA credit transfers (since 28 January 2008). SEPA direct debits however will not be available until 1 November 2009 at the earliest.

» It is not yet known how long the transition period will last for national payment products to be fully replaced by SEPA payments. However it is hoped the Single Euro Payments Area (SEPA), an initiative of the European Payments Council, will be fully operative by around 2013. It will consist of all EEA member states plus Switzerland. Final transition dates and a completion date are expected to be decided in mid- to late 2009.

Transaction Volumes, mil. Transaction Values, PLT bn.

2004 2005 2006 % change 2004 2005 2006 % change Debit cards * 156.30 196.73 267.54 35.99% 19.11 22.66 29.79 31.47% Credit cards 45.13 67.45 86.37 28.05% 7.16 9.91 12.40 25.13% Credit transfers ** 726.61 804.61 917.61 14.04% 2,000.96 2,080.69 2,385.25 14.64% Direct debits 7.54 11.09 14.54 31.11% 6.71 8.51 10.14 19.15%


Cheques 0.40 0.04 0.02 -50.00% 0.72 0.19 0.24 26.32% Total 935.98 1,068.83 1,286.09 20.33% 2,034.66 2,121.96 2,437.82 14.89% * Includes payments by cards with a debit and/or delayed debit function. ** Due to changed statistics on the value (and volume) of credit transfers from 2003, all (SORBNET) transactions above 1 million PLN are not included in these statistics.

Note: Figures are rounded. Percentage change calculated from 2005-2006 Sources: ECB Statistical Data Warehouse

Card Payments » 2007 saw continued dynamic growth in the number of financial cards. The background of this strong rise is in part

a low starting base, due to the limited uptake of banking services in Poland. Gradually, however, more Poles are using banking products, including financial cards.

» The development of the banking market is being driven in part by economic growth, which is leading to an improvement in the financial situation of a large proportion of the Polish population. This positive trend has been strengthened by intensive promotional activities by banks and financial card operators, which are promoting financial cards as an essential element of a modern lifestyle.

» The majority (94.4%) of payment cards offered have both payment and ATM withdrawal functions. » Over half of all card transactions in 2006 were cash withdrawals from ATM machines, mostly using debit cards. » At as month-end June 2008, a total of 12,400 ATMs were available. At year-end 2006 there were roughly

140,000 POS terminals. » At at month-end September 2008 more than 28 million cards were issued, of which 19.2 million were debit cards,

half a million were delayed debit (charge) cards, and nearly 8.6 million were credit cards. » While debit cards still dominate the market, credit card usage as a means of payment also has seen a substantial

increase in the last few years. » Payment cards, especially debit cards, will definitely play a major role in the further development of the Polish

retail banking market, although their current share of payment transactions is still not impressive. » Cards issued by Polish banks usually bear the logo of international organisations, i.e. Visa or MasterCard, which

facilitates wider acceptance of cards both within the country and abroad. » The Polish market is dominated by two largest card operators, Visa International Service Association and

MasterCard Europe. Visa is the clear leader in terms of volume of financial cards and transaction numbers. The remaining operators, such as Diners Club, American Express and Polcard, account for only a small share of the market. Both Visa and MasterCard have a strong image among Polish consumers, which results mainly from intensive promotional campaigns in the mass media.

» The largest Polish retail bank, PKO Bank Polski SA, leads in terms of number of financial cards in circulation. It is the largest issuer, due in part to the bank having the largest number of individual bank accounts. PKO Bank Polski SA took the leadership position in terms of credit cards in circulation from the previous leader, Citibank Bank Handlowy SA, in 2006.

» PolCard is the leading card processing company (with some 60% market share), with a retail network of almost 70,000 point-of-sale terminals. The company has relationships with many of the leading card-issuing banks and financial institutions. The majority of shares in PolCard were acquired by GTECH's in 2003. GTECH is a U.S. information technology company that provides software, networks, and transaction processing solutions.

» PolCard acquired one of the emerging providers of electronic bill payment services, BillBird S.A., in September 2004. BillBird has processing contracts for approximately 75% of the utility and telecommunications bar-coded bill issuers in the country. Additionally, it has approximately 6,600 VIA-branded points-of-access through supermarket chains, large grocery and convenience stores as well as gasoline stations.

» Growth in the financial cards market has led to intense competition among the banks, which have endeavoured to attract potential customers by means of telephone marketing, Internet campaigns and direct mail. Customers who are interested in consumer credit or lending are frequently offered credit cards instead. The banks have also simplified their regulations regarding processing and the timing of card issuing, in many cases to reduce the number of visits customers need to make to a branch.

Credit Transfe rs » By far credit transfers are the predominant way of settling payments in Poland. » Their share of total value transfers processed by KIR is more than 99%. The existing system for the settlement of

customers’ transactions via the KIR (ELIXIR) enables credit transfers between customers of two different banks to be settled on the same day.

» The Polish Post Office is permitted to perform certain bank activities.


» Postal transfers are mostly used for transferring cash between two persons who do not have a bank account, cash payments to bank accounts and payments of pension and disability allowances.

» The postal branch office network comprises around 8,389 offices as at the end of 2006. It is only the larger post offices, which hold an account and thus clear through a bank. The cash transfer person-to-person is executed outside the banking system.

Direct Debits » The first direct debit transactions were executed in July 1998. This payment method can be used for electronic

payments in the range 0 – 1,000 / 50,000 EUR (individuals / legal entities) through ELIXIR only. The transaction can be revoked by the debtor within 5 business days (legal entities) or 30 calendar days (individuals). In accordance with the Banking Law, direct debits are permitted subject to that: – Both the creditor and the debtor hold a bank account with a bank that has entered into the agreement on

direct debits; – The debtor has authorised the creditor to debit his / her account on agreed payment dates and in

connection with specified liabilities, and; – The creditor and the bank have entered into an agreement on direct debits.

» New business-to-business direct debit system (GOBI) has been recently introduced in Poland. Unlike the classic direct debit system, there is no amount threshold applicable to GOBI transactions. Furthermore, the transactions cannot be revoked.

» The usage of direct debits is growing, both in volume and value of transactions, but still does not play a significant role in retail payments.

Cheques

» The usage of cheques as a payment method has never been widespread, and with the rapid expansion of the payment card market, their relevance has decreased significantly.

Electronic Banking

This section includes an overview of electronic banking in the country as well as information on EDIFACT, e-payments and e-invoicing.

Overview » Bank Handlowy, owned by Citibank, was the first to offer electronic banking via the Internet in 1997. » In recent years pure internet banks have been set up, e.g. by BRE Bank and Volkswagen Bank Polska. » Electronic banking is becoming increasingly common in Poland and is generally based on the MultiCash Plus

multi-banking system (the most common in Poland) although banks are increasingly using their own custom-built proprietary solutions.

» There are two broad trends that characterise the Polish electronic banking market: – The increasing popularity of web-based solutions that are developing at a rapid pace and are now offered

by all major banks in the corporate services space. – The evolution of e-banking applications and systems that offer increasing functionality to corporate clients.

» Web-based electronic banking is being used more widely by small and medium-sized enterprises (SMEs) in Poland as well as big domestic and international firms. Most big companies that demand advanced functionality now have online electronic interfaces with their banks. Another factor driving the demand for online platforms is the added technical security and reliability of having the platform hosted almost entirely by the bank's IT infrastructure, which makes any adjustments to the system easier for the bank to make.

» Electronic multi-banking platforms are not currently available in Poland. Corporates can use a SWIFT connection but this is not common. Some electronic banking applications include interfacing with third-party bank systems via the MT 101 and the MT 940 (SWIFT message types that provide requests for transfer and account statement messages, respectively). Electronic banking platforms will develop significantly, however, and banks will introduce the option for corporates to perform some basic cash management operations on their accounts with third-party banks.


General Funct ional i ty of EBS Offe r ings » Many Polish banks only have electronic banking via the internet and simply by-passed the PC based systems

era. » Internet services include payment transactions, account information, FX dealings and information etc.

EDIFACT / Host-to-Host Solut ions » Corporations growing effort of streamlining payment processing is supported by a number of Polish banks. » Host-to-host solutions are provided for purely domestic as well as international payments (the latter usually

through a ‘single, global pipeline’ solution to the central processing centre of the bank).

E-payments » In general, micropayments are offered by regional and “global” players. Such solutions usually rest on two

important prerequisites: (1) prepayment and (2) settlement via debit or credit cards. » Alongside the development of electronic trading, new payment services have appeared whereby payment can be

made online for products and/or services in online shops and auctions (Allegro, eBay, etc.). Online payments are usually effected using electronic transfers from bank accounts which a customer can access online, with payment cards and via other innovative methods (e.g. pre-paid internet accounts with service providers, pre-paid cards and text messaging).

» Nonetheless, e-payments are not widely used in Poland.

E-invoice / EBPP » The Minister of Finance's decree introducing regulations on electronic invoicing into the Polish tax law entered

into force on 4 August 2005. This decree establishes ways and conditions of issuance and delivery of e-invoices as well as rules for their storage and presentation to the tax authorities.

» The conditions determining the possibility of using e-invoices may be difficult to meet, particularly by smaller companies, because an electronic signature is required supplied by a small number of vendors

» It is expected that large and medium-sized companies especially, will start to implement e-invoicing on a large scale.

Cash Pooling Solutions

This section covers cash pooling solutions such as notional pooling, cash concentration, and multicurrency and cross border pooling.

Overview » In the years since 1989, when Poland transformed from being a socialist state to a capitalist one, the country has

retained a legacy of specific, complicated and, therefore, unfriendly foreign exchange (FX) and tax regulations. Instruments such as cash pooling were not recognized by Polish legislation and any type of liquidity management solution (local or cross-border) was either virtually impossible or at least bore substantial (mostly fiscal) risks.

» As there are no specific regulations that directly address cash pooling some uncertainty with regards to the legal framework prevails. This is true both in respect of notional cash pooling schemes and co-mingling of funds solutions. No doubt however, that the banks present on the Polish market all have the expertise and technology to offer the solutions. Successful cash pool structures that have been tailor-made by banks for their large corporate clients and have done for several years.

Notional Pool ing » Notional pooling is permitted but lacks a clear legal framework in Poland and is therefore not widely offered,

largely because banks are not permitted to offset credit and debit balances on their balance sheets. » Nonetheless, some banks offer interest enhancement / compensation models.


» Polish regulations do not allow the offsetting of debit and credit balances, which means that notional pooling is expensive to implement and not widely used.

» Additional challenges for notional pooling include compulsory reserve costs (all the banks in Poland are obliged to put 3.5% of each deposit amount on a non-interest bearing account at National Bank of Poland), capital adequacy requirements and risk-related issues. As a result, interest enhancement schemes are more commonly used.

Cash Concentrat ion » Most companies prefer to manage their liquidity via cash concentration (particularly via zero balancing). » Cash pooling is not legislated for within Polish law and this means that pooling structures need to be tailor-made

by the banks to suit the needs of their clients. » Zero balancing between accounts held by the same legal entity (accounts consolidation) is the most common

liquidity management technique in Poland. Zero balancing and cash concentration structures between the accounts of different legal entities are more complicated, since they face several restrictions, such as: – Stamp duty, also known as tax on civil law transactions (TCLT), is payable on inter-company loans. The

sweeping of excess balances into a Polish-based master account maybe considered to be an inter-company loan.

– Transfer pricing, which operates by reference to the arm's length principle and follows OECD guidelines. It is applied to transactions between related entities.

– Thin capitalisation, which is applicable to interest on loans. – Withholding tax, which, in principle, is payable at 20% on income earned by non-residents from interest.

» Implementing cash concentration solutions requires independent legal advice as the legal status of cash concentration remains uncertain.

Mult icurrency and Cross Border Pool ing » Cross-border sweeping is permitted but not widely offered as a result of exchange controls (when involving non-

resident from countries outside the EU, EEA or OECD), legal uncertainty and stamp duty.

Sources

The hyperlinks of various sources used throughout this country profile are provided below.

National Bank of Poland www.nbp.pl Ministry of Finance www.mofnet.gov.pl Ministry of the Treasury www.mst.gov.pl Polish Information & Foreign Investment Agency (PAIiIZ) www.paiz.gov.pl Polish Bank Association www.zbp.pl Poland Development Gateway www.pldg.pl National Clearing House (KIR S.A.) www.kir.com.pl PolCard www.polcard.com.pl Polish Import Export Chamber of Commerce www.chamberofcommerce.pl Warsaw Stock Exchange www.gpw.com.pl

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