The Central Bank of Poland published its December 2025 Financial Stability Report, concluding that the financial system is stable and resilient to shocks and that banks hold a large capital surplus over regulatory requirements, supporting loss-absorption capacity even under pessimistic stress-test scenarios. The report identifies largely unchanged key risks, centred on uncertainty in the legal and regulatory environment, while noting that the expected scale of provisions for foreign-currency housing loan legal risk has fallen markedly and the risk is now considered considerably reduced. The report highlights two dimensions of legal uncertainty: costs linked to legal risk from interpretations of consumer protection rules for zloty-denominated loans, and limited predictability of national regulations that constrains long-term planning. It also flags that the banking sector’s large holdings of Treasury bonds could amplify challenges from rising public debt and state borrowing needs, increasing the risk of bond valuation declines in a context of high geopolitical uncertainty and potential market risk aversion. Recommendations include reducing legal and regulatory uncertainty and ensuring proportionality in consumer protection, completing interest rate benchmark reform, requiring banks to fully cover the required minimum requirement for own funds and eligible liabilities recapitalisation amount with eligible debt instruments, reviewing the Long-term Funding Ratio (WFD), strengthening cooperative banks’ interest rate risk management and shareholder base, incorporating specific risks into insurance solvency assessments (including expected profits from future premiums in own funds and double gearing), expanding life annuity offerings and improving insurance contract value and disclosures, and reducing maturity mismatches in open-ended investment funds.
Central Bank of Poland 2025-12-19
Central Bank of Poland’s Financial Stability Report finds banks well capitalised and urges action on legal uncertainty, sovereign debt exposure and MREL
The Central Bank of Poland's December 2025 Financial Stability Report confirms the financial system's stability, with banks maintaining a substantial capital surplus. Key risks remain largely unchanged, with reduced legal risk from foreign-currency housing loans and concerns over legal uncertainty affecting long-term planning. Recommendations focus on reducing legal and regulatory uncertainty, enhancing consumer protection proportionality, and addressing risks related to interest rate benchmarks, bank recapitalisation, and insurance solvency.