Commission Report (2002): Poland

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 3: Freedom to provide services

Progress since the last Regular Report

Since the last Regular Report Poland has made some progress with transposition and implementation of the acquis in this area, but much remains to be done, mainly in the area of financial services.

In the field of the right of establishment and the freedom to provide services (other than financial services), there have been some legislative developments. The Law on Detective Services entered into force in March 2002. Under the provisions of the law EU citizens will, from the date of accession be able to operate in this sector. The Law on the principles for the recognition of qualifications acquired in EU Member States to undertake or perform certain types of activities was adopted in May 2002. With regard to supervision of the tourism industry, legislation adopted in 2000 came into effect in September 2001.

In the field of financial services, there have been developments both in terms of legislative alignment and administrative capacity. With regard to banking most of the amendments to the Banking Law came into force in January 2002. These bring Polish banking law closer to the acquis, notably with respect to supervision of banking groups on a consolidated basis. A range of secondary legislation has been adopted. This includes December 2001 regulations establishing the principles for calculating own funds, credit concentration limits and norms of capital adequacy for banks subject to consolidated supervision.

The amendment to the Banking Law also introduced a new requirement that non-Polish citizens on the management board, including the bank's chairman, whose appointment is approved by the banking supervision authority, must ``have a proven knowledge of the Polish language''. The authority justifies this measure for prudential and supervisory reasons and it is strictly applied. This regulation in its application to non-Polish citizens is not compatible with the Treaty; moreover, the measure is also disproportionate and does not conform to the principles established for protecting the ``general good''. It is to be noted that a similar provision has recently been proposed for the insurance sector. There has been no legislative progress in the insurance sector. In April 2002 a new body, the Commission for Insurance and Pension Funds Supervision, replaced two existing supervisory institutions: the State Insurance Supervisory Office (PUNU) and the Pension Funds Supervisory Office (UNFE).

A number of pieces of secondary legislation have been adopted in the field of securities including regulations relating to the amended Law on Public Trading in Securities and the Law on Investment Funds (both of which came into force in 2001). These regulations concern, among others, conditions for conducting brokerage activity, the detailed requirements for prospectuses, conditions for managing joint securities portfolios and producing financial reports on them, and information prospectuses for open-end investment funds.

Amendments to the Act on Personal Data Protection came into force between October 2001 and January 2002. These aimed at bringing Polish legislation closer to the acquis. Poland ratified Convention 108 of the Council of Europe in May 2002.

In the area of the information society directives, the Law on Electronic Signature entered into force in August 2002. Under the law, an e-signature placed under a document sent via the internet has the same legal effect as a hand-written signature and unambiguously defines the identity of the person using it. It may be used by both natural and legal persons. The Law on the Protection of Certain Services Provided by Electronic Method based on or Consisting in Conditional Access was adopted in July 2002 as was the Law on the provision of services by electronic means. The Law on electronic payment instruments was adopted by the Parliament in August 2002.

Overall assessment

In the field of the right of establishment and freedom to provide services, natural or legal persons from EU Member States may freely set up companies in Poland and/or acquire up to 100% of existing companies in most sectors. However, there remain a few sectors (detective services, radio and television stations, public utilities games of chance) which are governed by specific restrictive legislation, such as the requirement of Polish nationality or permanent residence. Some of these restrictions run against Poland's existing Europe Agreement obligations. In some of the laws such restrictions will expire on accession; this is the very least which should be done and all such restrictions should be removed by accession.

Banking legislation is in the main well defined and to a large extent adjusted to the acquis. The issue related to the language requirement for members of the boards of Polish banks needs to be resolved. As noted in the last Regular Report, the Law on the Bank Guarantee Fund requires further modification to align it with the acquis. The legislation complies in part with the Basle Core Principles for Banking Supervision. The operational independence of the supervisors requires further attention. The fact that all supervisory decisions of major importance have to be taken by the Commission for Banking Supervision, which is partially composed of political representatives, is problematic. With regard to cross-border supervision, the Commission for Banking Supervision may share with foreign supervisors information that is subject to secrecy regulation, and give a home supervisor on-site access to local offices of foreign banks, provided a Memorandum of Understanding has been signed with the other country. To date only one such memorandum, with Lithuania, has been signed. Consequently, the access of foreign supervisors to banks established in Poland and the possibility for Polish supervisors to supervise overseas activities of Polish banks are limited.

In the insurance sector, a range of primary and secondary legislation is being prepared and must be adopted and implemented to bring Poland in line with the acquis. All of the necessary directives remain to be adopted. In the area of securities, while a range of legislation has been adopted, this has on examination been found to be insufficient to align Poland with the acquis. Further work is required to strengthen the legislation, give it the necessary focus and adapt it to EC standards.

The Commission for Banking Supervision is entrusted with the responsibility of supervising banking institutions. The Commission is chaired by the President of the National Bank of Poland and composed of the Deputy Minister of Finance and representatives of the President, the Bank Guarantee Fund, the Securities and Exchange Commission and the General Inspector of Banking Supervision. Its executive body is the General Inspectorate of Banking Supervision (GINB), an autonomous unit of the National Bank of Poland.

The General Inspectorate of Banking Supervision employs about 500 people. It has continued to be regarded as an efficient and well-organised institution. The quality of domestic banking supervision in general is high, as are the expertise and commitment of the employees of the Inspectorate. Because the legal framework for consolidated supervision was laid down only in the amendments to the Banking Law of August 2001 and secondary legislation enacted in December 2001, General Inspectorate of Banking Supervision inspectors have only recently started to familiarise themselves with consolidated supervision principles and to apply them in their work. Some time may be needed to develop capacity in this element of the Basle Principles. More generally the operational independence of banking supervision should be strengthened and cross-border supervision needs to be brought into line with international standards.

The Commission for Insurance and Pension Funds Supervision is responsible for insurance supervision. It is composed of the chairman, appointed by the Prime Minister, two deputies appointed by the Finance and Labour ministers, and representatives of the Securities and Exchange Commission and the Office for Competition and Consumer Protection. The composition of this Commission and the means by which its members are selected suggest that there is scope for strengthening the operational independence of the supervisors.

The office of the Commission for Insurance and Pension Funds Supervision is a new institution and it is difficult to assess its administrative capacity at this stage. This having been said, the ``inherited'' staff of the old institution were experienced and well-trained for their duties, and the existing information technology system is of good standard. In order to address the weakness of its predecessor the Commission needs to be fully independent and to have sufficient autonomy including authority to issue and withdraw licences which is currently the prerogative of the Minister of Finance. It should also have the power to exert greater control over the governance of insurance companies and their management boards as well as internal controls of insurance companies. The implementation of the acquis with respect to insurance groups is important, as will be the ability to share information with foreign supervisors and domestic banking and securities supervisors.

The government agency charged with supervising public trading of securities is the Polish Securities and Exchange Commission (PSEC). The Commission is composed of its chairman (nominated by the Prime Minister), 2 deputies and 6 representatives of ministries. In 2001, the Commission met 26 times and made 889 decisions, including 18 decisions on admitting securities to public trading. The Commission has long been considered a mature and professional institution, performing its functions well. It is generally considered that the PSEC has sufficient well-skilled staff to perform its tasks, as well as possess adequate tools and procedures to perform on-site and off-site inspections. The Commission is also an active member of the International Organisation of Securities Commissions (IOSCO).

Areas where more could be done to enhance the capacity of the PSEC include further enhancing the independence of the PSEC by reducing the presence of government officials, and giving the PSEC more comprehensive powers to supervise listed companies. An agreement with the insurance supervisor for the exchange of information would also be of use, as would a take-over code including provisions on the protection of minority shareholders. Finally, the development of an electronic system for monitoring the transactions on the Warsaw Stock Exchange would greatly assist the PSEC.

Further efforts are required to align Polish legislation in the area of information society directives. Poland has made further progress in the area of data protection. Poland has ratified Convention 108 of the Council of Europe and Polish law has to a great extent been harmonised with EC standards. This notwithstanding, the Data Protection Act is still not fully compliant and further amendments will be needed to bring it in line with the acquis and resolve the issues which currently render implementation problematic for the supervisory authority.

The supervisory authority for the protection of personal data is the Inspector General for Personal Data Protection who satisfies the requirement for complete independence imposed by the acquis. The Inspector's office is operational and has achieved a great deal in terms of ensuring compliance with the Law and raising awareness. However, lack of office space makes it difficult to hire all the personnel allocated in the budget and thus the Office remains understaffed. Furthermore, the Inspector should be given stronger administrative powers to better ensure implementation of the data protection rules. The Law should also be amended in order to simplify some procedures which currently unnecessarily burden the activities of the Office, such as the lack of a system of prior checking for risky operations as provided for in the acquis. The office requires strengthening, to perform its future duties connected with the launching of the National Schengen Information System (protection of personal data contained in this system).

Conclusion

In the Commission's Opinion of 1997 it was noted that significant progress had been achieved in the banking sector but that further reform was required, in particular in relation to capital adequacy for market risks, consolidated supervision and special requirements regarding establishment of foreign branches. The assessment of the capital market and the insurance sector was similar. Taken as a whole, the Opinion concluded that the Polish financial sector was supervised in a satisfactory way by the competent authorities, and it was expected that there would be significant improvement.

There has been considerable improvement since the Opinion was adopted: good progress has been made in the area of banking. This notwithstanding, further significant efforts are required, particularly in the securities and insurance field, to ensure an adequate alignment with the acquis and particular attention needs to be paid to issues of supervisory independence.

Negotiations on this chapter have been provisionally closed. Poland has been granted transitional periods (until 31 December 2007) in which to ensure its provisions on capital requirements for co-operative banks and the investor compensation scheme fully comply with the acquis. In addition Poland has been granted the exclusion of credit unions and a specialised bank (BGK) from banking acquis. Poland is generally meeting the commitments it made in the accession negotiations in this field.

In order to be ready for membership, Poland now needs to focus efforts on completing alignment, in particular for non-financial services but also in the insurance and securities sectors, data protection and with regard to the outstanding issue in the banking law, eliminating provisions which discriminate against non-nationals as regards the right of establishment and freedom to provide services and further enhancing the capacities of the respective supervisory bodies including assuring their functional independence. In order to fill the remaining gaps, a first step would be the adoption of the range of legislation currently before Parliament, notably the package of legislation on insurance. The Polish action plan for financial services, if fully adopted, meets a number of concerns relating to administrative capacity although the independence of supervisory bodies would require further attention.

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