Poland Orders Probe of Bank Regulator After Report of Misconduct

Poland’s prime minister ordered an investigation into the regulator of the country’s financial industry after a newspaper reported that its chairman made an improper offer to the owner of a troubled bank.

The Financial Supervision Authority rejected as “untrue” a report in Gazeta Wyborcza that Marek Chrzanowski suggested to Leszek Czarnecki, the owner of Getin Noble Bank SA, how he could get favorable treatment from the regulator if he hired a specific lawyer.

Prime Minister Mateusz Morawiecki “called the regulator for explanation and ordered the prosecutor’s office to collect information immediately,” Michal Dworczyk, the head of the premier’s chancellery, told private radio station RMF FM on Tuesday. The biggest opposition party called for a parliamentary investigation into the “corruption.”

However it plays out, the affair has highlighted an ongoing row between the government and central bank over who should ultimately regulate the financial industry. Poland’s nationalist ruling party has been tightening its grip on the country, appointing its own people to the courts, public media and state-run companies. Oversight of the Financial Supervision Authority is currently shared between politicians and officials from the central bank.

Central bank Governor Adam Glapinski is a close colleague of Chrzanowski and has for years sought to wrest control over banking supervision, saying that such a model would better protect the stability of the industry. Morawiecki, a former chief executive of one of Poland’s biggest banks, has proposed to strengthen the government’s role.

Newspaper Splash

Citing transcripts from recordings made by Czarnecki as well as comments by his legal adviser, the newspaper said Chrzanowski suggested that Getin hire a lawyer whose fee should be the equivalent of 1 percent of the bank’s market capitalization. Gazeta Wyborcza put the figure at 40 million zloty ($10.5 million) on its front page on Tuesday.

The regulator, known as KNF in Polish, said in a statement that it recommended the name of a lawyer to Czarnecki, though denied making any specific proposals regarding fees or promising any special treatment.

“No such proposal was made during any meeting with Mr. Czarnecki,” the regulator said. “The KNF reads Mr. Czarnecki’s actions, as described in the article, as an attempt to influence the supervisory authority by blackmail.”

The incident has brought the challenges facing Getin back into the spotlight. The bank’s shares have plunged almost 90 percent from a 2014 peak and the bank has been in a restructuring program with the regulator the past two years. The stock dropped more than 7 percent in Warsaw, valuing the lender at just over 500 million zloty.

Stricken Bank

Czarnecki’s financial empire has melted away in recent years after Getin’s strategy of aggressive sales of Swiss franc-based mortgages backfired. Getin has been unprofitable since 2016, and its overhaul took another hit this year from the default of a Polish debt collector formerly owned by Czarnecki. That also led to write-offs on some of Getin’s assets.

The transcripts revealed a split within the regulator over how to deal with Getin, which had almost 47 billion zloty of deposits at the end of June. Chrzanowski reportedly said a fellow KNF official was seeking to push the bank into insolvency so that it could be taken over by a larger rival favored by the government.

Wyborcza cited Czarnecki as saying that the allegations were “shameful” and that he notified prosecutors about the alleged incident this month. His spokesman declined further comment when contacted by Bloomberg on Tuesday.

Bloomberg Quint | November 13, 2018
https://www.bloombergquint.com/politics/poland-premier-to-probe-bank-watchdog-over-getin-bribe-report