Lack of Response to the High Swiss Franc May Finish Off Financial Institutions in Poland
Commercial banks in Poland fell under detailed scrutiny of Polish antitrust authority after some of them refused to cut interest rates on mortgage loans in Swiss francs, despite the currency’s rapid appreciation. Seeking to ease the burden on borrowers hit by the franc’s strength, last week the Polish antitrust authority decided to launch a probe to determine whether the banks’ refusal to cut rates and demand additional security violated consumer protection laws.

For the time being, the Polish antitrust authority is carrying out an investigation in the case and not against specific banks, where this investigation aims to explore the mechanisms on the market and standard clauses used by the banks in credit agreements. If any potential irregularities are found, proceedings against specific entities for infringement of the collective consumer interests will be initiated.

The current political situation does not seem to be in favor of the banks. The Polish government is under growing pressure to help borrowers adjust to the new levels of the franc after it surged around 20% on currency markets in response to the Swiss National Bank’s shock decision to scrap its currency cap against the euro. The pressure is much higher as Poland is heading for parliamentary elections this year, which the ruling center-right Civic Platform party hopes to win, with the fate of franc-denominated mortgage loans directly affecting more than half a million families in the country.

Difficult Times for Financial Institutions
The Polish antitrust authority’s launching of proceedings and verifying the commercial banks’ actions is not an isolated case but reflects the continuing trend of the increased supervision over financial institutions.

In October 2014, the Polish antitrust authority imposed high fines on four financial institutions for infringement of collective consumer interests. The case concerned offers to consumers of products constituting a combination of a bank deposit and an investment in insurance policy. The joint fine imposed on financial institutions by the antitrust authority exceeded PLN 50 million. Moreover, this matter is ongoing and the Polish antitrust authority is currently conducting proceedings in this scope against another 24 financial institutions, which also may result in decisions on finding prohibited practices infringing the collective interests of consumers and in imposing further fines.

In the last two years, the Polish antitrust authority consistently instituted proceedings and imposed huge fines on many financial institutions, also in other cases. The fines were imposed on such entities as PKO BP S.A. (over PLN 29 million, 2014), BRE Bank S.A. (over PLN 14.7 million, 2013), PKO BP S.A. (over PLN 14.6 million, 2013) and Getin Noble Bank S.A. (over PLN 9.6 million, 2013).

The actions of the Polish antitrust authority are not the exception in Europe and consistent with the European Commission’s approach. In a recent case associated with the financial market, the European Commission fined eight international financial institutions a total of 1 712 468 000 Euro for participating in illegal cartels in a markets for financial derivatives (derivatives of yen and euro) covering the European Economic Area.

Financial Penalties for Breach of the Competition Law
The fine that can be imposed by the Polish antitrust authority on a company for even unintentional violation of the competition law amounts up to 10% of the company’s turnover in the year preceding the decision.

In accordance with the new Polish Competition Law that entered into force on January 18, the management of a company can also bear financial responsibility for a breach of the competition law by the company. The Polish antitrust authority may impose a penalty of up to PLN 2 million (EUR 500,000) which is paid from a management member’s personal property. The penalty may be imposed also on former management members, if the competition law was breached during their management of the company.

Antitrust authorities may also order banks to submit to an inspection or search of their premises (i.e. dawn raid). Lack of cooperation, giving false or misleading information and even unintentional disturbance of the inspection by the employees of a firm under inspection, may result in the imposition of severe financial penalties of up to PLN 50 million.

In addition, the Polish antitrust authority’s recognition that the banks’ refusal to reduce interest rates on loans taken in Swiss francs is a violation of the Act on competition and consumer protection, will encourage people affected by this practice to pursue their claims in civil proceedings.

The most common reason for the Polish antitrust authority’s imposition of a fine is the lack of suitable organizational preparations as well as ignorance of the competition law and its improper application. Introduction of a compliance program individually tailored and adjusted to the financial institution’s needs and its business profile and the support of a competition lawyer, including drafting corporate guidelines and training management and employees, as well as support during an inspection and antitrust proceedings, significantly decreases the risk of being fined and enables the effective management of this risk. K&L Gates successfully advises companies at each stage of the antitrust proceedings and in cases of practices infringing collective consumer interests, prepares comprehensive compliance programs, carries out training in competition law for companies and their management, which purpose is to ensure that a company acts in compliance with Polish and European competition law. Last year we successfully advised in more than 30 court proceedings, including proceedings before the Supreme Court, in cases concerning infringement of consumer interests.

For more detailed information, please contact our competition law lawyers.