Bank loan

Snapshot: Regulation of bank credit facilities in Poland

Regulation

Equity and liquidity requirements

Describe how capital and liquidity requirements affect the structure of bank loan facilities, including the availability of related facilities.

Capital and liquidity requirements impact the availability and valuation of bank debt financing. The leverage ratio has the effect of reducing the overall loan amount. Regulatory requirements are important factors, but not necessarily key factors that affect the structure of bank loans. In most cases, greater attention is paid to security documents to ensure that a given transaction can be treated as a secured transaction for regulatory capital purposes.

Disclosure requirements

For public enterprise debtors, are there any disclosure requirements applicable to bank loan facilities?

If the information is confidential within the meaning of the Market Abuse Regulation (MAR), the public company must, as soon as it is identified, make it public by means of a current report unless a confidentiality procedure is implemented. . However, this is dependent on meeting the conditions set out in the MAR and requires the preparation of appropriate documentation confirming that the conditions are met.

Use of loan proceeds

How is the debtor’s use of bank loan proceeds regulated? What liability could investors be exposed to if the debtor uses the product contrary to the regulations? Can investors mitigate their liability?

Lenders should verify – using knowledge of your consumer procedures – whether the loan is used in compliance with anti-corruption, money laundering and anti-terrorist financing regulations, and it is used contrary to applicable penalty regulations. In addition, the purpose of the bank loan must be specified in the facility agreement.

If a borrower uses the loan contrary to the purpose specified in the facility agreement, this is generally treated as an event of default, and the lender can accelerate the loan and begin enforcement under a loan guarantee.

Generally, lenders are not liable if the borrower abuses a loan; however, they can be held liable if the loan proceeds are used to commit a crime, and there is evidence that the lenders failed to properly perform relevant know-your-consumer procedures.

Cross-border loans

Are there regulations that limit an investor’s ability to extend credit to obligors organized or operating in particular jurisdictions? What liability do investors incur if they lend to these debtors? Can investors mitigate their liability?

The possibility of granting loans in Poland is limited by sanctions. Following the conflict in Ukraine, in which Russia is involved, sanctions were imposed on a list of specially designated nationals. Due to these sanctions, the countries on the list cannot benefit from loans.

Debtor leverage profile

Are there limits to an investor’s ability to extend credit to a debtor based on the debtor’s debt profile?

Polish legislation does not contain any general provision limiting the granting of loans depending on the debtor’s debt profile. However, under the banking law, banks can only grant bank loans to borrowers who have sufficient creditworthiness (i.e. they can prove that they are able to repay the loan and to pay the interest and the corresponding costs within the agreed deadlines); otherwise, banks must receive additional security and a business plan for the borrower demonstrating their ability to repay the loan in full within the agreed time frame.

Interest rate

Do regulations limit the interest rate that can be charged on bank loans?

Polish law contains provisions limiting the interest rate that can be applied to bank loans.

There is a cap on the regular interest rate calculated as follows: maximum interest rate = (the currently published benchmark rate of the National Bank of Poland + 0.5 percentage point). Currently, the regular interest rate cap is 8%.

In addition, a cap on the interest rate for overdue amounts applies and is calculated as follows: maximum interest rate for late payment = (the currently published benchmark rate of the National Bank of Poland + 5 .5 percentage points) x 2. Currently, the ceiling on the interest rate for an overdue amount is 13 percent.

There are additional limits on the interest rate that can be charged on consumer loans. These ceilings are more restrictive and cover not only interest rates but also other charges imposed on borrowers in connection with consumer loans.

Currency restrictions

What are the limits on investors funding bank loans in a currency other than the local currency?

There are no limitations under Polish law.

Other regulations

Describe any other regulatory requirements that impact the structuring or availability of bank lending facilities.

In Poland, the borrower uses the line of credit according to his needs, which means in practice that the disbursement of a loan does not involve additional conditions and procedures related to the examination of creditworthiness. As a result, access to financing via a line of credit is very fast. A line of credit allows the borrower to take out a loan on the account up to the amount of the limit granted. The line of credit may also take the form of a general financing agreement. The client can decide on the form of financing to receive, choosing from the products offered by the bank. The client can use overdraft facilities, revolving loans or bank guarantees. The total value of the debt to the bank cannot exceed the set limit. The line of credit can be revolving or non-revolving. For revolving lines, amounts repaid by the borrower automatically increase the amount available for payment – ​​during the term of the contract, the loan can be paid and repaid multiple times. For non-renewable lines, the loan can only be used once and its repayment does not increase the amount that can be withdrawn later. Line of credit charges incurred by the customer consist of two components: the interest paid on the amount of debt drawn and the bank’s preparation fee to disburse the funds, usually set as a percentage of the available limit. In addition, the commission costs for granting or renewing the line must be taken into account.