Jan Cienski in Warsaw -
Poland's government faces a potential bill of more than €100m if the banking sector regulator follows through in its bid to force a private equity fund to disgorge a small bank due to concerns over management procedures.
The warning comes from Abris Capital Partners, a private equity fund with about €770m in assets in Central Europe and, as of 2012, a controlling shareholder in FM Bank PBP, a small lender focussed on small and medium-sized enterprises.
Poland's Financial Supervision Authority (KNF) prevented Luxembourg-registered Abris from exercising its shareholder votes, and demanded that the fund sell its stake in the bank by the end of the year. The action is unprecedented in a country where more than two-thirds of the banking system is foreign owned.
The supervisor said it was forced to act because of concerns over changes in the bank's management, the way that the CEO was employed and allegations that Abris had not followed through in promises made to the regulator. “This is not a minor matter because the safety of the Polish banking system depends on among other things the realisation and execution of these promises,” Andrzej Jakubiak, the head of the Authority, told the Gazeta Wyborcza newspaper.
But the price for Jakubiak's action could be steep. Pawel Boksa, a partner at Abris, released a statement this week demanding that the Authority reverse its decision. If that does not happen, “we will demand damages from the Polish state through arbitration,” he wrote.
Abris has reportedly invested about €100m in the bank, and had planned to make an exit in about four years. “The KNF decision affects not only Abris's good name, but it also practically removes our ownership rights, which means a de facto nationalisation, while also exposing our investors to a financial loss,” Boksa wrote.
The KNF's move comes despite solid results from the bank, which has a capital adequacy ratio of 15%, above the required minimum.
Jan Cienski is a Senior Fellow at DemosEuropa, a Warsaw-based public policy think-tank
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