Polish Bank Watchdog Quits After Report of a $10 Million Bribe

(Bloomberg) -- Poland’s financial industry regulator quit after a newspaper reported that he made an improper offer to the owner of a troubled bank, triggering a government investigation.

Financial Supervision Authority Chairman Marek Chrzanowski said allegations by Gazeta Wyborcza on Tuesday were a “dishonest and groundless” provocation, but that he must resign to ensure stability in the banking industry, he told Poland’s PAP news agency.

“For the good of the state, I resign,” Chrzanowski said.

Earlier, the watchdog rejected as “untrue” Wyborcza’s report that he suggested to Leszek Czarnecki, the owner of Getin Noble Bank SA, how he could get favorable treatment from the regulator if he hired a specific lawyer.

Polish Bank Watchdog Quits After Report of a $10 Million Bribe

Prime Minister Mateusz Morawiecki “called the regulator for explanation and ordered the prosecutor’s office to collect information immediately,” Michal Dworczyk, the head of the premier’s chancellery, told private radio station RMF FM. The biggest opposition party called for a parliamentary investigation into the “corruption.”

However it plays out, the affair has highlighted an ongoing row between the government and central bank over who should ultimately regulate the financial industry. Poland’s nationalist ruling party has been tightening its grip on the country, appointing its own people to the courts, public media and state-run companies. Oversight of the Financial Supervision Authority is currently shared between politicians and officials from the central bank.

Central bank Governor Adam Glapinski is a close colleague of Chrzanowski and has for years sought to wrest control over banking supervision, arguing it would better protect the stability of the industry. Morawiecki, a former chief executive of one of Poland’s biggest banks, has proposed to strengthen the government’s role.

Newspaper Splash

Citing transcripts from recordings made by Czarnecki as well as comments by his legal adviser, the newspaper said Chrzanowski suggested that Getin hire a lawyer whose fee should be the equivalent of 1 percent of the bank’s market capitalization. Wyborcza put the figure at 40 million zloty ($10.5 million) on its front page on Tuesday.

The regulator, known as KNF in Polish, said in a statement that it recommended the name of a lawyer to Czarnecki, though denied making any specific proposals regarding fees or promising any special treatment.

“No such proposal was made during any meeting with Mr. Czarnecki,” the regulator said. “The KNF reads Mr. Czarnecki’s actions, as described in the article, as an attempt to influence the supervisory authority by blackmail.”

Chrzanowski said he will pursue justice in Polish courts.

The incident has brought the challenges facing Getin back into the spotlight. The shares have plunged almost 90 percent from a 2014 peak and the bank has been in a restructuring program with the regulator the past two years. The stock dropped 3.7 percent in Warsaw, valuing the lender at just over 500 million zloty.

Indeed, if true, the allegations call into question Poland’s new status as a developed, rather than emerging, stock market, according to Bloomberg Intelligence analyst Tomasz Noetzel. The bribery allegation report may be read negatively by foreign investors as it exposes another issue with governance, said Jovan Sikimic, an analyst at Raiffeisen Centrobank AG in Vienna.

Stricken Bank

Czarnecki’s financial empire has melted away in recent years after Getin’s strategy of aggressive sales of Swiss franc-based mortgages backfired. Getin has been unprofitable since 2016, and its overhaul took another hit this year from the default of a Polish debt collector formerly owned by Czarnecki. That also led to write-offs on some of Getin’s assets.

The transcripts revealed a split within the regulator over how to deal with Getin, which had almost 47 billion zloty of deposits at the end of June. Chrzanowski reportedly said a fellow KNF official was seeking to push the bank into insolvency so that it could be taken over by a larger rival favored by the government.

Wyborcza cited Czarnecki as saying that the allegations were “shameful” and that he notified prosecutors about the alleged incident this month. His spokesman declined further comment when contacted by Bloomberg on Tuesday.

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