RECOMMENDATION of 2nd August 1993
concerning the procedures employed by banks when granting credits, money loans, bank guarantees, warranties (Burgschaften) or any other type of obligations for the sake of shareholders, stockholders and persons who are officers of the Management or sit on Supervisory Boards/Boards of Directors of banks, as well as subjects connected with them on a capital or personal basis.
In accordance with art. 100, para. 3 of the Act of 31st January 1989 "Banking Law" (Dz. U. of 1992, No 72, item 359 and of 1993 No. 6, item 29, No 28, item 127) I hereby recommend for the use of banks the following principles and procedures when granting credits, money loans, bank guarantees, warranties (Burgschaften) or any other type of obligations for the sake of shareholders, stockholders and persons who are officers of the Management or sit on Supervisory Boards/Boards of Directors of banks, as well as subjects connected with them on a capital or personal basis.
1. Preparation and implementation of internal codes of practice to determine detailed conditions of granting credits, money loans, bank guarantees, warranties (Burgschaften) or any other type of obligations for the sake of shareholders, stockholders and persons who are officers of the Management or sit on Supervisory Boards/Boards of Directors of banks, as well as subjects connected with them on a capital or personal basis.
2.1. Decisions to be taken by the Management of a bank (within the mode envisaged by the bank's byelaws for the bank's Management decision-making) as to granting to a shareholder or stockholder as well as subjects connected with him on a capital or personal basis, of a credit, money loan, bank guarantee, warranty (Burgschaft) or other obligation of a bank in excess in total of 5% of basic funds of the bank. The above decision can be taken after the assessment of creditworthiness understood as capability to repay the obligation drawn together with interest within the time-frames and upon principles established by an agreement or stemming from the nature of an obligation.
2.2. Decisions to be taken by the Management of a bank in a secret ballot as to granting of a credit, money loan, bank guarantee, warranty (Burgschaft) or other obligation of the bank in excess in total of 5% of basic funds of the bank for the sake of persons who are officers of the Management or sit on Supervisory Boards/Board of Directors of the bank, as well as subjects connected with them on a capital or personal basis. The above decision can be taken after assessing creditworthiness in the way determined under item 2.1.
3. Keeping for subjects mentioned under item 2 a separate register all credits, money loans, bank guarantees, warranties (Burgschaften) and other obligations granted such subjects as well as recording their utilization.
4. Keeping for subjects under item 1 separate analytical sheets whose integral part is Attachment B form 7 containing particulars characterizing their financial standing and indebtedness vis a vis the bank, updated along with an on-going reporting scheme and gathered information.
5. Making a report in the format of Attachment B form 7 titled "List of shareholders and stockholders and persons who are officers of the Management or sit on the Supervisory Board/Board of Directors of the bank, as well as subjects connected with them on a capital or personal basis vis a vis whom/which the total exposure of the bank is 10 billion z or more, or is in excess of 15% of own basic funds in banks in which such funds are lower than 70 billion z ".
This means that the report Attachment B form 7 will contain a list covering shareholders/stockholders and persons who are officers of the Management or sit on the Supervisory Board/Board of Directors of the bank, as well as subjects connected with them on a capital or personal basis who are liable vis a vis the bank by way of credits, money loans, bank guarantees, warranties (Burgschaften) granted them or other performances stemming from the relation of obligation in a case when the total exposure of the bank is 10 billion z or more, or exceeds 15% of total basic own funds.
There is no change in the scope of the report Attachment B form 3 and it should be made in the format and within the time-limit binding before 29th March 1993.
Report Attachment B form 7 should be submitted on a quarterly basis. The first such report should refer to the state of affairs as of 30th September 1993 and sent within the time-frame of 20 days counted as from the first day of the new quarter; the same goes for subsequent reports.
6. Repealed is hereby the recommendation by the President the NBP of 29th March 1993 concerning the procedures of banks when granting credits, money loans, bank guarantees, warranties (Burgschaften) or any other type of obligations for the sake of shareholders, stockholders, as well as persons connected with them on a capital or personal basis.
7. This recommendation enters into force as from 2nd August 1993.
President of the National Bank of Poland
Dr. Hanna Gronkiewicz - Waltz Attachment No 2
Procedure of granting credits, money loans, bank guarantees and other performances stemming from the relation of obligation:
The recommended procedure does not seem to pose any threat to the proper functioning of the Management a bank. NBP thinks that a decision by the full Bank Management in a secret ballot after prior analysis of creditworthiness should contribute to the improved repayment capacity of credits drawn. Neither does the procedure seem to be more time-consuming and complex than other procedures related to the operations of a bank.
covered by the Recommendation are all banks, also those in the form of a joint stock company, no matter if their stocks are accepted by a decision of the Securities Commission for public trading or not, as well as cooperative banks.
On the basis of point 1 of the Recommendation a bank is obliged to work out internal regulations defining the conditions of granting credit, money loans, guarantees, bank warranties (Burgschaften) and other obligations to shareholders or stockholders and persons who are officers in of the Management or sit on the Supervisory Board/Board of Directors, and also subjects connected with them on a capital or personal basis.
In its internal regulations a bank may adopt an auxiliary criterion of e.g. portfolio and character of shares, also taking into account the provisions under item 2 and 3 of the recommendation which obligate a bank to go through the appropriate procedure when granting credit e.g. to shareholders and to compile a list of shareholders/borrowers.
A bank can freely draft agreements concluded with other entities and decide upon the scope of information which it considers necessary to appropriately assess a potential borrower.
As part of this authorization a bank may demand before the signing of a credit agreement a statement on the possession or non-possession of shares of the bank, which may be helpful when assessing the number of shares to bearer held by individual shareholders. Additional possibilities of identification of the owner of shares to bearer are provided in art. 349 and 399 &2 of the Commercial Code, although one should agree with the view that mechanisms provided therein are less effective than one proposed above.
In order to avoid inconsistencies in legal regulations, the recommendation uses such interpretation of the phrase "subjects related on a capital or personal basis" which is similar to the interpretation of the definition of dominance within the meaning of art. 2 point 9 and art. 4 of the Act of 22 March 1991 on Public Trading in Securities and Trust Funds, however an assumption is made that the capital or personal connection is a broader concept than the relation of dominance and covers also cases like e.g. personal connections such as family relationship, affinity or marriage ties.
Bank Employees who are Simultaneously Shareholders/Stockholders:
The recommendation pertains to shareholders/stockholders and members
of the Management and the Supervisory Board/Board of Directors and subjects
connected with them on a capital or personal basis, to that extent the
recommendation covers also employees of the bank who meet the above criteria.
is understood as such legal relation binding the creditor and the debtor in which each party to the obligation is simultaneously entitled to demand the meeting of the obligation as well as to perform it upon demand of the other party. Naturally, it is also acceptable to have a situation in which there is only the entitlement of the creditor and the obligation of the debtor.
Attachment B form 3 which is based on a special format and submitted within the time- limit in force before 29th March 1993 retains the obligation to disclose the total exposure (covering also people covered by the contents of the recommendation of 2nd August 1993 (irrespective of the particulars listed in Attachment B form 7).
INSTRUCTIONS ON HOW TO FILL OUT FORM B 7 This form should disclose information on the relations between the bank and a company along three levels covered by the following group of columns:
1. Capital connection - column no. 4. The column should take into account the existence of capital connections between the bank and the client (capital connections ought to be understood as possession of shares or stocks of a bank by the client).
In a situation when the borrower is a company with no legal personality, e.g. civil partnership, a case may arise when shares or stocks of a bank are jointly held by persons who set up a civil partnership or same persons may hold shares in the bank as natural persons. The information should determine to what extent the owner of certain portion of shares/stocks of a bank is an entity which enjoys legal personality, and to what extent natural persons are such owners.
2. In case of combining posts in a bank and in a firm (combination of functions in a company and a bank - columns 5, 6, 7, 8, 9, 10) the fact of existence of the legal and formal relations should be taken into account. For the purposes of the form under discussion a shareholder/stockholder or owner is understood to be a person occupying a post marked by symbols provided in footnotes no 4 of the attached report.
3. Relationship or affinity (relationship by marriage) - columns 11 through 16. In the above columns the reporter takes into account the existence of connections by relationship or affinity in relations between persons who occupy posts, a stockholder/shareholder or owner being understood to be person who occupies a post and is marked by symbols provided in footnote 4 of the report attached.