•The new bank tax*** will reduce interest margins at major banks by 7% to 27%, and will particularly affect corporate loans (large) and mortgage loans, where margins are the lowest. •The design of the tax, does not differentiate loans by credit risk and it will encourage banks to reduce low margin engagements (loans to businesses and residential), and simultaneously will encourage consumer loans (highest margins), which seems to be an unfortunate outcome from the macroeconomic perspective. •It is also likely that financing of largest enterprises will be gradually taken over by foreign banks operating from abroad. •Taxation of assets in connection with a tax-free amount of PLN 4 billion and exclusion of government securities will promote small banks and conserve lower efficiency in the Polish banking sector.

1. Inteliace Research
BANKTAXINPOLAND,2016–UNINTENDEDCONSEQUENCES
1.80
1.80
1.80
1.80
-0.02
8.15
5.48
4.36
3.53
1.60
Consumer loans*
Loans to
entrepreneurs
Mortgage loans
Corporate loans*
(in PLN)
Corporate loans*
(in EUR)
Unintended consequences of a new bank tax in Poland
1
* With exception of C/A loans
** Respectively: WIBOR6M and LIBOR EUR6M for November 2015
*** Tax rate of 0.4392% p.a. ; in force since February 2016
Source: NBP, Inteliace Research
Nominal interest rate, %
Poland: Lending margins by product/segment , November 2015
Financing cost,
%**
• The new bank tax*** will reduce
interest margins at major banks by
7% to 27%, and will particularly
affect corporate loans (large) and
mortgage loans, where margins are
the lowest.
• The design of the tax, does not
differentiate loans by credit risk and
it will encourage banks to reduce
low margin engagements (loans to
businesses and residential), and
simultaneously will encourage
consumer loans (highest margins),
which seems to be an unfortunate
outcome from the macroeconomic
perspective.
• It is also likely that financing of
largest enterprises will be gradually
taken over by foreign banks
operating from abroad.
• Taxation of assets in connection
with a tax-free amount of PLN 4
billion and exclusion of government
securities will promote small banks
and conserve lower efficiency in the
Polish banking sector.
-76.35
3.68
2.56
1.73
1.62
Interest
margin, %
5.91
3.24
2.12
1.29
1.18
Interest
margin less
bank tax**, %
Loss of
interest
margin due to
tax***, %
-12
-17
-25
-27
In the corporates segment , the new
bank tax will reduce interest margin
by 25%+.