PZU is no longer in talks with GE Capital over the acquisiton of the US giant's local banking arm BPH, a representative for the Polish state-controlled insurance company said on October 8.

Reports suggest negotiations have broken down over a failure to agree on a price. Huge uncertainty currently reigns over the Polish banking sector, with the lead of the populist PiS ahead of elections this month only deepening concern that the lenders could be hit with huge losses on forex loans and via a proposed bank tax.

Those issues have all but halted M&A in the this year. The Polish sector was previously seen as offering perhaps the best potential in Europe; however, the uncertainty makes valuations highly problematic.

"I can currently confirm that we are not in talks over [Bank BPH]," PZU spokesman Michal Witkowski told Reuters. His statement comes less than two weeks after PZU’s CEO Andrzej Klesyk said it was “possible” PZU would buy the bank by the end of 2015.

Citing unnamed sources, Puls Biznesu reported that price was the ultimate factor that saw the talks break down. The news saw BPH’s share price in Warsaw drop nearly 9%; PZU stock gained almost 3%.

Following its takeover of Alior in May, PZU’s representatives have repeatedly said they were pursuing more takeovers in the banking sector as part of a strategy to build a top-five Polish lender. The strategy has the blessing of the Polish government, which is suddently keen to increase local ownership.

Bank BPH has typically been mentioned by PZU as the nearest takeover target, after another possible buy, Raiffeisen Bank International's Polish unit Raiffeisen Polbank, was withdrawn from the market in July. The Austrian bank is believed to have pulled the sale for the meantime due to the risk attached to its forex loans portfolio.

Bank BPH is also strongly exposed to forex loans; they make up around half of its loan portfolio. However, GE had suggested it could be preapred to split the foreign-currency assets from the rest of the bank in order to push through a sale.