OREANDA-NEWS. Fitch Ratings has affirmed Bank Gospodarstwa Krajowego's Long-term foreign currency Issuer Default Rating (IDR) at 'A-' with Stable Outlook. A full list of ratings actions is provided at the end of this commentary.

The decision follows a peer review of European development banks.

KEY RATING DRIVERS - IDRs, SR and SRF
Bank Gospodarstwa Krajowego's (BGK) IDRs, Support Rating and Support Rating Floor reflect Fitch's view that there is an extremely high probability that the bank would be supported by the Polish state (A-/Stable), in case of need. This view is predominantly based on BGK's policy role and its 100% government ownership. BGK is the only Polish bank with state bank status.

Dedicated legislation governs BGK's activities and exempts it from the Capital Requirements Directive (CRD) IV and Bank Recovery and Resolution Directive (BRRD). The bank, however, is going to comply with CRD IV requirements and remains subject to banking supervision by the Polish supervisor (KNF).

BGK is not subject to bankruptcy law. It can only be liquidated, with all liabilities of the bank taken over by the state on the liquidation date. The state can provide capital, including through subordinated debt or by contribution in kind, and provide liquidity support to BGK. According to Article 3 of the Law on BGK, the ministry responsible for public finance shall provide BGK with its own funds to ensure the fulfilment of BGK's tasks and ensure that the bank maintains adequate liquidity. The 2015 state budget has allocated PLN2bn to the Ministry of Finance (MoF) for a potential increase in BGK's supplementary funds.

The bank manages an account for public-sector entities' deposits at the MoF. BGK is responsible for providing all payment, transfer and clearing services to the entities. The MoF also uses the bank for placing its short-term liquidity surpluses, for foreign-currency transfers from the EU, and for servicing the foreign debt of the central budget. BGK also issues bonds on behalf of the National Road Fund.

The bank's activity outside its commissioned tasks and its participation in governmental and government-initiated programmes is focused on the public sector. The bank is also engaged in commercial activities not directly related to the bank's government-initiated programmes, but in line with its mission. These are usually through participation in banking consortia formed with commercial banks, but also through setting up and funding specialised closed-end funds.

BGK's funding comes predominantly from the public sector. The bank also receives funding from international financial institutions, has an active senior unsecured programme of up to PLN10bn and an up to EUR1bn EMTN programme guaranteed by the State. There have been no issues from the latter yet.
Fitch does not assign a Viability Rating to BGK due to the bank's policy role and its limited scope for commercial activities unrelated to the policy role.

RATING SENSITIVITIES - IDRs, SR and SRF
BGK's ratings are sensitive to changes to the Polish sovereign ratings and to a change in its status as a policy bank. Fitch does not believe that the state's strong propensity to support BGK is likely to change in the foreseeable future.

KEY RATING DRIVERS AND SENSITIVITIES - NATIONAL RATINGS
The National Rating of BGK reflects the highest rating available within Poland's National Rating Scale. It reflects our view that relative to other issuers or obligations in Poland, it has the lowest expectation of default risk. It is driven by the same factors as the IDRs and are sensitive to changes in Fitch's view of support available to the bank from the Polish sovereign. This in turn would be sensitive to changes in BGK's ownership and/or status as a policy bank. Fitch views these as unlikely in the foreseeable future.

The rating actions are as follows:
Long-term foreign currency IDR: affirmed at 'A-' with Stable Outlook
Short-term foreign currency IDR: affirmed at 'F2'
Long-term local currency IDR: affirmed at 'A' with Stable Outlook
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A-'
National Long-term rating: affirmed at 'AAA(pol)' with Stable Outlook
National Short-term rating: affirmed at 'F1+(pol)'
Senior unsecured debt issuance programme long-term foreign currency rating: affirmed at 'A-'
Senior unsecured debt issuance programme long-term local currency rating: affirmed at 'A'
Senior unsecured debt issuance programme National long-term rating: affirmed at 'AAA(pol)'
Senior unsecured bonds long-term local currency rating: affirmed at 'A'
Senior unsecured bonds National long-term rating: affirmed at 'AAA(pol)'