"Banks’ substantial capital surpluses create favourable conditions for the activation of the positive neutral countercyclical capital buffer, while at the same time allowing room for lending growth," the National Bank of Poland (NBP) said in its periodic Financial Stability Report released earlier this month.
It added that "the growth rate of lending remains low," mainly due to "limited demand for credit."
Key risks in the financial system "are structural and primarily associated with legal risk and regulatory risk," according to the report.
"Uncertainty related to these risks may weigh on the banks’ propensity to finance the private sector, especially households," the central bank cautioned, adding that foreign-currency housing loans were "the main source of costs" for the banking sector.
"High nominal income generated by banks has recently allowed them to increase the pace at which they create legal risk provisions, thanks to which the size of future costs will be substantially smaller," the report also said.
"Traditional banking risks, including credit risk, liquidity risk, interest rate risk and FX risk, remain moderate and do not put financial stability in Poland at risk," according to the Financial Stability Report.
It recommended "consistent reform of interest rate benchmarks" as "an important condition for the stable functioning of the financial system in the future."
(gs)
Source: PAP, bankier.pl, nbp.pl