Issue No. 41bpcc.org.pl/contact-magazine/issues/31.pdf · Agnieszka Skorupińska and Patrycja Białko from law firm CMS Poland take a look at proposals from Brussels that will steer

Issue No. 41

Contact Magazine Issue No. 41

Editorial Note 3

More regulation – better control? 5

Polish tax regulations regarding debt-financing costs in the era of Anti-Tax Avoidance Directive 7

Financial factors rank top of risks worrying Polish business 9

Cloud computing in Polish Financial Institutions 10

Pay your suppliers on time or face new penalties! 12

IP Box opens new tax opportunity for Polish entrepreneurs 14

Challenges of anti-money laundering regulations on the basis of the fourth AML directive 16

Corporate clients as the new payment service users (PSUs) 17

Success Story: Quantitative Analysis and Technology team at Credit Suisse Poland 20

The EU’s push for sustainable investing 22

PwC’s 2019 Global FinTech report – how firms will change 24

The role of financial institutions in reporting tax schemes 26

ECJ ruling on foreign-currency mortgage loans in Poland: Is it really a breakthrough? 28

Warsaw operation leads the way in transforming financial giant 30

Will I pay the exit tax when moving the company to the UK? 32

Are you a Five-star employer? Dare to get rated! 33

When uncertainty becomes the norm 34

Kaplan Financial – leaders in online accountancy qualifications, now in Poland 36

The application of blockchain technology through M&A process 38

Warsaw. The financial capital of CEE 40

Trends in the outsourcing sector 42

Export finance as an answer to international trade tensions – the case of Pekao S.A., the second largest bank in Poland43

Table of Contents

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Finance in the Brexit era – services for corporate clients of the Santander Group across Poland and the UK45

Roundtable with UK journalists considers chances for Polish-UK trade in IT services following Brexit47

Settling foreigners’ tax and social-security obligations 47

Szczecin business discusses tax changes and PPKs 48

Real Estate and Construction Breakfast looks at green building 49

How can workplace bullying be tackled effectively? 49

Speed Business Meeting 50

BPCC HR Review: how to keep the best employees in a company 50

Chairman's Note 52

Poland stands at the digital crossroads 53

Forecasts – economy, markets, innovation 55

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Editorial Note

by Michael Dembinski, chief advisor and DorotaKierbiedź, membership director, BPCC

Welcome to the latest issue of ContactMagazine Online – this time, we focus on thefinancial services sector and finance in itsbroadest sense, in the way it affects the Polisheconomy.

There’s so much to read – from the impact ofFinTech, to the global trend to outsource (fromwhich Poland benefits massively) and the roleof finance in driving global trade in anincreasingly uncertain world. A sectormassively affected by constant regulatorychange, financial services businesses aresubject to new requirements and obligations,often onerous. Five articles set out thosechanges that will have the most impact onfinancial services and their clients. And tax –again, the regulator is working to make thesystem more leak-proof, not always with theintended result. A further five articles look attax changes and what they mean to businessesin Poland.

We begin as always with the interviews that set outthe big picture. Adam Uszpolewicz, chief executiveof Aviva Poland talks to Contact about thefinancial prospects for the year ahead – globally,across Europe and in Poland; we also discuss howIT is affecting the insurance sector.

IT and finance is the main topic of our interviewwith Piotr Ciski, managing director of Sage Polska.The British accounting-software giant is big on thePolish market; Mr Ciski looks at three existentialchallenges facing Polish SMEs, and the role ofaccounting-software firms in the rush to digitisetax.

FinTech’s role in disrupting the financial servicessector is analysed further by

Aleksandra Bańkowska, and Anna Maj from PwC,on the basis of its Global FinTech Report. To whatextent has the sector has embraced the disruptionthat FinTech start-ups have brought on? How arefirms dealing with the skills shortages?

Mergers and acquisitions are the bread and butterof many businesses, either financing or advising orconducting due diligence. How will the dawning ofblockchain technology change the way firms arebought, sold or merged? Nicolas Klukowski fromMazars in Poland considers the benefits it willconfer.

Keeping the wheels of finance turning oversmoothly

Financial-sector back-office operationsoutsourced to Poland are becoming increasinglysophisticated. Credit Suisse employ hundreds ofquantitive strategists in Warsaw and Wrocław. Theteams keep growing and tackling new challenges,says the bank’s Adam Lodygowski.

What are the main trends in outsourcing?Dagmara Witt-Kuczyńska from TMF Group notesfour – legislative changes, globalisation,automation and the increasing scale of outsourcedprocesses. Driving all of these is the need of theclient to focus on its core business.

Another financial-sector giant that has set up ITdevelopment activities in Poland is FTSE 100-listed Hargreaves Lansdowne, whose HL Techoperation in Warsaw is described by MichałGłowiński, its general manager.

This trend towards outsourcing or movingsophisticated financial-services operations toPoland is resulting in a huge demand for qualityoffice space, say Maciej Ozdoba andMaksymilian Sobczak from Nuvalu Polska. Sowhere are the new hot-spots for investors?

As increasing numbers of financial-sectorbusinesses locate operations to Poland, there is anever-growing need for professional training

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to ensure the right numbers of qualified people forjobs in areas such as accountancy. Kaplan, theworld’s largest training provider in this area, hasentered the Polish market to ensure that theBPO/SSC sector has access to sufficient numbersof skilled people.

In an employee’s labour market, employers insectors with high staff turnover need to focus onretention. Building a strong employer brand is butone dimension to this, but just as we rate our taxirides, restaurants or hotels, our employees arerating us. What should employers do to get afive-star rating? Łukasz Chodkowski of Dehoraconsiders the key factors.

Financing trade in a risky world

When it comes to the biggest risks facing businessowners, Poland stands out markedly fromentrepreneurs in other countries, according toAon’s 2019 risk survey. For Poles, half of the TopTen risks turn out to be financial in nature, saysMariusz Pepłoński from Aon Polska. What are theothers?

Bibby Financial has also been surveying the SMEsector internationally to find out what worriesbusiness owners. Here, political risks, rising costsand red tape are identified as the issues that keepentrepreneurs awake at night. But overall, they aregetting used to trading in a climate of ever-increasing uncertainty, says Jerzy Dąbrowski,CEO, Bibby Financial Services Poland.

Rising trade tensions are threatening global growthin the near future, say Piotr Stolarczyk and AndrzejLatoszek from Bank Pekao SA. Strong tradefinance is the answer, they say; especiallyimportant for exporters looking to break into moreexotic markets.

Brexit is a worry for any Polish firm exporting to theUK. Trade finance is a big part of Santander’soffering to business, and, as Tomasz Bieliński,who manages the Poland-UK corridor at SantanderBank Polska SA says, the bank is adapting

to change. A blockchain-based real-time money-transfer facility between our two countries is part ofthe solution.

Legal challenges affecting finance

Not paying your suppliers on time if you are abig business can lead to big fines and even prison.New laws favouring SMEs come into force; beaware of the consequences of sitting on yourinvoices too long, says Bernadeta Kasztelan-Świetlik, from law firm Gessel and Partners.

Cloud computing is becoming the new reality forfinancial institutions. The law is slowly catching upwith the cloud - Dr Agnieszka Serzysko, from lawfirm Kochański & Partners unveils a joint initiativeby the banks, the regulator and the tech sector tocreate a legal framework for cloud-based financialservices.

What is sustainable finance? The EU is keen tochannel investment flows into projects that help (orat least don’t harm) the environment. AgnieszkaSkorupińska and Patrycja Białko from law firmCMS Poland take a look at proposals fromBrussels that will steer financiers towards greenerinvesting. The new regulations may affect thefinancial market and companies looking forfinancing from the middle of next year. Will theyaffect your business?

Do you have a mortgage in Swiss francs? Hasyour financial institution lent mortgage loansdenominated in Swiss francs? What does lastmonth’s ECJ ruling mean for you? DanielSmarduch, Łukasz Szegda and Sylwia Boguskafrom law firm Wardyński & Partners consider theimplications.

Are you a co-signatory to a corporate bankaccount making online transactions? MartaStanisławska, and Filip Windak, from law firm Bird& Bird brave the regulatory tsunami affecting thefinancial services sector to discuss theimplications of the new Payment ServicesDirective.

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Taxation issues

Polish businesses - fancy paying 5% corporateincome tax? If you’re earning money from patentedtechnology, it’s possible. Although there are manystrings attached, for tech firms (especially in IT),the new Polish IP Box tax solution is a financiallyattractive incentive, say KR Group’s Michał Zdyb,Adam Apel and Aleksandra Piasna.

The concept of an exit tax is potentiallytroublesome for businesses spanning Poland andthe UK, needing to move capital from one countryto another. However, as Agnieszka Moryc, CEO ofAdmiral Tax writes, the way the EU Directive hasbeen implemented into Polish law has beendescribed by Poland’s financial media as ‘a legaldud’ – too many ways around it have been leftopen.

Moving money across borders also attracts theattention of anti-money-laundering enforcement.The latest EU Directive in this area imposes newresponsibilities on banks. Konrad Kąkol of DaumanBros. writes about the standards of financialsecurity that need to be observed, and when theyneed to be heightened.

The very phrase ‘tax schemes’ sounds dodgy. Buta s Agata Nieżychowska from Crowe Polandexplains, most are not set up with the aim ofcreating a tax advantage. But some are! What dofinancial institutions – and their employees – needto be aware of in terms of their new responsibilitiesunder the new EU Directive on cross-border taxarrangements?

Debt financing and the Anti-Tax AvoidanceDirective in Poland, by Accreo. The SupremeAdministrative Court says one thing, Poland’s taxauthorities another. The difference in the rulingscan be significant. Who’s right?

More regulation – better control?

By Marzena Richter ACA, Staniszewski & Richter,Polish Registered Auditors, BPCC Board Member

The last 20 to 30 years have seen a host ofspectacular corporate and financial failuresworldwide, mostly in developed economies.

Nevertheless from each financial disaster orscandal, governments, legislators and regulatorstry to learn from their mistakes and provide thegeneral public with solutions to rebuild trust andconfidence in the particular system which has justfailed. These have included pension schemes,investment funds, retail or investment banking,rigged money-markets, stock-exchangesuspensions or de-listings and even tax systems!Each outrageous situation breeds a new acronymor codeword, new procedures and a whole newdepartment of technological bureaucrats. For someof you not so familiar with this language, I intend tooffer insight into the provenance of these schemesin the US, UK and EU.

COSO from 1985 – Committee of SponsoringOrganisations of the Treadway Commission –US

The Treadway Commission was established in theUS in the mid-80s as a general reaction to fraudand corruption reported within financial informationand the private-business sector. As a result of thecommission’s report, the Committee of SponsoringOrganisations (COSO) was formed. The purposewas to analyse internal control systems andprovide models and benchmarks for theirevaluation and improvement. The objective of thisorganisation is to provide thought -eadership inthree areas: enterprise risk management, internalcontrols and fraud deterrence. COSO models havedeveloped over time and addressed newtechnology.

These US-style compliance

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requirements have influenced EU professionalsand standards.

TPR or The Pensions Regulator - UK

From Maxwell to Carillion via BHS, these are allvery familiar pension scandals in the UK. It isimpossible to ignore the Maxwell pension fundsabuse given the scale of the fraud. Over time, allthese cases have resulted in a series of statutorypension oversight reforms from 1995 and severalchanges to name, responsibilities and structure ofthe regulator.

Cadbury Report 1992 - UK

In the wake of spectacular failures at Maxwell’sMirror Group, the Bank of Credit and CommerceInternational (BCCI) and Polly Peck on the LondonStock Exchange in the80s and early 90s, theCadbury report focused on tightening up corporategovernance and accounting systems.

Sarbanes Oxley (SOX) Law 2002 -US

As a reaction to a string of further corporatescandals such as Enron and WorldCom, theobjective of SOX legislation was to focus onfinancial information rather than internal control.Regulations concerned the two parties mostinvolved with the financial statements: boards(including their corporate governance) and theauditors. Rigorous rules regarding theindependence of auditors were introduced (such asauditor rotation), as well as additional corporate-board responsibilities with criminal penalties.

SOX is integrated with COSO particularly in areasof internal control and risk management. Forexample, an additional report of management oninternal control authorised by external auditors is arequirement.

Global Financial Crisis – EMIR, MIFID II,- EU;BASEL 3 - Global

Following the collapse of Lehman Brothers and

the ensuing global financial crisis globalorganisations such as the G-20 and the EUimplemented a range of regulations as preventativemeasures. This included the mandatory centralclearing of all derivatives under EMIR (EuropeanMarket Infrastructure Regulation) throughauthorised repositories. The purpose is to preventthe collapse of the financial system. MIFID(Markets in Financial Instruments Directive)standardises regulation and disclosure of financialinstruments and was implemented in 2007replacing weaker EU Directives. BASEL 3 protectsthe liquidity of banks.

Dodd-Frank 2010 - US

The Dodd-Frank law was enacted in the USfollowing the aftermath of the financial crisis(triggered by Lehman Brothers Investment Bank)and further investment industry scandals such asformer NASDAQ chairman Bernie Madoff’sinvestment fund swindling investors of billions offunds whilst faking returns. Amongst the changesintroduced in regulating financial services, Dodd-Frank implemented new reporting requirementsand gave the Securities Exchange Commission(US stock exchange regulator) the authority tomonitor financial firms.

FSA, now FCA and PRA (2013) – UK

In response to the banking crisis in the UK whichresulted in the collapse of Northern Rock andseverely affecting The Royal Bank of Scotland andHBOS, the UK overhauled its financial regulatorystructure, dividing the old Financial ServicesAuthority into the Prudential Regulatory Authorityand the Financial Conduct Authority. The PRA isclosely associated with the Bank of England andmonitors the major financial institutions andfocuses on financial stability. The FCA registers allfinancial institutions and addresses the consumersof financial services.

The restructuring of the FSA (2013) took placeshortly after the mis-selling of interest rate swapswas reported (2012) resulting

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in the major banks compensating their clients.

I hope the above explains some of the jargon thatis influencing legislation worldwide. Compliancefunctions within financial institutions andcorporations or outsourced to professional firmscontinue to grow. Increasing reporting is now alsocovering detailed transactions whether for tax ormoney laundering regulations. Compliance nowseems endless, while ever-expanding IT systems,conversion files and data transmission combine toform a RegTech world.

Does all this regulation ensure financial stability,prevent fraud and improve corporate governance?Only those charged with the relevant responsibilitycan answer this question. Ethics and the integrityof the individuals so charged will always be themost important qualification!

Polish tax regulations regardingdebt-financing costs in the era ofAnti-Tax Avoidance Directive

By Accreo Sp. z o.o.

Since 2018, as a result of the implementation ofthe Anti-Tax Avoidance Directive (ATAD), newrules have been introduced regarding debt-financing costs.

The previous regulations of Polish CorporateIncome Tax Act regarding thin capitalisationproved to be, in the opinion of the EuropeanCommission and the Ministry of Finance,insufficient in fighting tax evasion. The oldregulations consisted of the inability to takeinterest, after exceeding a certain ratio, into taxdeductible costs.

The new regulations introduce new rules regardingreduction of debt financing, the so-called earningsstripping rules. These state that taxpayers whohave their registered office or management

board in Poland are obliged to exclude from debtfinancing costs the part in which the surplus of debtfinancing costs exceeds 30% of the taxpayer'sEBIDTA*.

Initially, Polish tax authorities interpreted the newregulations in such a way that the 30% EBITDAratio would apply to the entire amount that exceeds3,000,000 zlotys. However, in administrativecourts the case-law established itself quite quickly,indicating that the ratio will apply to any surplusabove 3,000,000 zlotys (I SA/GD 287/19; I SA/WR14/19; I SA/Po 699/18). However, each of thesejudgments was appealed by the tax authorities, soultimately the dispute will be settled by theSupreme Administrative Court. The amount thattaxpayers will have to exclude from tax-deductiblecosts now depends on the position taken by theSupreme Administrative Court. To better explainthis, here’s an example of the reasoning of taxauthorities vs. administrative courts:

A company has 100 million zlotys in revenues; 1million zlotys of interest income; 85 million zlotys oftax deductible costs; 6 million zlotys ofamortisation charges and 30 million zlotys of debtfinancing costs. Given the above formula, we havethe following calculations:

The position of the courts is much more favourablefor taxpayers, and it seems correct due to the factthat, according to the CIT Act, interest ratededuction does not apply to the excess of debtfinancing costs in the part not exceeding theamount of 3,000,000 zlotys.

According to the ATAD definition, debt financingcosts should be understood as all kinds of costsrelated to obtaining funds from other entities,including unrelated entities, and the use of thesefunds. As a consequence, the

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new regulations will limit the possibility of deductinginterest on a loan granted even by banks and otherfinancial institutions.

The above-mentioned indicator refers to costsexceeding 3,000,000 zlotys and hence, debtfinancing costs below this amount can be 100%included in tax deductible costs. For taxpayers witha tax year less or longer than 12 months, theamount of this threshold is calculated bymultiplying the amount of 250,000 zlotys by thenumber of active months of the taxpayer's taxyear.

The new regulations are particularly applicable totax-capital groups, which the Ministry of Financehas long considered an instrument for aggressivecorporate income-tax optimisation. For example,the amount of 30% EBITDA above 3,000,000zlotys will apply to the entire tax-capital group,which in consequence may lead to unequaltreatment, due to the fact that a single companywithin the group may include the entire amount,that is 3,000,000 zlotys as tax-deductible costs,while the tax-capital group, which by its natureconsists of at least two companies, will have totake into account the above mentioned ratio acrossthe entire tax-capital group.

However, regarding costs incurred for consultancyservices, fees for the use of copyright and relatedrights and the transfer of the risk of the debtor'sinsolvency from loans not granted by banks,cooperative savings or credit unions, incurreddirectly or indirectly for the benefit of entities related(and independent in the part in which these costs intotal exceed 5% above PLN 3,000,000 in a taxyear), a particular company from a tax-capitalgroup will have to exclude these costs from tax-deductible costs.

These restrictions do not apply to the costsincurred by the company forming the tax-capitalgroup for the benefit of other companies from thistax-capital group. Consequently, each individualcompany from a tax-capital group will becalculated separately for each of these companies.

The Polish Corporate Income Tax Act alsoprovides for an exception to the reduction of debt-financing costs – income resulting from long-termpublic infrastructure projects serving the supply,modernisation, operation or maintenance of asignificant asset that is in the general publicinterest is not taken into account in the calculationof revenues and costs of debt financing. Forexample, the Administrative Court in Warsawdecided that the construction of electricitygenerating equipment is a public investment, whichin consequence means that it is not affected by thelimit of debt-financing costs (III SA/WA 2493/18).

Due to the limitation of the debt financing limit,there may be a situation when loss cannot beincluded in the tax-deductible costs. In such asituation, the Polish legislator allows for thepossibility of settling the loss resulting from thereduction of debt financing costs in the subsequentfive tax years following this year.When assessing new footnotes in the scope oflimiting debt-financing costs, it should be noted thatthe Polish legislator, when implementingregulations regarding the limitation of debtfinancing, adopted a very restrictive position. Forexample, failure to make use of the optionalexemption for "independent entities" foreseen in theATAD will have a negative impact on entities withlow profitability which use financing from unrelatedentities.However, the final assessment of the newregulations will require more time.

* This surplus is calculated as follows: 30% x [(∑revenues - interest income) - (∑ costs –amortization charges - debt finances)]

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Financial factors rank top of risksworrying Polish business

By Mariusz Pepłoński, business developmentdirector in the Financial Risk Department at AonPolska

Aon’s Polish Risk Management Survey isconducted every two years to identify thechallenges faced by organisations and howthey assess and respond to threats.

The results of latest Polish ranking of key risksvary greatly from the global or European rankings.As in previous years, the Top Ten in Poland isdominated by financial risks, which occupy half ofthe positions. This proves the current problemswith payments from counterparties, or uncertaintyrelated to obtaining loans, which is significant incertain industries.

The number of bankruptcies on the Polish markethas increased significantly over the last two years.This is most visible in the transport, wholesale andconstruction sectors, although the food industry isalso in the infamous forefront.

Top Ten risks facing Polish companies, 2019:

1. Commodity price risk

2. Counter-party credit risk

3. Economic slowdown/slow recovery

4. Cashflow/liquidity risk

5. Accelerated rates of change in market factors

6. Increasing competition

7. Workforce shortage

8. Absenteeism

10. Exchange rate fluctuation

11. Capital availability/credit risk

The three risks in the ranking belong to a group ofexternal factors: economic slowdown,accelerated rates of change in market factors, andincreasing competition. The second one, change,has appeared in the Top Ten in Poland and in theworld for the first time. Entrepreneurs have noticedthat it is increasingly difficult to predict thedevelopment of events in today's world, and theorganisations managed by them are increasinglyexposed to the influence of external factors – andof global dimensions.

Two of the Top Ten risks in Aon's ranking arehuman capital risks. Both are relatively new in theranking. The risk related to the workforce shortagefirst made it into the Top Ten two years ago; thisyear it maintained its position. However, the risk ofabsenteeism from the 27th position in the previousedition to eighth position is interesting, as itsposition in the global (32nd) and European (27th)rankings indicates that this is our local problem.

Łukasz Konotopski, smart benefit manager at Aon,says that companies cope with the risk ofabsenteeism in a number of ways. Employers areincreasingly offering employees attendancebonuses of 3%-8% in addition to the remunerationfor not taking advantage of medical leave.Wherever possible, home-office solutions arebecoming more popular.

Other key findings:

Accelerated rates of change in market factors isthe risk that has gained most importance – inPoland it moved from the 31st to fifth position, inEurope it was ranked first and globally third.

An important issue is cyber risk, and the differencein understanding its importance in Poland and inthe world. Entrepreneurs in our country placedcyberattacks and data breaches in 23rd

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place, while globally this risk maintains its strongposition in the top ten. It might seem that Polishcompanies will start to pay more attention to cyberthreats in coming years, but it turns out that theirimportance is becoming less relevant, which maybe a sign of lack of awareness, or a belief that thecompany is well prepared.

Environmental risk in Poland is much further thanin the world – in 33rd place (compared to 22ndglobally). Despite the loud public discussion onenvironmental issues, entrepreneurs do notconsider this issue to be particularly important inthe context of risk for their business.

Dominika Kozakiewicz, president of themanagement board of Aon Polska, notes that therisks related to climate change, limited availabilityof natural resources, or corporate socialresponsibility are all on very distant positions in theranking – both in Poland and worldwide. Issuesthat have a direct impact on the conduct ofbusiness obscure those whose effects aresomewhat postponed. Now, however, is a goodtime to reflect on and nurture existing resources.

Polish Risk Management Survey 2019/2020contains a ranking of 55 risks identified by Polishentrepreneurs together with a comparison to globalresults and to the previous edition of the survey. Italso discusses trends and perspectives in areassuch as a formal action plan, financial lossesincurred in connection with the materialisation ofthreats, methods of identifying and assessing risksand how to organise risk management andinsurance. In addition, Aon experts comment onlegislative change and their impact onmanagement boards, the situation in theconstruction industry, record-breaking years interms of bankruptcy, and the problem of humanresources as a special risk area.

The profile of respondents in the Aon surveyincludes small, medium and large companies withdifferent types of activities and representingdifferent industries. The full report is available atwww.aon.pl.

About AonAon Poland is a part of Aon plc – the leading globalprofessional services firm providing advice andsolution in risk management, retirement and health,at a time when those topics have never been moreimportant to the global economy. Aon plc throughits more than 50,000 colleagues worldwide, unitesto empower results for clients in over 120countries.

Aon began its operation in Poland in 1992 andtoday engages over 1,500 employees working inoffices around the country: in Warsaw, Gdańsk,Katowice, Kraków, Poznań, Szczecin andWrocław.

Cloud computing in PolishFinancial Institutions

By Dr Agnieszka Serzysko, attorney-at-law,partner, head of Financial Services Sector,Kochański & Partners

In recent years, cloud computing has become asignificant technological enabler for innovativeservice development.

The cloud allows industries to tap into new servicemodels, utilising its technological advancement fornew and better service to clients, improvingproductivity, cost, efficiency and the flexibility ofinternal business processes. Ultimately, cloudcomputing provides a foundation for the digitaltransformation of the industry and financial sector.

The financial sector is in the process of adoptingcloud computing to take advantage of thesebenefits. New opportunities for service delivery toclients, serving their needs and expectations, areas relevant as improving security, reducing costsand improving flexibility in the conduct of business.Cloud computing can also open new markets andhelp financial institutions find new ways ofcompeting with FinTech market entities.

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During the adaptation of cloud computing by thefinancial institutions, it was necessary to considerthe highly regulated nature of the sector whilepaying special attention to sector stability and thesecurity of data.

The Polish legal system lacks a framework thatcovers cloud computing. The banking sector inPoland has for years been moving towardsembracing dispersed laws and recommendationsto regulate the financial sector. The first legaldocument in this area was Recommendation D onthe management of information technology areasand security of the ICT environment in banks,issued by KNF, (Komisja Nadzoru Finansowego,the Polish financial supervision authority) inJanuary 2013. This was followed by thecommunique of the Office of the Polish FinancialSupervision Authority regarding the use ofprocessing services by supervised cloudcomputing data entities issued on 23 October2017. This year, on 25 February, the EuropeanBanking Authority issued guidelines on outsourcingarrangements, with the applicable law being theprovisions of Banking Law (especially art. 6 andothers).

To meet the expectations of the Polish financialmarket in terms of implementing cloud-basedsolutions in financial institutions, a working groupdedicated to this topic was established in 2019 atthe ZBP (Polish Bank Association, the union ofPolish banks) and the FTB (Banking TechnologyForum). Legal support and ISO norm serviceswere provided by Kochański & Partners law firm.Adapting the latest technological solutions inbanking in the context of these regulations is noteasy. The current interest of the sector combinedwith relative inexperience of the financialinstitutions prompted them to create a joint initiativeto create an implementation standard based oncloud computing in accordance with applicableregulations, the so-called WhiteBook. The aim ofthis document is to allow anyone to progress easilythrough the process of adapting to the cloud of theorganisation itself and to solutions offered bysuppliers.

WhiteBook is an analysis setting out which tasks,procedures, processes, and analyses should becarried out and documented in terms of cloudimplementation in relation to the individualprovisions of the regulations in force.

WhiteBook will also refer to guidelines for theclassification and assessment of information,including their compliance with legal requirements.Specific to the financial sector and/or to an entitysupervised by its provisions and contractualobligations, WhiteBook will also set out

the scope of classified information

its type and validity

the value of information for a supervised entity(with respect to legally protected informationprocessed)

the minimum technical and organisationalrequirements for information processing in thecloud, (ensuring competence for informationprocessing activities, including the use of specificcloud-environment architecture, rules for itsconfiguration, division of responsibility for securityof processed information)

provisions of a formalised contract with cloudcomputing service providers, an informationprocessing plan in cloud computing, monitoring theinformation processing environment in cloudcomputing services, and documenting theoperations of a supervised entity.

Banks require the intensive use of technology foroperations. Traditionally this has been solved byon-premises systems, deployed locally via thecompany’s own computer infrastructure. However,technological progress has accelerateddramatically, requiring banks to embrace thisdevelopment.

Cloud has become a key technology to developnew financial services and to innovate, tocollaborate with third parties and

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to compete in the digital context. Opinions of cloudcomputing by regulators, technologists and serviceusers differ and although not conflicting, theseshould be balanced to enable the most effectiveuse of cloud technology in financial services.

Cloud computing can help to control costs in amore efficient way, improve flexibility of thebusiness model, allow operational specialisationand improve resilience. With cloud computing’sfurther evolution, more advantages are expected tobecome apparent in the future. Cloud computing isa key enabler for a successful data economy andservice delivery, as it can seamlessly connectbanks with other financial institutions, clients andFinTech innovators.

Pay your suppliers on time or facenew penalties!

By Bernadeta Kasztelan-Świetlik, partner, legalcounsel, competition law, Gessel and Partners

Payment deadlines in ‘asymmetric’transactions – ones between large enterprisesand SMEs– may not, under any circumstances,exceed 60 days.

If the debtor is a public-sector entity, deadline fallsto 30 days. (Medical institution, however, will bebound by the general 60-day deadline.

While, in some instances, the parties to acommercial relation may agree upon a paymentdeadline longer than 60 days, by making expresscontractual unfair vis a vis the creditor, no suchavenue exists in the case of contracts betweenlarge enterprises and SMEs. It shall be up to thedebtor to demonstrate that any payment deadlinein excess of 60 days is not blatantly unfair vis a visthe creditor.

New rights for the consumer protectionwatchdog

In cases where non-public entities excessivelydelay performance of pecuniary benefits, UOKiK,the office of competition and consumer protection,may initiate proceedings and impose a fine onbusiness enterprise which, in the space of threeconsecutive months, has aggregate paymentarrears of at least:

5m zlotys (in 2020-2021)

2m zlotys ( as of 2022)

Such proceedings may be initiated, if so requiredby law, once UOKiK has performed a probabilityanalysis assessing excessive delay in payments.Such an analysis, identifying areas in which therisk of delays is greatest, will focus on:

The estimated value of invoices unpaid, orpaid late, by the entity concerned,and

The number of creditors affected by such failure topay or late payments.

Information about probable delays will be passedon to UOKiK by the KAS (national treasuryadministration), working on the basis of tax data atits disposal. Apart from that, a suspicion ofexcessive delay in payment may be reported byany entity in possession of such information (theidentity of its author will be confidential). In thecourse of the relevant proceedings, UOKiK mayrequest any and all information and documents (itmay also enjoin the enterprise to present all orsome of its tax documents and accountingevidence in electronic form) as well as auditingenterprises within the relevant scope, even oneswhich are not party to the commercial transaction.Faced with reasonable grounds to expectresistance or obstruction in the course of an audit,UOKiK may seek the assistance of the police withthe respect to:

Establishing the identity of individuals,

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Ensuring order on the scene of the audit andpersonal safety of those in attendance

An audit within any given proceedings may not lastlonger than 20 days.

As is assesses whether or not an excessive delayin settlement of financial liabilities has occurred,UOKiK will not take into account any outstandingor delayed payments which had fallen due morethan two years before commencement of theproceedings.

Penalties

An enterprise found guilty of excessive delays insettling its liabilities will face a penalty calculated asthe sum total of unitary penalties for liabilities notpaid or paid late due within the period covered bythe proceedings (again, without those where thedeadline for payment had elapsed more than2years before commencement of the proceedings).The unitary penalty, meanwhile, shall be calculatedin accordance with the following formula:

JKP (unitary penalty) = WŚ (value of paymentsoutstanding/remitted late) x n/365 (number of daysof delay) x OU (statutory interest)

Moreover, UOKiK may levy a fine correspondingto up to 5% of the revenue achieved by theoffending enterprise in the previous fiscal year, upto a cap of €50m, if the enterprise:

Didn’t not present the information requested byUOKiK, or presented information which was untrueor misleading;

Prevented or impeded UOKiK’s audit.

In the event that the enterprise in question had norevenues last year, or if that revenue cannot beestablished, the administrative penalty shall be notmore than €50m.

Duties of a large enterprise

An entity which is too large to qualify as an

SME will be bound by law to present to itscontracting party, not later than at execution of theircontract and in the same form, a declaration of its‘large enterprise’ status.

Certain business enterprises will be obligated, by31 January every year, to draw up and present tothe minister competent for economic matters areport on payment deadlines applies in itscommercial transactions. The duty to file suchreports shall apply to:

Equity groups (in the fiscal year), regardless oftheir revenues

Taxpayers other than equity groups whoserevenue for the fiscal year exceeds €50m

The first reports of this kind will have to besubmitted for the fiscal year 2020. In the case of anequity group, a report must be submitted by themanagement of every member of the company.Entities which fail to file a declaration or report, orwhich present untrue information, may be liable fora fine.

Penalties may be avoided – and the matter closedwith a caution – in cases where:

the value of unpaid or delayed payments for whichunitary penalties have been assessed is equal to,or less than, receivables collected by the givenentity during the period in question past theirdeadline, or not collected at all;

if excessive delays in payment are occasioned byforce majeure;

where the circumstances merit closing the casewithout a penalty.

Other noteworthy changes include:

Amendments to the Polish Civil Process Code: art.485 (payment injunction) and art. 730 (security)

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A new offence distinguished in the legislative Actsregarding counteraction of unfair competition (art.3.2 and art.17g) and contracting advantage(art.7.3.4) – unwarranted prolongation of paymentterms for goods delivered or services performed

Changes to the rates of interest and compensationfor delayed payments

Provision for ‘bad debts’ for purposes of corporateand personal income tax.

IP Box opens new tax opportunityfor Polish entrepreneurs

By Michał Zdyb, Adam Apel, Aleksandra Piasna,KR Group

IP Box (also called an Innovation Box) is a newtax credit introduced this year. It complementsthe R&D credit, which is already well known inPoland.

The preferential 5% rate of CIT/PIT isn’t foreveryone though – it only applies to companieswhich earn revenues from intellectual propertyrights.

5% tax – what is it about?

IP Box is a tax incentive which allows companiesthat are involved in R&D to take advantage of apreferential tax rate. It may turn out beneficialespecially when it’s mixed with already-existingR&D relief, since one affects income, while theother one affects tax costs. And the 5% tax mayalso be mixed with operating within a SpecialEconomic Zone or with getting Polish InvestmentZone support.

The cooperation of costs and incomes mentionedabove is key to see whether the IP Box isapplicable in the company: it’s only possible if thefinal product was made or upgraded as a directresult of the R&D activity. According

to the OECD’s explanation, it’s important toexclude costs that aren’t directly connected withproducing, improving or upgrading the qualified IP.As an example of inability to tell if the product isdirectly connected with the qualified IP the followingmay be the following: building costs (acquisition ormaintenance costs), car leasing, administrativecosts, additional accounting services or tendercosts.

The aim of 5% tax for companies which produce(or use) intellectual property is to urge investorsand entrepreneurs to keep their businesses inPoland and stimulate their development there.When it comes to more precise goals, they are:

Increasing of tax revenues (as a result ofunblocking intellectual property rights)

Giving an organic boost to investment in innovation

Increasing the number of well-paid jobs across theeconomy

Crafted for (some) entrepreneurs

The matter itself isn’t as simple as it seems – anentrepreneur has to be directly performing the R&Dactivity and also be the owner, co-owner or a userof qualified IP.

What must the company have to be eligible toapply for the 5% tax rate?

Patents

Protected right to software

Protection rights for a utility model, rights arisingfrom the registration of industrial designs orregistration of topographies of integrated circuits

Rights arising from the registration of medicalproducts or authorised veterinary products

Rights arising from the registration of varieties ofplants and animal breeds

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Additional protection rights arising from the patentfor a medical product or plant protection product.

And any of the mentioned above must have itsown and detailed evidence of incomes and costs,for every single product. As opposed to the well-known R&D relief, an Excel file won’t be enough inthe case of IP Box. This is because separateauxiliary accounts will be demanded to extractdetails of the exact operations. Of course, forcompanies it will result in increased costs causedby additional work for the book-keepingdepartment. If the company meets the conditions,it’s allowed to take advantage of the IP Box. It’sdifficult to raise the issue that arises in practise,because very few – if any – companies decided toimplement IP Box in 2019.

Bear in mind that claiming the IP Box relief mayautomatically trigger a tax-office inspection – justas it happens in case of R&D relief. When R&Drelief was introduced, almost a half of all thecompanies that had decided to use it were latersubject to a tax-office inspection. Taking intoconsideration the complicated accounting processassociated with the IP Box, such inspections mayhappen even more frequently.

The basic requirement for intellectual propertycompanies (achieved by implementing the nexusapproach) is that they have to conduct asubstantive activity. It means that the revenuesconnected with intellectual property may bebeneficially taxed only if the concrete IP is an effectof the taxpayer’s R&D activities. Its aim is limitingthe possibility of taking advantage of a preferentialtax regime when the intellectual property wasn’tproduced by the taxpayer themselves (whichmeans that it could be bought from third-partcompanies or related companies). Having takeninto consideration the complexity of businessprocesses, the OECD/G20 countries accepted amodified version of the nexus approach, whichallows taxpayers to increase their qualified costs(those that are included in calculation) by 30%.

The question on everybody’s lips is probably “Is it

going to be worth it?”. Unfortunately, there’s no oneanswer to it – every case has to be judgedindividually.

Let’s assume that in a company:

The sum of income from IP is 10m zlotys

R&D costs connected with qualified IP rights are1.5m zlotys

R&D acquisition costs from the firm’s subsidiaryare 150,000 zlotys

R&D acquisition costs for qualified IP law are300,000 zlotys

The company will save 1.4m zlotys.

We predict that the major recipient of IP Box will beIT sector – because in its case it’s easiest to earncopyright for computer programs (it doesn’tdemand any formal registration). But a lower taxrate should also be of interest for pharmaceuticalor chemical companies and for PIT taxpayers (ITspecialists developing codes).

Innovation Box in Europe – a great success?

IP Box has been already implemented in othercountries – in Europe and in the rest of the world,though its rules vary depending on a country. Inmost of them it’s considered a success. In Franceand Turkey, however, the functioning of the IP Boxwas deemed to be detrimental tax competition byOECD/G20. Having said that, the Frenchgovernment doesn’t plan any changes regardingthis fact!

Time will show whether the IP Box turns out asuccess in Poland – the prospects are promisingand offer the companies the possibility to developgreatly via tax reduction. Can we expect anyfurther relief for creative entrepreneurs? It seemsthat R&D credit and IP Box doesn’t leave thelegislation many ways for expanding further. It’s nobad news though, since mixing those two

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together does create an opportunity for reallyeffective tax optimisation.

Challenges of anti-moneylaundering regulations on thebasis of the fourth AML directive

By Konrad Kąkol, president of the supervisoryboard of Dauman Bros. EEIG, advocate

The issue of combating money laundering andpreventing the financing of terrorism hasbecome a hot topic in recent years, particularlyconsidering the employment opportunitiescreated in Poland thanks to the popularity ofoutsourcing such business processes.

The general term ‘Anti-Money Laundering’ – AML –encompasses the entirety of anti-fraud processes.AML consists of regulations which place theburden of preventing, detecting, and reportingfraudulent money laundering activities oninstitutions.

AML has been regulated at the EU level by a stringof anti-money laundering Directives, starting in the1990s – parallel to the development of OECD-backed Financial Action Task Force standards.Directive 2015/849 on the prevention of the use ofthe financial system for the purposes of moneylaundering or terrorist financing – the fourth AMLDirective – is currently the main legal instrumentthat lays down the ground rules that are to preventthe abuse of the EU’s financial systems for thepurposes of money laundering.

These acts have been – or shall soon be, in thecase of the two most recent Directives –implemented into the Polish legal system throughthe Act of 1 March 2018 on combating moneylaundering and the financing of terrorism. In thecase of the UK, the have been implemented via theMoney Laundering, Terrorist Financing andTransfer of Funds (Information

on the Payer) Regulations 2017 (MLR 2017).Considering the complexity of the regulations, thisarticle will focus exclusively on the problem ofcombating money laundering in Poland.

The list of entities obliged to apply the AMLregulations – the ‘obliged institutions’ – includescore financial market participants such as banks,credit- and financial institutions, investmentcompanies and investment funds. It also includescertain insurance establishments andintermediaries, real estate managers, as well as abroad catalogue of entities (entrepreneurs,foundations, associations) that pay or accept cashduring transactions, for the equivalent of €10,000 ormore.

The key aspect of AML obligations is riskassessment. Primary risk assessment practices,as outlined in article 34 of the Polish act, areessential to specify what level of financial securitymeasures should be applied to the customers. Therisk of money laundering and the financing ofterrorist activity should be analysed anddocumented when entering into new businessrelationships, in the case of incidental transactionsof a certain monetary scope – when cashtransactions exceed €10,000, when the risk offinancial fraud is suspected, as well as whendoubts as to the identity of the customer appear.The primary risk assessment is based on factorssuch as type of customer, geographic area ofactivity, purpose of the bank account, type ofproducts, services, and their distribution, value oftransaction, as well as the strength of the businessrelationship. The identity of the customer and theirultimate business owner should be identified priorto the start of a working business relationship orthe execution of an incidental transaction.

Financial security measures include theidentification of the customer and his final ultimatebeneficial owner, as well as identifying theownership structure of a legal entity, the evaluationof the customer’s other business relationships, aswell as their ongoing monitoring. If the primary riskassessment indicates a lowered risk of money

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laundering and the financing of terrorism, theobligated institution may apply simplified financialsecurity measures. Conversely, if the risk seemselevated, an enhanced standard of securitymeasures must also be applied.

The Polish act provides a non-exhaustive list ofcircumstances that can justify a lower standard offinancial security measures. These include as thecustomer being a public sector body, a stateenterprise, a resident of an EU member state, or acompany trading its securities on a regulatedmarket subject to information disclosurerequirements as laid out in EU law. The conditionsthat justify the application of a higher standard ofvigilance, on the other hand, are for example anatypical and complicated ownership structure forthe type of activity, an atypical style of formingbusiness relationships, or activity that requires theexecution of large or multiple cash transactions.Enhanced due diligence must also be applied if thecustomer is from, or is headquartered in, a thirdcountry with strategic deficiencies in its anti-moneylaundering and counter-terrorist financingframeworks. If the customer is operating in high-risk sectors (such as petrochemicals, arms orvirtual currencies), or if there are dealings withpolitically exposed persons and their families,enhanced measures must also be undertaken.

Parallel to the detection obligations, reporting ruleshave been introduced. Obligated institutions mustreport transactions over €15,000 to GIIF, the Polishinspector of financial information, as well as signalany potential criminal activity or suspicioustransaction. Institutions that do not fulfil theirobligations shall be subject to administrativepenalties (up to €5m). Criminal liability is foreseentowards entities that either fail to pass oninformation or provide inaccurate or false data (upto five years of imprisonment).

In the light of recent legislative trends, a regularincrease in anti-money laundering obligations is tobe expected. AML will become a permanentfeature especially in FinTech and cryptocurrency –and even among art dealers.

Given the severe penalties and the wide range ofobligations imposed on the market, entitiesencountering atypical transactions will implementappropriate safeguards to detect and exit riskytransactions at the earliest possible stage ofestablishing a business relationship. However, onlytime will tell whether the measures taken will proveeffective.

Corporate clients as the newpayment service users (PSUs)

By Marta Stanisławska, senior associate and FilipWindak, junior associate, Banking & Financepractice, Bird & Bird

Following the MiFID II, PAD and AML IVDirectives, the new Directive on paymentservices in the internal market (PSD2) is part ofthe so-called regulatory tsunami that we havewitnessed in the EU in recent years.

PSD2 was adopted in 2015 and has applied inmember states since 13 January 2018. In Poland,the relevant law entered into force in June 2018,and was implemented by payment servicesproviders (PSP) by 20 December 2018.

The main objective of PSD2 was to ensure faircompetition between PSPs, provide security ofpayments on the rapidly evolving market, andenhance consumer protection.

To increase competition on the payment servicesmarket, PSD2 introduced two new paymentservices, namely payment-initiation service (PIS)and account information service (AIS). Under thePIS, the payment-service user may initiate thepayment transaction through the external provider,which can be used for the purpose of onlinepurchases. According to the AIS, the user givesthe external provider access to the paymentservice account, thanks to which the user mayhave access to accounts maintained by manydifferent banks in one online application.

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The AIS and PIS may only be served by the PSPswhich have the relevant license or authorisationgiven by the competent financial supervisionauthority.

Even though PSD2 was intended to enhanceconsumer protection, its provisions to a largeextent apply to corporate clients. However, inparticular with regard to corporate clients applyingstrong customer authentication (SCA), as well asthe use of PIS and AIS by the latter, this causescertain difficulties in practice, which are furtherdiscussed below.

Consent for PIS and AIS

One of the main issues is who is allowed to giveconsent to the relevant PSP for PIS and AIS, andhow should such person be authenticated and bywhom.

The common understanding is that the personauthorised to represent a corporate client being theowner of the payment account, is allowed to giveits consent to the PSP for PIS and AIS. Theidentity of such person is authenticated by theASPSP (account servicing payment serviceprovider, usually the bank) maintaining thepayment account. In most cases, an authenticationis processed using the individual securitycredentials (such as access data to the e-bankingplatform, such as password, SMS code, tokencode etc) by the person granting its consent.Thereafter, the PSP providing PIS and AISreceives confirmation from ASPSP that the usergranting its consent has been successfullyauthenticated and is the person who they claim tobe.

After receiving such confirmation, the PSP hasaccess to the payment account and is allowed toprovide its services.

Power of attorney to the payment account vs.consent for PIS and AIS

Another important issue is whether the corporate

client’s agent, acting on the basis of a power ofattorney (PoA) to the payment account, is entitledto give consent for the provision of PIS and AIS.

The problem is that in the pre-PSD2 world the PoAdid not specify whether an agent is authorised togrant the firm’s consent for PIS and AIS, and itsscope only covered managing the paymentaccount. Thus, it is not clear whether or notgranting consent for PIS and AIS is covered by thecurrent PoA. Some market players follow that inpractice granting consent for AIS and PIS is a formof a further PoA (a power of attorney given by theperson acting based on an initial power ofattorney), as based on such consent the userauthorises the third party to access its paymentaccount maintained by the bank.

In the opinion of other market participants, grantingconsent for PIS and AIS is a just another form ofmanaging the payment account. By using thestandard banking services as based on PIS andAIS services, the user initiates the paymenttransaction or accesses its payment account, butthrough an external provider.

In our view, both interpretations are justified, but weare finding more legal arguments to defend thelatter standpoint. To avoid any potential risk,however, we recommend that the company'smanagement inform all agents with a PoA to thecompany's payment account to what extent theagents may grant consent for PIS and AIS (suchas the limits of transactions which may be initiatedthrough PIS).

Co-signing

Another interesting issue widely discussedbetween industry players regarding PIS and AIS ishow payment transactions initiated through PISshould be authorised when authorisation of twodifferent representatives is required.

When a corporate client makes a payment order, itis often the case that such payment order must beauthorised by two representatives

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(co-signed). There has been a broad discussion inthe industry on how to co-sign corp0orate paymentorders when using PIS. The most commonapproach is that after the payment order is initiatedand authorised by the first representative via PIS(provided that such representative is authorised todo so), the payment order ends up in a queue,waiting to be authorised by the co-signer. Thus, thepayment is not rejected because of lack ofimmediate co-signing. The payment order ispending and waiting to be co-signed for a specifiedperiod. The second representative can co-sign thepayment order after logging into their internetbanking platform. Some PSPs provide immediatepush notifications on the co-signer’s mobile phoneor computer.

SCA exemption

Another novelty of PSD2 is that PSPs authenticatetheir clients. The PSD2 introduced the SCA, amulti-factor authentication based on the use of twoor more elements categorised as knowledge(something only the user knows such as apassword), possession (something only the userpossesses – such as a SMS code or scratch-card), and inherence (something the user is – suchas fingerprint authentication). The SCA applies forday-to-day access to the e-banking platform andon-line payment transaction, irrespective ofwhether the user is doing so by themself orthrough the PIS/AIS provider.

The SCA applies where the payer:

accesses its account online

initiates an electronic payment transaction

carries out any action through a remote channelwhich may imply a risk of payment fraud or otherabuses

However, the PSP (in most cases, the bank) candecide not to apply the SCA by taking advantage ofone of the exemptions. The exemptions from theSCA are listed by law and

the PSP may decide whether or not to apply theSCA exemption. This means that even ifconditions for applying an exemption are met, thePSP can still decide to apply the SCA without theobligation to justify its decision. The aim of usingthe exemption is to simplify the authenticationprocess while ensuring a high level of the paymentsecurity.

One of several SCA exemptions provided by law isan exemption for secure corporate paymentprocesses and protocols. This exemption isdedicated for corporate clients only. The PSP isallowed not to apply the SCA, in respect ofcorporate clients initiating electronic paymenttransactions through the use of dedicated paymentprocesses or protocols that are only madeavailable to payers who are not consumers, wherethe financial supervision authority is satisfied thatthose processes or protocols guarantee at leastequivalent levels of security to those provided forby PSD2.

The above means that, for example, host-to-hostcommunication or central travel accounts might beexempted from the SCA (provided that it providesat least the equivalent level of security to thisprovided for by PSD2).

As mentioned above, PSD2 has opened up themarket for new market players (in particularFinTechs) and authorised them to provide newpayment services. This revolution has generatednew market opportunities for financial sectorparticipants, but at the same time it has createdmany new practical issues. Only time will tell howservice providers and other market participantshave found themselves in the new legal reality, andhow the new payment services have changed thepayment services market as we know today.

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Success Story: QuantitativeAnalysis and Technology team atCredit Suisse Poland

By Adam Lodygowski, Quantitative Analysis andTechnology Poland Head

Many people consider ‘offshoring’ as a way toreduce costs by moving low-value work to aplace with lower wages, and then bundlingsimilar work to increase process efficiency.

However, in the Quantitative Analysis andTechnology Group at Credit Suisse, present inPoland since 2010, ‘low value’ is nowhere to befound. This department, initially established underthe name of ‘Quant Strats’, was founded with anobjective to ‘do more with less’. Poland, a countrywith strong mathematical and technical traditions,seemed to be the best location to start theirjourney.

What do quants do?

Quantitative analyst or “quant” is a financialengineer who applies mathematical methods tofinancial and risk management problems. Our jobis to develop and implement complex quantitativemodels allowing to price derivative financialproducts and associated risks. To be a quant, youneed to have a strong mathematical background,extensive financial knowledge, and solid codingcapabilities. All these unique skills were identifiedand further developed while setting up the QuantTeam for Credit Suisse in Poland.

Credit Suisse Quant Team

Initially, the key objective was to build modellingand technology group capable of strengthening theglobal Credit Suisse Quant Strats Team operatingin London, New York, Zurich and Singapore. Dueto geographic separation from trading, and limitedlocal expertise, such

a setup faced many challenges. Despite the odds,we have developed our success story to becomethe strongest and most diversified Quant Team inPoland. The key ingredient that contributed to ourgrowth and achieved results lies within the localtalented individuals willing to learn, proactively andrelentlessly driving the improvements, notcompromising on half-satisfactory solutions. Theirpassion for mathematical and programmingexcellence continues to remain the key componentto our success. For the last five years, we havejointly delivered a number of key projects for theentire bank and effectively gained the trust ofsenior management and number of businesses wesupport. Our key strengths – continuouscollaboration and knowledge sharing – has broughtus all the way from team extension profile to a fullyintegrated part of the global Quant Team within theCredit Suisse structure.

QAT Poland covers all teams within QuantitativeStrategies Modelling, Counterparty PortfolioModelling and Quantitative Technology & Data. Weare responsible for providing financial modellingsoftware and desktop tools for front office userssuch as trading and sales, control and IT functions.Globally, we have around 500 members working inall main regions and covering all product classesand multiple divisions. We are an integral part ofthe Credit Suisse business model delivering criticalcontributions to various divisions and functionsacross the entire bank.

Quant Modelling Wroclaw

The competences of this team span modellingtasks within various business lines. Our work isfocused on pricing the risk and value ofderivatives, leveraging models under ourgovernance. We provide crucial expertise in credit,rates, FX, commodities, equity derivative, XVA,indices and regulatory area. This group carries outa range of activities, among others, the creation ofsophisticated stochastic models allowing for thevaluation and risk-management of complexderivatives, development of analytics platformsused to deliver models to end-users and

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expansion of those models throughout the entireCredit Suisse Bank.

Projection Modeling Warsaw

Banking regulators require important financialinstitutions to demonstrate that they can endureadverse economic environments through aprocess called ‘stress testing’. The most salient ofthese tests, carried out by the Federal Reserve inthe US, is the Comprehensive Capital Analysisand Review (CCAR). Since April 2018, CreditSuisse is required to make CCAR submissions,and therefore, we have grown our team to coverthe work related to this requirement. The team hasrecently expanded its remit to provide times-seriesanalysis modelling and mathematical modellingexpertise to other regulatory bodies such asFINMA and APAC regulators.

Quant Technology and Data Team Wroclaw

The technology team in Wroclaw is responsible forbuilding, testing and releasing financial models,developing desktop and web-based tools used bytrading and sales, and for developing-marketbuilding libraries. We are responsible for thedevelopment of key pricing engines, which areused by front office traders, risk managementofficers, and product controllers within GlobalMarkets and APAC groups. We are deliveringcontinuous integration that allows us to build 3,000projects and run 10,000 tests daily. Under ourmanagement there are also two most significantstrategic risk calculation frameworks used in themost significant risk management systems atCredit Suisse.

Training future ‘quants’

Building and educating the future generation of‘quants’ has become one of our priorities. Hence,we have initiated a collaboration with top Polishuniversities in search for the best mathematicaland computer science talents to help them acquiretangible experience within the financial industry.We have established the Credit

Suisse Quant Scholarship Program targetingtechnical students from the Wroclaw University ofScience and Technology to demonstrate howadvanced mathematics and modern technologiesare shaping the financial world. Top modelling andprogramming Credit Suisse Quant experts sharetheir knowledge of the markets and products,teach appropriate computing techniques, and holdlectures on relevant quantitative methods to enablestudents understand the challenging nature of thework and the skills required to succeed in the roleof a quant analyst. The programme concludes witha final project, which spans modelling andprogramming knowledge and offers careeropportunities within the Quant Poland Team for thebest graduates.

Additionally, we are trying to build awarenessamong academic societies (lecturers, scientistsand students) on quant competencies that arehardly recognised on the Polish labour market. Forthis reason, we have committed to a series oflectures for students and academics of a numberof major Polish universities and technologycolleges to broaden the quant finance expertise byhelping aspiring candidates to upskill with the latesttechniques used in the industry.

Recognising the potential of building internationalcooperation, we have partnered with universitiesabroad to share our presence and expertise withforeign students as well as the academic world topromote quant qualifications that incorporate thelatest industry advancements. We are convincedthat this will popularise quant analysts’ careers andattract top talents to the financial industry, and ourorganisation, in particular.

Currently, our Quant Poland Team is an integratedbusiness partner for key Credit Suissebusinesses, risk managers, as well as regulatoryand control functions. We are highly regarded byour stakeholders and frequently demonstrated asan exemplary team delivering sophisticatedsolutions to the business of a substantial addedvalue. Due to gravity of our deliverables andextremely advanced implementations,

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we tend to be considered as a success storyteam. I personally think that we are just a group ofvery passionate and talented individuals enjoyingthe complexity of problems we face and solveevery day.

About Credit Suisse in Poland

Credit Suisse has been present in Poland since1992 through its Investment and Private Bankingoffices, Brokerage House and Asset Managementbusinesses. Currently, the bank operates in twomajor locations – Credit Suisse Wroclaw since2007 and Credit Suisse Warsaw since 2016.

Credit Suisse Wroclaw is the bank’s secondlargest office in the EMEA region and one of thelargest employers in the Lower Silesia regioncurrently employing almost 5,000 people. Theoffice provides continued support to our globaloperations, contributing substantially to the bank’seffectiveness and improvement of its processes.

In September 2016, Credit Suisse opened a newoffice in Warsaw that complements the existingsite in Wroclaw and already provides employmentto 900 staff in HR, legal and compliance, riskmanagement, IT and finance departments.

Both offices in Poland are part of a global CreditSuisse organisation supporting our diversebusinesses in Switzerland, both Americas as wellas the EMEA and Asia-Pacific regions in suchareas as investment and private banking,operations and risk management, legal andcompliance, as well as infrastructure developmentand IT.

Credit Suisse in Poland is one of the largestemployers in the modern business-services sectoroffering outstanding growth opportunities andinternational career prospects to graduates andexperienced professionals.

The EU’s push for sustainableinvesting

by Agnieszka Skorupińska, counsel and head ofenvironmental law practice, CMS Poland and CEE,and Patrycja Białko from the EPC team, CMSPoland.

The EU is working on creating new rules tosupport environmentally sustainableinvestments.

The purpose is to redirect capital flows towardssustainable investment. The new regulations mayaffect the financial market but also companieslooking for financing from mid-2020. The financialservices sector and investment entities shouldalready be looking at the planned changes, andtake them into account in their strategies.

On the way to the new EU Regulations

In March 2018, the European Commissionpublished the Financing Sustainable Growth ActionPlan, which set up a strategy on sustainablefinance. Its goal was to reorient capital flowstowards sustainable investment to achievesustainable and inclusive growth, as well as tomanage financial risks stemming from climatechange, resource depletion, environmentaldegradation, social issues, and foster transparencyand a long-term approach in financial andeconomic activity. These objectives resulted inlegislative proposals for EU Regulations.

In May 2018, the Commission proposed threeprojects. The first was the Regulation on theestablishment of a framework to facilitatesustainable investment, setting out the frameworkfor the new approach. It is still in the legislativepipeline. Two other projects concerned theRegulation on sustainability-related disclosures inthe financial services sector, and the Regulationamending Regulation (EU) 2016/1011 as regardsEU Climate Transition

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Benchmarks, EU Paris-aligned Benchmarks andsustainability-related disclosures for benchmarks.These two proposals are awaiting signature at themoment and will be then published in the OfficialJournal of the European Union.

Framework to facilitate sustainable investment

The system proposed in the Regulation providesbusinesses with clarity on which activities aresustainable, so as to inform their investmentdecisions. An ‘environmentally sustainableinvestment’ means an investment that funds oneor several economic activities that qualify underthis Regulation as environmentally sustainable. Aneconomic activity is environmentally sustainable ifit fulfills the four conditions mentioned in theRegulation. It has to contribute substantially to oneor more of the environmental objectives listed inthe Regulation, without significant harm to them.And the economic activity should be carried out incompliance with the minimum safeguardsconcerning the basic principles and rights at workand should comply with technical screening criteriaspecified by the Commission.

The following actions are defined as theenvironmental objectives:

Climate-change mitigation

Climate-change adaptation

Sustainable use and protection of water andmarine resources

Transition to a circular economy including wasteprevention and recycling

Pollution prevention and control

Protection and restoration of biodiversity andecosystems.

Example – energy generation from wind sources iscarbon-neutral, thereby contributing substantially tothe environmental objective

of climate-change mitigation. However, if a windproject is implemented in a nature protected area inan irresponsible way it may significantly harm theobjective of protection of biodiversity. Such aproject will not be sustainable in the meaning of theRegulation. After the new Regulation comes intoforce, only an economic activity that relates toprojects that meet the above-mentioned criteriamay be described as environmentally sustainablein the financing context.

Sustainability-related disclosures and the EUBenchmarks

The Regulation on sustainability-relateddisclosures in the financial-services sectorrequires market participants and financial advisersto publish updated information on their websitesabout their policies on the integration ofsustainability risks in their investment decision-making process or investment/insurance advice.The Regulation defines a ‘sustainable investment’as an investment in an economic activity thatcontributes to an environmental objective or asocial objective, for instance it contributes totackling inequality or fosters social cohesion.Therefore, the investee companies should followgood governance practices and ensure theprecautionary principle of ‘do no significant harm’,so that neither the environmental nor the socialobjective is significantly harmed.Regulation 2016/1011 established uniform rules forbenchmarks across the EU and catered fordifferent types of benchmarks. The new act alsosets up the EU Climate Transition Benchmarks(EU CTBs) and the EU Paris-aligned Benchmarks(EU PABs). The establishment of the newbenchmarks would contribute to increasingtransparency and would help preventgreenwashing.

Technical Expert Group’s Reports

To give a more practical aspect to the abovedescribed ideas, the European Commission set upa Technical Expert Group on sustainable finance(TEG). In June 2019, the

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TEG presented three reports. The first oneintroduces an EU Taxonomy, a classificationsystem which helps determine whether or not aneconomic activity is environmentally sustainable.So far, the draft has concerned only twoenvironmental goals out of six: climate changemitigation and adaptation. The report provides a listof 67 activities across several sectors, includingmanufacturing, energy, waste, transport andconstruction. The report does not include coal-powered electricity generation, as it is consistentwith the aims of the EU Taxonomy. Nor does itinclude nuclear energy, as it was not possible forTEG to conclude that the nuclear energy valuechain does not cause significant harm to otherenvironmental objectives. However, moreextensive technical work should be undertaken inthe future. The draft taxonomy was subject topublic consultation, which finished in September.The final version of the report is to be published inDecember 2019. The remaining reports concernEU Green Bond Standard and Climatebenchmarks and benchmarks’ ESG disclosures.

Possible impact on business

The sustainable investment system is not readyyet. However, it must be noted that the EUCommission has moved very fast on this one –faster than with most other legal acts. Once thewhole system comes into force, it will not rule outinvesting in and financing non-sustainable projectsat this stage. But it will definitely create morepressure for serious consideration of what tofinance. It will also impact on businesses whichmay show more caution when developing non-sustainable projects. Taking into account the EU’sfocus on climate change, in the long run the newsystem may become more and more important,putting tools like the EU in the centre of anybusiness strategy.

PwC’s 2019 Global FinTech report– how firms will change

By Aleksandra Bańkowska, partner, counsel, PwCLegal and Anna Maj, FinTech leader, PwC

Last month, PwC published its Global FintechReport 2019, based on a survey among morethan 500 managers worldwide in the financialservices (FS) and technology, media andtelecommunications (TMT) sectors.

The research aimed to examine what factors willdetermine the winners and losers in the race todevelop and profit from technology-based businessmodels.

Modern financial technologies and their impact onthe sector are an extremely new topic and arebecoming the subject of research. ‘FinTech’ isfinancial technology, an innovation that can lead tothe development of new business models,applications, processes and products that have asignificant impact on financial markets.

FinTech's future

FinTech is increasingly being used by the FS andTMT industries to increase operational efficiency,reduce costs, improve customer experience andincrease the attractiveness of their products andservices. New business opportunities are alsobeing created. Banks operating exclusively in thedigital realm offer new customer propositions andcost profiles. Investment managers can offer fullycustomised advice. Insurers use sensors tomonitor people's health and prevent roadaccidents. Consumers are ready for digital shocks.The question is no longer about whether FinTechwill transform FS, but which companies will use itbest and emerge as the new leaders.

According to the survey, 47% of TMT and 48% ofFS organisations have fully integrated technologyinto their strategic business

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model. Besides, 44% of TMT and 37% of FSorganisations have integrated new technologiesinto their products and services. In the context ofcustomer retention, the FS managers surveyed byPwC believe that the key to this will be to useFinTech to improve ease and speed of use. TMTleaders, on the other hand, focus onpersonalisation. In a market that is rapidly movingtowards mass customisation, it can be expectedthat the use of FinTech in this way will be morelikely.

Companies' desire for cross-sectoral merge

FS and TMT should look at each other and retrainto fill skill gaps. As shown by the PwC survey,80% of TMT companies and 75% of FSorganisations have created jobs related to FinTech.However, 42% of both TMT and FS organisationshave difficulty filling these roles. While 73% of FSorganisations have employees in the technologysector, only 52% of TMT companies are looking forFS employees.

It will be important for future success to find waysto attract people across from TMT to FS and viceversa because each sector needs the other'sexpertise. Upgrading skills, as well as appropriatemergers, acquisitions and joint ventures will alsobe significant challenges.

Among the organisations that are planning atakeover, strategic alliance or joint venture tostimulate growth through FinTech, 78% of TMTcompanies and 76% of FS companies focus ontheir sectors. Less than half (44% of TMT and 47%of FS organizations) focus on a companyspecialising in the FinTech industry.

Over the next two years, three-quarters of the FSand TMT directors surveyed will increase theirinvestment in precision technologies. More than90% of them are convinced that in the next twoyears FinTech will bring an increase in revenues.The adoption of a technology-driven strategy isnow of the utmost importance, but the focus,maturity and speed of the market are different.

It is now a fact that FinTech has brought innovationto the FS and TMT sectors. As is the reality ofcooperation between FinTechs and corporates.

However, translating opportunity into successfulexecution is difficult. Most tech developments arestill stuck in the lab, in the incubation phase. Fewerthan 40% of executives surveyed have moved AIprojects beyond the pilot stage into implementation.We all face the same challenges to move solutionsfrom a pilot proof-of-concept stage toimplementation, regardless of geography. At theend of the day, it comes down tocommercialisation and monetisation of innovativetechnologies.

The high-potential technologies include AI, IoT, aswell as RPA, voice and biometrics, as indicated inthe report. I would also say they are the mostpromising ones, in payments for example.

When it comes to building data-driven models anduse cases, in a data-intensive but also data-intuitive environment, I would stress theimportance of the end-to-end digital customerjourney and its personalisation, with data privacyand trust still remaining the key pain points.

It's all about the collaborative models, not onlybetween different stakeholders within the sameindustry, such as FinTech and corporate entities,but also between different sectors, such as FS andTMT.

Entering the FinTech market is a very attractiveoption for both traditional financial servicesproviders and IT companies. Activity in this area isusually connected with the implementation ofbreakthrough technologies and innovativesolutions. It is a fascinating journey filled with hugebusiness possibilities. However, it is alsoassociated with the necessity to comply with theregulatory requirements applicable across thesector. Indeed, it is the fear of regulatory barriersthat is mentioned by our respondents as one of thetop three most important challenges facingFinTech development.

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The financial services sector is one of the mostregulated in the world, an area encompassed bythe enhanced due diligence standards in terms ofbusiness ethics. Trust is the foundation of thefinancial services market. Appropriate and fairregulatory requirements should be the key elementof the strategy of every FinTech. Such behaviourallows the company to build in trust from theperspective of both regulatory authority and theclient. It is a high level of trust that should beconsidered as the success formula for everyFinTech

The full report is available on the websitehttps://www.pwc.com/gx/en/industries/financial-services/FinTech-survey.html

The role of financial institutions inreporting tax schemes

Agata Nieżychowska, tax director, Crowe Poland

Businesses are obliged to provide taxauthorities with information on tax schemessince 1 January 2019.

This obligation arises from EU Directive (EU)2018/822 of 25 May 2018, which amends Directive2011/16/EU regarding mandatory automaticexchange of information relating to reportablecross-border tax arrangements, the so-calledMandatory Disclosure Rules (MDR) Directive.

However, the Polish legislator has extended theboundaries of the MDR Directive, introducingprovisions on reporting arrangements betweenPolish businesses in the area of VAT.

MDR regulations are intended to provide the taxadministration with information on tax planningmodels used by taxpayers. This information will beused to tighten the tax system. Although the term‘tax scheme’ has quite a negative connotationassociated with tax avoidance,

the definition of a ‘tax scheme’ is very broad, andthe reporting obligation covers taxpayers' activitiesfully compliant with the tax law as well as thosethat are not.

From the outset, the new obligation to report taxschemes has raised doubts. Rules can beinterpreted differently. And there are technicalissues to do with submitting information about theschemes. In this respect, on 31 January 2019, theMinistry of Finance published Tax ExplanatoryNotes - Information on Tax Schemes (MDR). Thepublication was intended to help reporting entities ininterpreting the rules, Unfortunately, the notes didnot erase the doubts.

Taking into account the specific nature of thefinancial sector and the essential role of banks inreporting tax schemes, the Ministry of Financedecided that it was necessary to issue additionalclarifications for banking sector. The draftclarifications are now available (in a draft dated 1October 2019), but have not yet been finallyapproved and adopted. However, until such timeas they are finally approved and published, thedraft may only serve as set of good-practiceguidelines for the banking sector.

What is a tax scheme, and who is obliged toreport?

The concept of a tax scheme is very broad,covering many typical transactions that are notentered into for the purpose of tax savings or taxavoidance. Therefore, the reporting obligation in thevast majority of cases concerns situations in whichno tax advantage will occur at all. The occurrenceof the ‘main advantage criterion’ is indispensablefor the schemes that have the so-called generichallmarks.

Three categories of entities are obliged to provideinformation on tax schemes. They are defined inthe rules as promoters, beneficiaries andsupporters. In customer relations, financialinstitutions usually act as supporters. Althoughstandard banking products and services

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are not tax schemes in general, the servicesprovided by financial institutions may support theirclients in implementing tax schemes. That is whyin this article I would like to focus on thesupporters’ role of financial institutions and theiremployees.

Generally required due diligence – what is it?

Under MDR rules, supporters` obligations will beimposed on a financial institution only if itundertakes (through its employees) to provideassistance, aid or advice on designing, marketing,organising and making available forimplementation, or supervising the implementation,of an arrangement. At the same time, the financialinstitution must ensure the due diligencegenerally required in the activities performed,taking into account the professional character ofthe activity, the area of its specialisation and thesubject of the performed activities. This duediligence should be examined in relation to aspecific person, such as an employee of a financialinstitution who has undertaken to provideassistance, or advice, and not to the institution asan organisation.

To exercise the due diligence, an employee doesnot need to actively search the databases or anyclient documentation of a financial institution forhallmarks, such as discovering whether or not theoperation has another particular hallmark, orwhether the client is engaged in a largertransaction and the banking services in which heparticipates are part of a larger whole that mayconstitute a tax scheme.

Neither is it required for a financial institution tocreate for this purpose tools that would monitor thecrossing of thresholds resulting from particularhallmarks (e.g. whether the income of a foreigncontractor for whom a bank guarantee is grantedexceeds PLN 25 million in a tax year). In thisrespect, it will be sufficient to take advantage ofexisting tools used, for example, in the processesof counteracting money laundering and terrorismfinancing.

In conclusion, these entities are not obliged toactively seek information about the arrangementand its tax consequences. If a particular eventtriggers an obligation to report a tax scheme, it willonly concern the information held by the supporter.

How and when to report?

If the supporter has any doubts that thearrangement may constitute a tax scheme and hasnot been informed by the client of the schemereference number (numer schematu podatkowegoor NSP) or its lack, they are obliged to:

request the client in writing to provide a writtenstatement that the arrangement does notconstitute a tax scheme (within five days from themoment of the doubt arising),

and

submit information on the tax scheme on theMDR-2 form (also within five days from themoment of the doubt arising).

If the supporter immediately notices that thearrangement constitutes a tax scheme, they maynot request the client to confirm that thearrangement under which the activity is performeddoes not constitute a tax scheme.

Moreover, if the supporter was not informed aboutthe NSP (scheme reference number) or the lack ofan NSP by the client, they are obliged to submitinformation about a tax scheme, if they saw orshould have seen that the arrangement they aresupporting constitutes a tax scheme. In this case,the supporter is obliged to submit informationabout the tax scheme on the MDR-1 formwithin 30 days.

However, if the supporter is not released from thelegal obligation to maintain professional secrecy(which is a statutory obligation), they are requiredto submit information about the tax scheme on theMDR-2 form within 30 days and immediatelyinform the client in writing that in their opinion

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the arrangement constitutes a tax scheme.

With their limited role and lack of knowledge aboutthe whole transaction to which the conductedactivities relate, employees of financial institutionsmust not only be able to identify a tax scheme, butalso, within in a very short time, provideinformation about the tax scheme they haverecognised. Taking into account the discretionarycharacter of due diligence and very strict sanctionsfor non-compliance with MDR reporting obligations,the supporter`s situation looks rather difficult.

ECJ ruling on foreign-currencymortgage loans in Poland: Is itreally a breakthrough?

By Daniel Smarduch, adwokat; Łukasz Szegda,attorney-at-law; and Sylwia Boguska, Banking &Project Finance practice, Wardyński & Partners

One of the most critical issues captivatingbanks and their retail borrowers in recent yearsin Poland has been the future of foreign-currency loans, especially those denominatedin or indexed to Swiss francs.

After the political battle around such loans hassettled, the issue is now mainly being addressed incourt proceedings between borrowers andcreditors. A long-awaited judgment was issued bythe European Court of Justice in October and hasalready been followed by judgments of local Polishcourts. Putting aside myths and hopes, we lookcloser at what may be the actual consequences ofthe ECJ ruling for all interested parties –borrowers, and both primary and secondarycreditors.

What’s it all about?

After Poland joined the EU in 2004, many Polesenticed by low interest rates took out mortgageloans linked to foreign currencies, including

the now-notorious Swiss franc. Following thefinancial crisis in 2008–2009, its repercussions andthe decision of the Swiss central bank to abandonits currency cap in 2015, the rate of the Swissfranc against Polish zloty surged. Trapped withfacility agreements containing indexation ordenomination clauses, borrowers started to suebanks over allegedly unfair terms of foreign-currency linking mechanisms, claiming that theyincluded abusive terms and consequently couldnot be effective against consumers. Usuallyborrowers in such cases have been claiming thatthe loan granted to them was actually a Polishzloty loan, and the linkage to a foreign currencyshould be removed either by nullifying the entireagreement or by striking the denomination orindexation mechanism. The main goal is to avoidan increase in indebtedness resulting from thesurge of foreign exchange (FX) rates, and to repaythe Polish zloty amount that was actuallydisbursed to them.

In one such case, the matter was raised with theEuropean Court of Justice. Hearing the case of theJustyna and Kamil Dziubak – Polish borrowerschallenging the allegedly unfair practices of aPolish bank – the Warsaw District Court submitteda request to the ECJ for a preliminary ruling on theissue. Many borrowers expected that the judgmentin the case would bring a breakthrough andestablish guidelines for adjudication favourable toborrowers.

What did the ECJ really say?

Firstly, the ECJ ruling did not directly answer thequestion of the consequences of foreign currencyloans issued in Poland. The ruling was delivered toguide the courts on whether EU law sets anyboundaries for remedies the Polish courts couldapply in cases where they find that specificclauses in loan agreements are abusive towardscustomers who took out FX mortgage loans.These guidelines, although issued in a case wherean indexation clause was disputed, could alsoapply to other situations where a clause is found tobe abusive against a consumer who entered

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into a loan agreement that included a denominationmechanism.

Secondly, the grounds for finding an indexation (orother) clause ‘abusive’ are not discussed in theECJ ruling. It provides instead that each caseshould be examined individually and that it is withinthe competence of national courts to determinewhether, in the circumstances of a given case, theterms of the loan may be regarded as abusive. Ifso, the consequences of such clause beingabusive are generally subject to the local law ofeach member state.Finally, the ECJ held that if the local court finds aclause abusive, it may apply remedies availableunder local law, bearing in mind that EU law doesnot preclude the courts from ruling that anagreement that includes an abusive indexationclause

is entirely invalid, if such consequences areprovided for in local law and the agreement cannotcontinue without such clauses due to a change ofthe main subject matter of the contract, or

is valid, but with the abusive provisions stricken, ifsuch consequences are provided for in local lawand the agreement can continue without suchclauses.

At the same time, the decision on whether theagreement without abusive clauses could continueto bind the parties belongs to the local court anddepends on the provisions of local law.Significantly, the ECJ cited its previous rulingswhich found that contractual provisions related toFX risk may be treated as related to the mainsubject matter of the contract, and thus may besubject to different scrutiny in terms of theirabusive nature.

A discussion of the possibility of upholding thevalidity of the loan agreement may be particularlyrelevant in cases where borrowers seek toreclassify the loan agreement as denominated inPolish zlotys but at the same time subject to aninterest rate calculated

based on LIBOR. Considering the most recentjudgments of Polish courts, which seem to allowfor such reclassification, issued after the ECJruling was announced, it remains to be seen whichdirection will be followed by most Polish courts.

The ECJ ruling held that national courts maysupplement loan agreements with dispositiveprovisions of law or other provisions which theparties agreed to apply instead of abusive clauses,but are precluded by EU law from supplementingloan agreements with customary arrangements orgeneral provisions of law. Nevertheless, suchsupplementation of loan agreements remainssubject to other conditions and is not an automaticmechanism to be implemented by the court.

Potential implications for borrowers

The ECJ ruling does not provide borrowers with aclear answer on whether they can successfullypursue their claims. The one thing they can besure of is that each case will be analysedindependently, within the limits indicated in the ECJruling. From the perspective of borrowers, althoughthe ECJ ruling concerns Swiss franc-indexedmortgage loans, it seems that the interpretiveguidelines presented may also be applied to loansdenominated in a foreign currency, as long as thegiven clause has already been found abusive. Butin any case, the burden of proof on theabusiveness of the clause lies with the borrower.

Consequences for banks

The ECJ ruling is not a source of anyconsequence affecting the banks or the bankingsystem automatically, nor on a widespread scale.Although it may be expected that increasingnumbers of borrowers may challenge their loanagreements, the process will take some time andthe results will largely depend on judgments issuedby Polish courts.

Importantly, the ECJ ruling does not completelyrule out any possibility. This means that wheredenomination or indexation clauses

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are found to be abusive, there may still be caseswhere the loan agreements are entirely invalidatedas well as other cases where the agreements arereclassified as loans granted in Polish zlotys, butwith the interest rate based on LIBOR.

Each such case will require the bank and theborrower to recalculate their obligations. It hasbeen quite clear what claims may be raised byborrowers, but it remains an open issue if thebanks will be entitled to a fee for advancing capitalfor a long period when the loan agreement isdeclared invalid at some point. And it must beremembered that the existence of the loanagreement is vital for many types of securityinterests, including mortgages securing repaymentof loans.

Different consequences may apply to banks thatdecided to securitise their portfolio.

Implications for secondary creditors

Portfolios of FX mortgage loans are not only heldby banks, but may have been acquired bysecondary market participants as part of thesecuritisation process, either as performing or non-performing loans. An effective challenge of theunderlying loan agreement will always haveconsequences for investors, as it will affect eitherthe balance or existence of the loans in the portfolioas well as the possibility of enforcing claimsagainst collateral.

As a result, banks and securitisation funds mayhave to scrutinise their receivable purchaseagreement in light of the parties’ liability and put-back provisions. In certain cases, mutualsettlements may be required.

At the time of publication, there have been coupleof judgments of Polish courts issued after the ECJruling reported by the media. For the moment, thejudgments suggest that a loan agreementcontaining abusive clauses does not always haveto invalidated, but may survive without the abusiveindexation clauses, although with

the initially agreed interest-rate calculationmechanism based on LIBOR (although not inevery case this has been definitely decided). Moredetails should be available after the writtenreasonings for those judgments have been madepublic. Furthermore, there are cases where wemay see the courts asking ECJ new questionsrelated to FX mortgage loans which mayadditionally help to clarify situation of debtors andcreditors.

Summing up, the ECJ ruling did bring certainanswers, but a number of issues remain open tobe addressed by Polish courts, depending on theevidence and arguments presented by theborrowers and creditors and possibly further ECJruling. Until there is stable and clear case-lawsupported by the Supreme Court of Poland, it willbe difficult to make general and definitivepredictions on the direction that may be followed bythe courts – and thus the degree of risk related toportfolios held by banks or securitisation funds.Nevertheless, the ECJ ruling reminds all marketparticipants, whether debtors or creditors, that theissue of mortgage loan agreements linked toforeign currencies should not be left unattended.

Warsaw operation leads the wayin transforming financial giant

by Michał Głowiński, general manager, HL Tech

HL Tech is Hargreaves Lansdown’s Polishinnovative technology centre, established in2017 in Warsaw, responsible for softwaredevelopment and for the strategic digitaltransformation of the British financial giant, acomponent of the FTSE 100.

Our goal here is to provide secure software to helpinvestors perform their financial operations. Thedecision was taken to keep the core softwaredevelopment in house; the IT used to serve ourclients was deemed too strategically important

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to outsource. Warsaw was chosen after a globalsearch for locations, from India to Canada.

Speaking about trends in the tech that standsbehind personal investment, we can distinguishfour general directions: ease and accessibility,high-quality customer service, personalisation andtrust.

Reputation, and security are nowadays not enoughto attract and retain customers who expect thebest customer experience and personalisedservice more than ever.

Customer needs, best practice, quality and gooddesign lie at the heart of HL Tech’s DNA. The workthat HL Tech delivers is focused on automation,consulting aimed at continuous improvement ofexternal and internal processes and services ofHargreaves Lansdown, and redesigning ways ofworking and educating.

What does it mean?

HL Tech helps to orientate the HargreavesLansdown organisation towards agile product-development, ownership of the processes and thediscipline required to make these conceptssustainable. We have proved that HL can work indifferent ways. The approach to gatheringinformation about how some processes currentlywork – and how they should work (known as‘event-storming’) has been exceptionally useful. Itfairly quick and easy to bring business people intothe event-storming process, the business peopleare using this method themselves in their ownmanual operation process designs.

Hargreaves Lansdown is transitioning to an event-driven set of systems, and has prototyped manyoptions to replace legacy systems in a carefullycontrolled manner. HL Tech has jumped in withboth feet to learn – and to help business learn –how to get the best out of technology. It has alsohelped to lead the evolution into a continuousintegration and continuous deployment approachfor code delivery. HL Tech’s developers have

been experts in Java and associated technologies(teams and individuals have presented at globallyrenowned conferences and forums). They havehelped set Hargreaves Lansdown on a successfulpath in migration to a Java-based, automatedsoftware delivery. This has helped define theapproach to application transformation and goodapproaches to breaking down heritage monoliths,using application of modern techniques of domain-driven design, event-storming and deliveringmicroservices. It has also helped to takeadvantage of Cloud Native technologies, educatingpeople in their adoption.

Other important benefits include the automation ofmanual interactions, which has saved considerabletime and reduced the risk associated with themanual handling of such interactions; upgrades touser interfaces mean simplified and cleaner user-experience; process redesign has helped provideusers with the data that they need in a format thatbest suits the task they are working on; redesign ofbatch routines that will spread the load on oursystems throughout the month rather thanconcentrating it in one pre-defined period.

Our internship programme has been brilliantlyshowcasing collaboration between HL Tech andbusiness along with delivering products in a shortperiod of time. The cross-cultural way of workingbetween Warsaw and Hargreaves Lansdown’sBristol headquarters has been exceptionallysmooth, we have bidirectional workingrelationships that have become stronger over time.

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Will I pay the exit tax whenmoving the company to the UK?

By Agnieszka Moryc, CEO Admiral Tax

Starting this year, exit tax applies in Polandunder the obligations imposed on Poland bythe EU Directive to those who move theirbusiness together with their assets outside thecountry.

In theory, this is one of the tools that is intended tokeep entrepreneurs in Poland and prevent taxoptimisation and moving business activity toanother country due to a more favourable law or afriendly tax system. In practice, the exit tax in itsPolish version is called a legal dud by theeconomic media, and it is fairly easy to avoid.

The idea of introducing exit tax was very simpleand was initiated by an EU Directive, although thePolish authorities had considerable freedom inshaping the rules of collecting the tax and were notrequired to impose it on ordinary citizens, income-tax (PIT) payers. Exit taxation is intended to stopentrepreneurs from moving their companies toother countries and compensate for lost tax profitsin the country where the business is actuallyconducted. The actions of the Polish governmentare supposed to force business owners to stay inthe country and refrain from attempting to optimisemostly in terms of income tax. It is worthremembering, however, that exit tax does notapply in every case and de facto is not an obstaclefor entrepreneurs who decide to develop theircompany in the UK. This is because the principleof the European single market and the freedom toconduct business activity still apply.

Who is subject to the tax?

The Act sets out two exit tax rates – 19% and 3%.The first rate applies to those assets whose valuehas been determined. The second one applies tothose assets whose value is not determined

in the case of flat-rate taxation.

According to Polish law, exit tax applies to thosewho own a company abroad and transfer part oftheir assets to it, assets previously related tobusiness conducted in Poland. The law alsoapplies to entrepreneurs who are Polish taxresidents, who change their tax residency toanother one in relation to revenues generated inPoland. Also included are entrepreneurs whoseassets transferred abroad exceed 4m złotys.

The above list is open, so it can be expected thatthe officials will indicate additional circumstancesunder which they can impose exit tax, although intheory it is fairly easy to identify entities eligible fortaxation. Simply put, exit tax is intended to dealwith entrepreneurs who not only change their taxresidence, but also decide to transfer their assets.

Exit tax base

The tax base is the sum of income from unrealisedprofit for individual assets. The income is theexcess of the market value of the asset,determined as of the date of its transfer (or the datepreceding the date of changing the tax residencyabove its tax value). The new regulations introduceboth the definition of ‘market value’ and ‘tax value’.

The market value of items (or property rights) isdetermined on the basis of market prices used inthe trading of such items or rights of the same typeand grade, taking into account in particular theircondition and degree of consumption as well astime and place of disposal.

On the other hand, the tax value of an asset is thevalue not previously included in tax deductiblecosts in any form that would be assumed by thetaxpayer as tax deductible – had f such an assetbeen disposed of by the taxpayer for consideration.The tax value of an asset is not determined incases where, according to separate provisions, taxdeductible costs from the disposal of such assetbeing considered are not taken into account forincome tax purposes.

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How to avoid exit tax?

Exit tax may make it difficult to move the businessto large corporations with numerous relationships,but not to small- and medium-sized enterprises,which by nature react more dynamically toadverse trends.

There are several options for moving a company tothe UK without being subject to exit tax. Firstly:total closure of the business in Poland and openingof the company in the UK. A parallel companydedicated to a market other than the Polish marketis a neutral solution. It is also possible to purchasea company operating in the UK. The purchase of acompany with history is a practice also used onthe Polish market. Another solution is to establishan offshore company, i.e. a tax structureconsisting of a new or existing British limitedcompany and a civil law partnership in a tax-friendly jurisdiction outside of the UK.

In practice, at Admiral Tax, in the case of servicecompanies operating in the B2B sector, we hardlyever come across any doubts regarding exit tax. Itis also worth noting that according to judgmentsmade by the Court of Justice of the EuropeanUnion and the following representation of the PolishMinistry of Finance, with respect to PIT, the tax willbe deferred until the disposal of assets or therealisation of profits – and not their transfer abroad.

Obligatory bank account in Poland for a Britishcompany When it comes to exit tax, there are alsoquestions about the obligatory Polish bankaccounts for foreign companies in Poland. Startingfrom 1 November, all companies that areregistered outside of Poland and have beenregistered for VAT in Poland are required to haveaccounts with Polish banks. This is the result ofthe entry into force of the amendment on the so-called split payment. It is worth noting, however,that the obligation to register for VAT in Polandapplies only to those entities which conduct salesto consumers. Companies operating in theenterprise

sector are still exempt from these obligations, andit is companies from the B2B sector that mostoften move their business from Poland to the UK.

More information Admiral Tax

Are you a Five-star employer?Dare to get rated!

By Łukasz Chodkowski, managing director,Déhora Poland

We are increasingly using mobile applicationsinstalled on our mobile phones to make our lifeeasier.

Frankly, I cannot even recall the last time I called acab. After each ride, the application asks you aquestion: Are you satisfied with your ride? Sure –five stars out of five. Are you dissatisfied with yourhotel? Was it not clean enough? That’s true, itcould have been better – rating: three stars.

Easy, right? Not quite. After all, it would be unwiseto expect a rating that is impulsive by definition toalso be reliable and generated without emotion.What does it mean that the ride was ‘satisfactory’?Does it mean that the driver got you to the trainstation on time despite numerous and blatantviolations of road traffic regulations? Perhaps thehotel room was clean, but an argument with youremployer made you angry and caused you to rateit 3 stars.

By the way, few people know that just as we rateour drivers so do they, in turn, rate us…

But let’s start from the beginning…

It would actually be really difficult to determine theexact moment where rating everything became thenorm. In Poland, the beginning of rating could betraced back to the boom of the largest onlineauction platform – Allegro. The rating system itselfat that time was simple, clear and transparent.

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On the most basic level, the rating system couldbe summarised as follows: you are an honestseller/buyer, you receive a comment and a rating:positive, neutral or negative. Most likely, each of ushas at some point written something like: Irecommend this user!

However, it seems that we have failed to notice avery important phenomenon, and we are not yetfully aware of its social consequences.

We have become used to our applications, wecrave likes in social media, and we failed to noticethat booking systems such as AirBnB or Bookingas well as Uber and BlaBlaCar or other mobileplatforms that connect service providers withcustomers who need such services, such asUpWork, actually request a lot more than just ourrating. Most importantly, it is a brilliant businessmodel using a simple method to engage us, theusers, in order to save plenty of money that wouldotherwise have to be spent on hordes of qualifiedemployees to rate the service quality. Can youimagine an annual employee evaluation of Uberdrivers? No need, they are rated routinely.

Naturally, we appreciate this solution because alarge number of stars makes it easier for use tobuy things or book a specific hotel. After all, oncewe have booked our room, we do not want to bedriven there by a driver who has less than 4.5stars. And just when we started to believe that weare already rating everything and everyone, Uberhas started testing an application in Chicago toconnect employees with employers – Uber Works.

Employer, are you ready for this?

It seems that everything has already been writtenabout how we are now dealing with an employee’smarket and how difficult life has become foremployers, not just in Poland. The record-lowunemployment, generation mix andinternationalisation of the labour market arecombined with the increase of labour costs andunyielding competition for the best employees.However, I am convinced that we are

about to witness a tremendous cultural change.Firstly, the low unemployment and absence ofworkforce have put significant pressure on wages.Secondly, the rising wages will – much soonerthan we might expect – make a large portion of theworking population ready to seek employment on apart-time basis. This is something that thecompanies in Poland are neither culturally nororganisationally ready to handle.

This is no longer science fiction. Pretty soon,mobile applications that connect employees withemployers will replace employment contracts. Acompany that is not ready for a cultural andorganisational transformation that enables it toincrease the flexibility of employment will not be thefirst choice for anyone who desires greaterfreedom in work-time scheduling and who expectsto have even more free time.

What, then, should HR departments regard as themost important challenge in 2020?

A five-star rating and a comment: I recommendthis employer!

When uncertainty becomes thenorm

By Jerzy Dąbrowski, CEO, Bibby FinancialServices Poland

In recent months, the media has beenconstantly flooded us with reports abouteconomic threats such as risk of losingimportant data, currency crisis, environmentalrisk and the potential economic effects thatmay come with it, Brexit and the rivalrybetween US and China.

What do the world’s small and medium-sizedbusinesses have to say about operating in such arisky climate?

2019 Global Business Monitor

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reveals insights from SMEs around the world

In partnership with Euler Hermes, this year’s reportsurveyed 2,300 SMEs across 13 countries:Canada, USA, Ireland, UK, Netherlands, Belgium,France, Germany, Poland, Czech Republic,Slovakia, Hong Kong and Singapore. The reportpresents the opinions of owners and seniordecision-makers of SMEs across themanufacturing, construction, wholesale, transport,and services sectors.

Overall, the proportion of SMEs voicing concernabout the global economy has fallen to 56%, downfrom 65% in 2017. However, only 20% of SMEsthink the global economy is performing well, downfrom 30% in 2017. Why has concern decreased ifbusiness leaders think the global economy is inworse shape?

According to David Posting, Bibby FinancialServices’ global chief executive, SMEs have gotused to the uncertain situation on the economicmarket. “If compared with our findings in GlobalBusiness Monitor 2017, when almost two-thirdsvoiced concern about the global economic outlook,these results show an improvement. It remains tobe seen whether business owners are indeedmore positive about global prospects, or if they arebecoming accustomed to the possibility of adownturn and, in pockets, are taking advantage ofthe changing environment.”

Of course, they are well informed about theeconomic situation in the world. SMEs nowadaysare a very important part of the global economyand make an enormous contribution locally. According to the World Bank, these businessescontribute up to 60% of employment and up to 40%of GDP in emerging economies.

It makes sense to treat SMEs as a sentimentbarometer. They react to international trends,respond to technological advances, and form thenucleus around which local economies revolve.According to the SMEs surveyed, when asked forthe top three threats to global economic growth

in 2019, the answers were the political situation inthe US (42%), Brexit (35%) and rising raw materialcosts (23%). This is broadly the same as in 2017.But they are not so concerned about these threats,because they think that in reality most of theserisks will never affect their own supply chain.

So what are SMEs afraid of?

According to the report, the 2,300 SMEs surveyedidentified rising overheads/cost (42%), red tape(36%) and cashflow (32%) as the top threechallenges faced. They are also expected toremain the top three for the next 12 months.

Companies are living their problems; they areconcern about shortages in qualified staff as wellas cashflow. Skills and staffing continue to be a topissue for SMEs. Owners are afraid that they areless attractive then big corporations. Cashflow hasbecome a greater challenge in the interveningperiod, moving from fifth to third on the list ofchallenges (compared to 2017). Owners of theSMEs are afraid of bad debts, because one inthree SMEs struggles with cashflow. The time ofrepayment takes time, 24% of SMEs have to wait30 days or more to receive payment from theircustomers. But nearly half of SMEs (47%) havebeen made to wait between 30 and 90 days!

The biggest threat? Bad debt.

Last year 31% of SMEs have experienced baddebt. Every time an owner is waiting forrepayment, there is the possibility they will neversee the money. Of the SMEs that reportedsuffering a bad debt, over two fifths (44%) said ithas affected their growth and/or profits. Bad debtsuspends development of the company and alsohits daily business. The proportion of SMEssurveyed that suffered a bad debt that they wereunable to recover has broadly remained the same(30% in 2019 versus 35% in 2017). In practice, thismeans that companies still have a problem withcollecting money on time and don’t have money topay for their current liabilities such as payingemployees or suppliers. It is worth

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thinking about ways of securing financial liquidityand use factoring as additional security againstunreliable contractors. It is also an excellentsolution to secure financial liquidity.

Cashflow is one of the most important things in thecompany. If we compare a company to a body,then cashflow is like blood circulation. Thanks tofinancial liquidity, it’s possible to develop companyand also think about innovation. As Albert Einsteinwrote to his son in 1930: “Life is like riding abicycle. To keep your balance, you must keepmoving.” That’s why the company’s owners mustthink ahead. The competition never sleeps.Overall, 85% of SMEs surveyed plan to invest intheir business in 2019. Those in the US (92%) andCzech (90%) are most likely to invest, whilst thosein the UK are least likely. In the UK, many havebeen deterred from investing while Brexitdiscussions continue.

External financing

Across the sample, 15% of SMEs are likely toapply for external finance in the next 12 months tosecure their financial liquidity and have funds tofinance new investments. Polish SMEs are mostlikely to apply (25%), while only 6% of German andDutch SMEs say they are likely to apply. PolishSMEs are most likely to believe that the economicsituation in their own country and in the world isdoing well, and that is why they look positively intothe future.

Overall, one in three SMEs feel the availability offinance is excellent/good. But In 2019, one in fiveSMEs reported themselves as having beenrejected for external finance, with SMEs in France(37%), and the Czech Republic (33%)experiencing the highest levels of rejection. Ofthose that have been rejected for external finance,the main reason cited was ‘poor creditrating/history’ (31%). Frequently it’s aninsurmountable barrier for them. That’s why SMEsshould consider factoring as a form of externalfinancing.

Factoring companies use a different riskassessment model than banks: unlike traditionalcollateral, they focus on invoices and customers,not a mortgage. A company that wants to usefactoring does not need to have significant assets.A factor will examine the business’s customers,invoice payment time, sales volume anddevelopment plans. On this basis, a financingdecision is made. It is especially a good solutionfor entrepreneurs who want to develop theirbusinesses.

Kaplan Financial – leaders inonline accountancy qualifications,now in Poland

Kaplan Financial is excited to be expanding toPoland to help businesses exceed and meetglobal demands.

Kaplan provides training for professionalqualifications and business programmes acrossthe globe. Every year, the firm trains more than45,000 professionals from business andgovernment as well as international students forinvestment qualifications (including CFA),professional accountancy and tax exams, andbespoke programmes for corporate andgovernment offices. Kaplan Financial is part ofKaplan, Inc., a leading international provider ofeducation services and a subsidiary of GrahamHoldings Company (NYSE: GHC), formerly theWashington Post Company.

Accountancy training in the past and today

The period from the 1970s to the turn of themillennium was pivotal when looking at theevolution of accountancy training in the UK.Training became more accessible and itsdevelopment, as we know it today, really began.Large professional training companies grew, andthe qualifications continued to evolve. Much of thechange which began in the 1970s was due to legalamendments, which came about in the late ‘60s.The early ‘70s, through to the late ‘80s,

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was also a period where accountancyqualifications were evolving. The Association ofChartered Certified Accountants (ACCA), and theChartered Institute of Management Accountants(CIMA), both gained Royal Charters (in 1974 and1986 respectively) and continued to develop.

Businesses today operate in an increasinglyvolatile and uncertain world, and it’s Kaplan’smission to teach finance professionals the skillsrequired to meet global business needs.Accountancy is essential for the success of anybusiness, especially today as corporate financialactivities are under intense scrutiny as neverbefore.

Professional qualifications

The accountant’s role today goes beyond purelychecking financial figures and balancing books – they are expected to consult and provideactionable insights to their clients, adding value tothe organisation’s strategic business goals. Kaplanwants to equip staff with these dynamic skills sothey are in a good position to enter the businessworld, applying their understanding to excel in theirorganisation.

A professional accountant is an invaluable asset toa company. The skills they learn gives them anunderstanding of the company, and theenvironment in which they operate. This enablesthem to ask challenging questions and adopt apragmatic and objective approach to solvingissues. This is a valuable asset to management,particularly in small and medium enterprises wherethe professional accountants are often the onlyprofessionally qualified members of staff.

Employees who are professionally qualified canadd further value to an organisation. For example,the use of analytical skills can enhance strategicdecision-making and in turn, their teams are moreproductive, making fewer mistakes. It can alsogreatly decrease staff turnover, which is a problemmany companies face in Poland today. Employeeswho feel they are supported in their

personal development are happier and morepositive about their organisation. This benefits boththe employee and the business.

Kaplan online learning

Online learning serves as a vital tool for employeesto access learning resources including expertlecturers, peers and reading materials that are up-to-date and relevant with current industrydemands. Where once online learning was viewedwith uncertainty, learners today are more open tothis approach, with many students opting forflexible online courses.

Today’s technology allows for an interactivelearning experience, replicating that of theclassroom. Virtual classrooms provide aconvenient space for learners, tutors and lecturersto interact and be part of a joint collaborativelearning experience. Beyond lessons, learners canovercome geographical constraints, and effectivelycollaborate with their peers and lecturers in avirtual community to gain new knowledge andskills.

Kaplan is the world’s leading supplier of financialtraining and qualifications from financial markets toaccountancy qualifications. With 25 centres acrossthe UK, it is the country’s leading accountancytraining provider. Kaplan believes thatprofessionally qualified accountants bring the mostbenefit to organisations, wherever they are based.If you want the best from your staff, have a look atthe qualifications that Kaplan can provide here inPoland and see what else it can do for you andyour business. Find out more.

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https://www.kaplan.eu/


The application of blockchaintechnology through M&A process

By Nicolas Klukowski, consultant, FinancialAdvisory Services at Mazars in Poland

Blockchain technology has beenenthusiastically embraced and promises newbenefits in many sectors including M&Atransactions. But how could blockchaintechnology impact M&A process?

The mergers and acquisitions (M&A) process hasseveral steps and take a long time to complete.From the preliminary negotiations to the dealclosure and integration, many parties can beinvolved – corporate experts, accountants,lawyers, financial advisors, tax consultants, etc.The preparation phase consists in developing anacquisition strategy, identifying potential targetcompanies and performing an analysis. Followingthis, all participants share and process a widerange of data especially throughout the due-diligence process. It is a procedure implementedby the seller (vendor due-diligence) or an acquirer(buyer due-diligence) for purpose of analysinghistorical and prospective situation (financial, tax,legal) of all or part of one or more companies.

Globally it is providing information to enableinvestor/ purchaser to make an informed judgmentas to the balance of risks and opportunities and theterms at which to proceed to completion of thetransaction. From the non-disclosure agreement tothe sales and purchase agreement, there is acumbersome signing process which requiresnegotiation, drafting and compilation of approvalsand signed documents in order to achieve thetransaction.

Technology will radically change the way financialprofessionals work and help them to face growingchallenges. The new technological tools such asartificial intelligence, robotic

process automation, Internet of Things, enterpriseresource planning and blockchain will modify theapproach to M&A transactions. From targetscreening to implementation and integration, theM&A process will be fundamentally transformed tooffer more visibility on the deal, to make it morefluid and generate added value.

Among game-changing technologies, blockchaincould come in handy at some phases of an M&A.Created in 2008, blockchain is above all a storageand information transmission technology. Offeringhigh standards of transparency and security, itworks without a review body as it is completelydecentralised. In a simultaneous way, users canshare a large range of information and all users areable to manage the register. This chronologicalregister contains every historical exchange carriedout by all participants since its creation.

Initially, blockchain was developed to supportcryptocurrency (such as Bitcoin digital currency)transactions, but its use is not limited to this. Manybusiness lines are interested in this technology andtake advantage from it. For example, the bankingsector is testing blockchain to automate money-laundering checks; the logistics sector usesblockchain to track and trace products or even theart market can use it to make identification andcertification of works of art more reliable.

Within the M&A process, blockchain technologycan have a significant impact to improve the qualityof the process. Possible applications would be toprovide an unalterable and secure register througha virtual data-room (VDR) during the due diligenceprocess or to use smart contracts to speed up thetransaction and enable automatic payment at theclosing stage.

The virtual data-room in the age of blockchaintechnology

Once the due diligence process starts the vendormakes available to the buyer and his advisorsbundle of documents via the data room. It is aplace for consult the principal documents giving

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financial, accounting, tax, legal and economicinformation on a company that’s up for sale.Traditionally, it was a physical room, nowadays itis made available virtually via an internetconnection.

A register securing confidential data [??]

These documents are subject to a deep reviewand contain strategic data as well as confidentialinformation. There are two types of data collected,stored and transferred to third parties throughoutthe data-room. The first type is personal data usedto create the user account (name, first name,company, position, email, password). The secondtype is commercially sensitive data such asfinancial statements, trial balances, list ofsuppliers/customers, contracts, shareholderresolutions. Both types of data require a high levelof protection. Blockchain technology seems tooffer a great opportunity to secure this contentagainst potential cyber-attacks but also to ensurecompliance with regulations.

An immutable record offering transparency

The main feature of the blockchain is itsimmutability, it guarantees the integrity of the dataand the recording of the transactions. Any changesto the record would be seen by other users. Andthe blockchain provides an encryption solution tostored data that enhances the security ofexchanges and transfers. This traceability enablesusers to know at what time documents wereconsulted, which ones in particular and by whom.The sharing of information between users istransparent, simplified and more secure. Thetechnology eases the comprehensive storage ofthe surrender file to provide a copy of all theinformation disclosed in the VDR to the parties, aswell as compliance with legal requirements ofarchiving. In addition, it helps prevent the risk ofpost-transaction conflict by accurately proving thelevel of access to information that each of theparties had thanks to the history of consultationsand exchanges.

As a large number of parties are involved duringany M&A process, there is a high risk thatinformation may leak. The protection of confidentialdata and discretion are the keys to a successfultransaction; blockchain technology provides a safeenvironment in order to achieve this goal.

Smart contracts: innovative and trusty M&Aagreements

Smart contracts represent another asset of theblockchain technology. It is a computingconversion of a contractual agreement, madebetween two or more parties, which allows them todefine mutual obligations and to apply themautomatically. Once the code is pre-set on thebasis of the initial terms of contract, it can beperformed by a computer network and without theneed for intermediaries. It works on the followingprinciple: if a given condition is met then the relatedobligation will be performed. Smart contractsstrengthen the trusted environment and reduce therisk that the conditions expected are not met.

A disintermediation reducing costs

Smart contracts found their use in many casesfrom public sector, insurance to health care. Thisfunction has the potential to play the role of thetrusted third-party to confirm the contract’sexecution and, one day, it could replace it. Thedisintermediation of this contractual process mayreduce the costs usually generated to pay a bank,legal or notarial fees. And modification ormanipulation of the programmed contract is notpossible without due authorisation, whichguarantees the integrity of the contract and itsoutcome.

Having this in mind, it seems that smart contractsare poised to change the way M&A agreementsare concluded. The parties can benefit from a highdegree of security and guarantee, and smartcontracts can be used whenever mutual trustbetween several parties is required. From the non-disclosure agreement – by ensuring traceability ofthe parties’ interest – to the earn-out provision

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– by determining how much the vendor is paidbased on different performance factors.

Accelerated cross-border payment processing

This allows also automatic payment which isinteresting in case of cross-border paymentsarising from M&A transaction. Through theblockchain, parties can trade assets withoutcentral authority, reducing transaction fees andusing smart contracts that can execute instantly atransfer and accelerate term of payment.Another key to an M&A transaction’s success aretrust and speed. Using smart contracts, blockchainsolutions establish mutual trust between the partiesand speed up the execution of concludedagreements.

Blockchain technology has a bright future andoffers plenty more functionalities that have not yetbeen used during M&A transactions. However,despite all the advantages discussed above,human contact remains essential, as at this stagetechnology cannot replace counsel and judgment,although it certainly enhances significantly theprocess.

Warsaw. The financial capital ofCEE

by Maciej Ozdoba, associate director, andMaksymilian Sobczak, senior property broker,Nuvalu Polska

International banks and companies from thefinancial sector are relocating their offices toPoland in ever-increasing numbers.

Why? The biggest CEE market provides access toqualified, well-educated employees and modernoffice space for a reasonable price. Poland is acountry with several large conurbations, yet mostforeign financial-sector companies chooseWarsaw as the location of their outsourcedservices or CEE headquarters.

The capital of Poland is a logical choice. Warsawis Poland's biggest business centre, headquartersfor most of the public-sector entities as well as thestock exchange. It also has the biggest labourmarket in the financial sector with graduates from anumber of reputable universities (such as WarsawUniversity, Warsaw School of Economics,Warsaw Technical University and the LeonKozminski Academy). Warsaw also sees thebiggest inflow of qualified staff from all over thecountry. The capital attracts the most ambitiouspeople. It’s still the best destination for those whoseek to pursue a career in the financial sector.

The financial sector chooses CBD

Warsaw is definitely the biggest office market inPoland with a total of 5,600,000m2 of space. It’s inthe best condition ever – it’s growing year to yearand demand remains high. Over the next twoyears, developers will deliver a further 800,000m2of modern office space in Warsaw, which means a14% growth in area.

Warsaw’s central business district (CBD) hasalways been the most popular location for thefinancial sector, but its centre of gravity is movingwest. The new heart of the CBD is situated closeto the Metro Line 2, between ulica Marszałkowska(the main north-south axis of central Warsaw) andRondo Daszyńskiego, where the new businessdistrict is being developed. The CBD was chosenby the most reputable brands - Goldman Sachs,J.P. Morgan, Standard Chartered, Santander,mBank, EY and Deloitte.

The district is dominated by modern A-classbuildings, which meet the highest Europeanstandards. Many of them are really spectacular. In2017, Warsaw Spire won the MIPIM Award; whileNorman Foster’s Varso Tower project (currentlyjust past the half-way stage in height) will becomethe tallest office building in the EU at 310 m. Alongwith prestige and recognition, the district providesexcellent access to public transport (Metro, bus,tram, suburban and long-distance trains)

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and a well-developed infrastructure of services.

The approach to interior design is also changing.Due to their prestigious character and therelentless struggle to recruit and retain the besttalents on the labour market, companies from thefinancial sector are at the forefront of this trend.Employees, their well-being and comfort are in thespotlight. Traditional open spaces give way tocreatively designed, flexible project workplaceswhich create a friendlier work environment. It’s theera of vast, attractive social spaces, well-developed office kitchens, relaxation zones,playrooms and exercise rooms. But the modernoffice also acknowledges different styles andmethods of working – collaborative work in teamslarge or small, and focused ‘deep work’, cut offfrom distractions such as noisy chit-chat andphone conversations. In recent years we haveobserved the rapid development of Polish designstudios, offering world-class fit-out projects whiletheir cost of implementation is still much lowercompared to Western Europe’s biggest businesscentres.

New opportunities: relocation andconsolidation

The huge investment leap we face in Warsaw hassparked a wave of relocations. They mainlyconcern the financial sector’s biggest marketplayers as well as BPO/SSC/IT/R&D companies –Poland has become the biggest European hubattracting international organisations with theirshared services centres. The rapid development ofthe banking sector has resulted in the increase insuch locations. Dispersion of office space isproblematic due to difficulties concerningadministration, cost-management, andcommunication. Currently, we can observe agrowing trend for consolidation, which is possiblethanks to the development of many new officefacilities with rental space exceeding 50,000m2. Asa result, there are many record transactions thatintegrate structures of companies, such as mBank(eight locations), BGK (three locations) and Warta(two locations). By the middle of next

year, we expect several new deals for spacesexceeding 20,000m2.

Such a wave of relocations will trigger anaftermarket. Companies which move to newfacilities will release their current space. Themajority of these facilities are still attractive. Someof them will need to be modernised to meet thenewest standards and customers’ expectations.

Time for right decisions

Leasing rates in the CBD and in the Wola districtjust to its west are between €16-24m2. They arecompetitive, particularly compared to those inLondon, Berlin, and Paris. Conclusion? It’s aperfect moment for companies which plan tolaunch their Polish office or expand alreadyexisting structures. Currently, there is good accessto modern, attractive office spaces for areasonable price. Due to high demand, we expectthat prices will rise, so it’s worth making decisionsquickly. Most of the new facilities are beingimmediately commercialized by a rapidly growingflexible office space sector. WeWork is a goodexample here – in just two years the global co-working giant has leased 52,000m2 in Warsaw.The right moment is now. ***

Nuvalu Polska is one of the leading advisingcompanies on the Polish commercial real estatemarket. The company specialises in thetransactions on office, retail, industrial & logistics,and investment market. Experts working forNuvalu have advised on the processes of over1,000,000m2 of space.

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Trends in the outsourcing sector

By Dagmara Witt-Kuczyńska, operations director,TMF Group

The outsourcing sector is constantly changing,reflecting the fluid needs of companies.Four main trends currently impact the sector –changes in legislation, globalisation,automation and the increasing scale ofoutsourced processes.

Changes in legislation

Changes in legislation determine and shape clients’needs. An ever-more complex businessenvironment will result in more clients willing tooutsource processes to mitigate risk connectedwith non-compliance. In Poland, recent changes intime and attendance regulations, for example,caused an increased interest in time andattendance (T&A) solutions.

One of the most significant drivers of outsourcingsector is complexity. A recent report by TMFGroup, the Global Business Complexity Index,ranked complexity in 76 jurisdictions worldwideaccording to how unpredictable the businessenvironment is and how difficult it is to operate inthem. A common theme was that jurisdictions withfrequently changing legislation, usually scoredhigher on the rankings – suggesting they weremore complex in the short-term. Complexjurisdictions require detailed local knowledge ofhow to enter and operate in them. Outsourcersworking in this sector may successfully fill thisgap.

Globalisation

Outsourcing, like other sectors, is subject toglobalisation. Although it is very muchconcentrated on local compliance, globalisation

as an international trend impacts the wayoutsourcing is developing. For many companies,foreign investment is a natural way to expand.Cooperation with an outsourcer with a regional orinternational presence would ensure meeting thesame standards, delivering consistency amongdifferent countries.

A growing trend of companies willing to operateregionally or globally, with one provider, has beenobserved. Therefore, the market has been prone tointernational expansion through greenfield orbrownfield investments, M&A processes or cross-border strategic partnerships to meet theaspirations of entrepreneurs wanting to go global.

Automation

Automation is a trend impacting practically allsectors. ‘Automate or die’ has become true formany processes, especially the labour-intensiveones, to free up resources for more abstract andcomplex activities. For the outsourcing sector,automation is an opportunity and a challenge.Automating internal processes leads tostandardisation and increased efficiency. Forexternal processes, it leads to expanding theoffering and addressing clients’ needs in supportingservices. Although operational activity is a centralinterest for companies, no true expansion can beachieved if their support services are not fit forpurpose. Managers who are aware of the risksconnected with the failure of support functions,such as in HR or finance, are more likely tooutsource these functions. However, they alsohave specific requirements of IT systems andprocesses, and by integrating the system of theoutsourcer with internal ones and ensuring dataflows among the systems, this will lead todecreasing administration engagement ofoperational staff.

Increase in the scale of outsourced processes

There has been a rise in movement from tactical tostrategic outsourcing. More and more companiesare willing to outsource entire processes so that

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the outsourcer can become a true businesspartner, creating additional value for the company.This trend is correlated with increase ofspecialisation – there is less incentive forcompanies to develop competencies within theorganisation if another entity can do it quicker,better and at lower costs, as a specialist in thefield. Nowadays, due to rapid changes happeningon several levels, keeping up with all of them iscostly, inefficient and could be a business risk (inthe case of regulatory compliance changes).Therefore, companies with growth ambitions, needexternal parties supporting the growth, or at leasteliminate the barriers or mitigate the risks in theeconomic environment.

The outsourcing sector is continuously evolving toaddress an increasingly complex world. The abilityto respond to constantly changing clients’ needsrequires the outsourcing sector to be one stepahead. The general trends as outlined above shapethe sector, however, the underlying message foroutsourcers is to support clients using theirspecialist skills and knowledge, so that the clientcan focus on what is most important to them –which is their core operational activity.

Export finance as an answer tointernational trade tensions – thecase of Pekao S.A., the secondlargest bank in Poland

by Piotr Stolarczyk, Managing Director of theInternational Banking & Export FinanceDepartment / Andrzej Latoszek, InternationalTransactions Office, Bank Pekao SA

According to the OECD Interim EconomicOutlook released in September, the global GDPwill grow by 2.9% , down from 3.2% in itsprevious forecast.

The main barrier to growth is the mounting trade

tension related to the increasing protectionism,which adversely affects international trade and theactivities of businesses on foreign markets.Ultimately, it subdues the rate of economic growth.Political action should be taken at international anddomestic level to put the global economy on asustainable growth path. There is an urgent need toreduce trade tensions, especially in the area ofdisrupted trade agreements. Apart from balancedfiscal policy priorities, all economies should bemore integrated and resilient to ensure appropriatetrade volumes.

It is clear that the higher the GDP of the buyer'scountry, the higher the volume of the buyer’spurchases on foreign markets. Thus, referring tothe destabilisation of global trade caused byincreased trade tensions, we should expect aslowdown in foreign demand, which will alsonegatively impact global GDP growth by limitingproductivity and investments.

Such dynamic changes in the global environmentalso affect Poland, for which exports have becomea significant component of the economy over thepast years. In 2018, Poland was the EU’s eighthlargest exporter of goods and services, its exportsaccounting for nearly 4.2% of total EU exports.Globally, Poland is ranked 23rd. The dynamics ofPolish exports in recent years has been more thantwice higher than the GDP growth rate. Accordingto data published by the Central Statistical Office,the compound average annual growth rate ofexports has been about 8.5% since 2010.

A dynamic increase in the value of exports inrelation to GDP has been noticeable for manyyears. As from 2010, the relation of Poland’sexports to GDP has increased by more than 15percentage points, up to 55% in 2018.

Poland's accession to the EU significantlyfacilitated access of Polish enterprises to the EUmarket as all trade barriers were lifted. More than80% of all the goods and services sent fromPoland goes to the EU countries (the cumulativeincrease of exports from Poland to these markets

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in 2016-18 amounted to around 11%). Polishexports to the UK (which amounted to $16.2 billion/ €13.7 billion) accounted for 6.2% of all Polishexports and remained at a stable level. The UK isone of Poland’s top export destinations (thirdplace). The compound average annual growth ofexports from Poland to the UK amounted to around7% p.a. in 2016-18. The reason for this is thatPolish companies have preferred so far to sell theirgoods to the more proven and predictable markets.Geographical and cultural proximity was the key tosuccess in foreign expansion.

Unfortunately, you should keep in mind suchforecasts as the OECD’s which predict subduedGDP growth in highly developed markets – theG20 group, the Eurozone and the US. A too-highconcentration of Polish exports to highly developedcountries means dependence on the markets witha relatively low long-term dynamics of demandgrowth.

One of the major challenges faced by exporters isthe availability of financing. According to the research conducted in the last few years (Ahn,Amiti, 2011; Napiórkowski, Stolarczyk, 2018),there is a strong relationship between internationaltrade and export financing – access to financetriggers sales to international markets.

On foreign markets, Polish companies often haveto compete with entities that have strong capitalfundamentals. They are able to offer theircustomers (importers) very favourable financingconditions and extended payment terms.Secondly, proper risk management – the riskassociated with a lack of payment from buyers forthe executed contracts – is crucial. Therefore,when expanding to new markets, such as the UK,the Polish companies should cooperate withfinancial institutions such as Pekao S.A. – thesecond largest bank in Poland which, thanks tofinancing, can make their business offer moreattractive, and thus can help them compete ininternational markets.

Our partners entering foreign

markets should actively cooperate with us. It isworth taking advantage of our expertise andexperience – a few dozen companies have alreadyput their confidence in us. We prepare tailor-madesolutions for companies taking into account theirbusiness model, the sector they operate in, as wellas the target markets where they plan to expand.Thanks to a wide range of export financingproducts, Bank Pekao S.A. ensures safety insettlement of transactions and is able to makeclients’ offer more attractive to their foreignpartners.

We are with our clients at every stage of theiractivity: starting from the decision to expandonto foreign markets right through to thesettlement of transactions:

Our vast experience allows us to offer companiescomprehensive advisory services, supportingthem already at the stage of formulating keyconcepts and market-entry strategies

We propose financing structures that are optimalfor the given type of business activity. We workclosely with the insurers of export loans from thevery early stage of transaction structuring

We offer competitive terms of financing of exportactivity, taking the payment and credit risk awayfrom Polish exporter, eliminating the impact of thisrisk on the exporter’s balance sheet

We support exports to all countries in the world –even to exotic destinations burdened with higherrisk

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Finance in the Brexit era –services for corporate clients ofthe Santander Group acrossPoland and the UK

By Tomasz Bieliński, Poland - UK corridormanager, Santander Bank Polska SA

The Santander Group offers immense potentialfor enterprises and corporations on the lookoutfor international business opportunities.

We want to share our experience and know-howwith our clients. To this end we have developed aprogramme for our clients who intend to expandbusiness operations abroad.

Being part of the Santander Group, we can offerour clients access to new markets, supportingthem in the expansion of their business on aninternational scale in every single country in whichthe group operates. Our support includes: openingbank accounts, financing subsidiaries, issuingguarantees and many other services. We alsooffer assistance in accessing business informationand contacting legal firms and accountants thatcooperate with us.

International business is of key importance to us.Since last year we have intensified our efforts inthose business corridors which are mostsignificant to the Polish economy and moststrategic to Santander Bank Polska. These includeGermany, Spain, Portugal, Latin America, the UKand the US. Between 2012 and 2018 foreigncompanies have invested over €60 billion inPoland, with companies from Germany, Spain andthe UK topping the list of foreign investors inPoland.

A dedicated manager with extensive marketknowledge and experience is responsible fordeveloping each corridor. Their role is also todevelop cooperation and business in the corridorthrough new client acquisition and the supportoffered to bankers in developing relationships withexisting clients.

Santander’s International Banking Office acquiresnew clients and coordinates relationships withinternational Business and Corporate Bankingclients of Santander Bank Polska and SantanderGroup.

Santander is the only bank with an extensive retailnetwork of branches across Poland and the UK,which gives is a specific edge in the Poland-UKcorridor.

The International Banking Office is alsoresponsible for cooperation with its equivalents inall the other countries where Santander is present,in particular in Spain, Portugal, the UK, and the US.We have similar offices also in Mexico, Brazil,Columbia, Argentina, Puerto Rico, Chile, Uruguayand in Germany. In Poland, we cooperate withforeign chambers of commerce, embassies, andmany investment support organisations.

The International Banking Office assists:

international clients in

initial formalities related to opening bank accountsby referring clients to appropriate segments, indocument execution coordination at Groupbranches across the EU

obtaining funding and using credit lines of theparent company in other countries where theGroup operates

Polish clients

opening bank accounts abroad and in their firstcontact with a foreign branch of the bank,

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obtaining information about a given country, itsbusiness opportunities, recommended businesspartners (law firms, advisors, etc.) from the localInternational Banking Office,

obtaining capital abroad by using credit lines inSantander Bank Polska abroad,

arranging teleconferences/meetings with the bankin the countries of interest to the clients andpotential clients of Santander Bank Polska.

The UK and Poland: new businessopportunities

In recent years, the UK has consistently been oneof the top three export destinations for Polishgoods. Yet there are still areas where UK-Polishbusiness relations could and should be developed.This applies equally to both import and export.

The UK is Poland’s third biggest recipient forexport goods, after Germany and Czechia.According to GUS, Poland’s central statisticaloffice, the British share in the total of Polish exportsamounted to 6.2% last year. Food is commonlyconsidered Poland’s main export to the UK,however the automotive sector is actually numberone, with cars and car parts outselling food anddrink. Furniture and interior fittings (mattresses,cushions, bed linen and pillows), constructionmaterials, windows and doors, chemicals,pharmaceuticals, and cosmetics make up much ofthe rest, along with precious metals (either asingots or processed as jewellery). Around 80% ofproducts sold in IKEA stores throughout the UKare sourced from Poland. Poland is ranked ninthas the UK’s largest export destination among theEU countries, according to HMRC data for 2018.

The Santander UK/Poland Corridor - how itoperates in practice

In recent months, we have become involved inbuilding a robust ecosystem of business partnerswilling to cooperate in helping British companieswho wish to start business in Poland, as well as

Polish companies which plan either to establish orexpand their presence in the UK. Without closecooperation with DIT, BPCC, and tradeassociations (such as the UK’s SMMT), theresults of our activity would be less impressive.

A perfect example of such cooperation was thetrade mission of British automotive industryrepresentatives to Poland in October. The visit wasorganised with active support from the above-mentioned organisations and Santander UK. Thissector was not chosen at random – the StrategicSectors Departments at Santander UK andSantander Bank Polska have been gatheringexpertise and information on selected industries foryears. This year we have focused on theautomotive, aviation, rail, and food industries,which resulted in a number of joint initiatives,events, trade missions and business meetingsattended by representatives of companies fromboth countries. Next year, we will continue jointactivities, based on best business practices, aswell as feedback from our clients, which reflectstheir business development needs.

Santander UK has prepared its Fast-Track forPolish companies wanting to start their operationsin the UK. It is a special credit offer, enabling quickand easy access to financing, based on analysis ofthe parent company’s results in Poland and on therecommendation of Santander Bank Polska.

We are the only bank in the EU to provide instantinternational real-time transfers to the UK, basedon blockchain technology, with a maximumtransaction amount of £20,000. This service isknown as One Pay FX. It is a convenient solutionfor most companies settling transactions betweenthe two countries. We also act as a clearing bankfor such payments for all UK-based banks, and inthe nearest future we are planning to develop theservice further by increasing the amount andintroducing other currencies, such as the euro andzloty.

I am looking forward to cooperating with you – let’sbring our talents together!

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Roundtable with UK journalistsconsiders chances for Polish-UKtrade in IT services followingBrexit

BPCC member Future Processing, a Gliwice-based IT firm that employs over 850 people andearns the majority of its income in the UK, haspublished a report looking at the role thatuncertainty plays among UK business leaders.

Entitled How to run a business in the times ofuncertainty, the report looks at the most significantrisks – and the ones with the greatest impact – thatBritish businesses face. Michał Sztanga, FutureProcessing’s managing director, had breakfastwith correspondents representing the BBC, theDaily Telegraph, Guardian and Scotsman as wellas the Warsaw-based English-language monthlyPoland Today, to discuss the results of the report.

In a wide-ranging discussion, journalists had thechance to question Mr Sztanga about how FutureProcessing copes with skills shortages, sales tothe UK market, public procurement and the effectsof Brexit. The keys to success, working in ITacross cultures, said Mr Sztanga, is building trust.“Only through solid partnerships can we navigatethe turbulent waters of our current uncertainties,”he said. The company is rather atypical when itcomes to Polish businesses; “sometimes, with ourbusiness partners with whom we have extendedand excellent relationships, we will undertake newbusiness on the basis of a phone call, withoutrecourse to a lengthy legal contract. While thisleads to risk, we’ve not yet been let down by thisapproach. A legal contract doesn’t stop thingsgoing wrong – a trust-based relationship does.

With staff retention figuring as the number oneconcern among BPCC members, FutureProcessing’s approach to keeping employeesinvolved is interesting. “We can’t afford to take ononly routine projects. We prefer projects that areinspiring to our team, so that they gain new skillsand learning experiences,” said Mr Sztanga.

The breakfast gave the journalists a chance todiscuss the key issues facing the Polish and theBritish economies, and how Brexit will impact two-way trade between the two countries.

Settling foreigners’ tax and social-security obligations

For a foreigner working in Poland, ZUS and PITregulations are black magic. They differsignificantly from the rules by which Polishemployees pay their tax and social-securitycontributions.

“When we employ workers from abroad, as well asthose who divide their time between Poland andanother country, we want them to focus on thebusiness and work for which they were hired,”saidŁukasz Bączyk, tax director at ASB Poland.Together with Justyna Trochimiuk, payrollmanager at ASB Poland, he delivered training toBPCC members on 19 November 2019 about thisdifficult issue. To determine the tax obligations of a givenemployee, it’s necessary to determine whetherthey are a tax resident or not. If the employee is aresident, which means having a place of residenceand the centre of your life interests is in Poland,and you are staying in Poland for more than half ayear, you are subject to unlimited tax liability inPoland. If the employee is a non-resident,according to the above criteria, only workperformed in Poland is subject to taxation.

As regards social security contributions, a personsubject to EU legislation is subject to socialsecurity in the country in which they physicallyperforms they work. The employer is the payer ofthe contributions, whilst the employer isresponsible for reporting their employees to theinsurance office. In the case of non-residents, theA1 certificate – a document that certifies

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that the employee is insured in another country –will be required. In this case, if the work is notperformed for more than 24 months, the employeemay be subject to contributions in their owncountry. This is regulated by the regulationsconcerning the posting of workers.

Passive income will also be subject to taxation – itmay be taxed in both countries, depending on whatresults from a given double-taxation agreement.

When settling accounts in the annual tax return forforeign income, it is necessary to submit anadditional PIT-36 or 37 form for business income.Double taxation is avoided by means of twomechanisms – progressive deduction orproportional calculation.

Employees receiving income from an employmentrelationship or pension from abroad are obliged topay tax advances on their own. However,experience shows that they often do not rememberabout it or have to use the help of an externalexpert. Therefore, to improve the effectiveness ofsuch settlements, it is worth consideringtransferring the settlements of such remuneration,regardless of whether it is the remuneration ofPoles earned in another country or foreigners inPoland, to experts specialising in this field.

Szczecin business discusses taxchanges and PPKs

Over 40 entrepreneurs and employees fromfinance and accounting departments took partin a meeting Changes in taxes and PPK - whatshould every entrepreneur know.

The event, organised by RSM Poland together withSantander Bank Polska SA and Business ClubSzczecin, supported by the BPCC and Finexa, theassociation of finance directors, was held on 24October 2019 Szczecin’s historic old town hall.The conference was entirely devoted to changes intaxes that will befall business in 2020 and the issueof auto-enrolment in employee capital plans (PPK– pracownicze plany kapitałowe).

The meeting was opened by Marcin Kaczyński,director of Santander Bank Polska CorporateBanking Centre, Bogumił Rogowski, president ofBusiness Club Szczecin, and SebastianGoschorski, accounting & payroll partner at RSMPoland, all of whom referred to the currenteconomic situation in Poland. Next, TomaszBeger, tax advisor and tax partner, and KatarzynaSadowska, tax advisor and tax supervisor at RSMPoland, talked about the changes in VAT, CIT andPIT planned for 2020 and discussed the mostimportant problems that taxpayers have to face inthe current year. There was also information anddiscussion on the mandatory mechanism of splitpayment, joint and several liability in VAT, the newmatrix of VAT rates and binding-rate information(WIS) or withholding tax (WHT). In turn, RobertMuszyński, manager for PPK in Santander BankPolska SA, discussed issues related to thecreation, administration and disbursement ofPPKs, answering numerous questions fromparticipants.

“At the meeting with Szczecin's entrepreneurs, wewere able to reliably and clearly discuss the mostimportant issues for taxpayers and clarify anydoubts concerning the functioning PPKs,” said MrBeger, an experienced practitioner who shares hisknowledge in the area of taxes during trainingsessions for management boards and financial andaccounting services or during specialist coursesorganised by the accountants’ association inPoland. “The high turnout at the conferenceconfirmed that changes in taxes each time raisemany concerns among taxpayers, and thatentrepreneurs look for reliable sources ofinformation and professional support.

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I am glad that we could help,” added Mr Beger.

Real Estate and ConstructionBreakfast looks at green building

A long-running and popular series of events,the BPCC’s breakfasts bring togetherstakeholders from the built environment –investors, developers, contractors, engineers,architects and of course real estate advisors.

The fourth quarterly breakfast of this year was heldjointly with the Scandinavian Chamber ofCommerce, in Skanska’s Spark office building,and attracted representatives of over 50 firms.

The construction sector is the biggest producers ofgreenhouse gases and waste materials, generatingthree times more waste than manufacturingindustry and four times more than households.Builders have a duty to the environment to sourcemore sustainably, focus on recycling and deliverbuildings that are carbon neutral. But withpressures on cost higher than ever before, whatshould the construction sector be doing to buildsustainably and within budget? How much moreshould tenants expect to pay for sustainability?How to apply innovative solutions to improve theenvironmental impact and the wellbeing of thetenants’ employees? How does Poland lookcompare with countries of Western Europe andScandinavia?

These topics were discussed by a panel of realestate and construction-sector experts, SylwiaChorąży, marketing, sustainability and innovationdirector, Skanska; Jacek Siwiński, CEO, VeluxPolska; Jonathan Cohen, senior partner fromColliers Poland, and Bartosz Clemenz, from thereal estate practice, of law firm Hogan Lovells.Michael Dembinski, the BPCC’s chief advisor,moderated the discussion, which also includedquestions and comments from the floor.

How can workplace bullying betackled effectively?

On 22 November 2019, members of the BPCC’sHR policy group met with Karolina Stawicka,Paulina Grotkowska and Michał Zabost, labourlaw experts from law firm Bird & Bird Law, todiscuss anti-mobbing procedures.

Companies today need to developed anti-mobbingprocedures as a market standard, fulfilling legalobligations, and proving that it has a responsibleorganisational culture. Having such proceduresalso help to effectively manage reputation risk.

While discrimination or harassment may affect awide range of people – candidates, formeremployees or contractors, ‘harassment’ in the legalsense refers only to harassment in the case ofemployees employed under a contract ofemployment. ‘Mobbing’ itself is a rather narrowlydefined in the Labour Code - it must be long-lasting, intentional, directed towards a specificemployee and must have the character of apersonal antipathy of the ringleader of the mobbingtowards the victim. When preparing anti-mobbingprocedures, it is worth bearing in mind that even ifit turns out that these conditions are not met, andthe reputation of the company has already beendamaged, because it has been forced to announcepublicly that it is dealing with a reported case ofmobbing.

Any employee may become a victim of mobbing –regardless of whether they are a subordinate or amanager, and whether it takes place in relation toanother employee of the company or, for example,with a client. Harassment cannot be determined onthe basis of subjective impressions, but on thebasis of objective criteria, which would beassessed in the same way by a person notpersonally involved in the case. It can happen thatpeople who report bullying commit it themselves

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and treat their accusation as a kind of insurance.

What behaviour constitutes bullying?

Communication – constant, unconstructivecriticism especially in front of others

Social relationships in which the bully avoidstalking to the victim, isolates them and, especiallywhen they are the superior, does not show implicitconsent to contact between co-workers and thevictim

The victim's reputation may suffer - when they areridiculed, slandered or their competences aredowngraded.

Harassment can affect the scope of tasks to becarried out – not to delegate them at all, or todelegate tasks that are impossible to carry out, orto congratulate someone for doing the job.

Harassment can affect the health of an employeethrough both chronic stress and direct intimidationwith physical violence. However, it is usually acombination of these factors.

Bird & Bird’s experts discussed possiblemeasures for the victim as well as solutions foremployers, such as an Anti-Mobbing Commission– how to appoint one, who can be a member, andhow to keep the balance of perspectives so thatthe case can be resolved objectively. Even if notevery accusation ends in a statement of mobbing,it is still necessary to react to every report –remembering not only about the wellbeing ofemployees or the reputation of the company butalso about the fact that the employee has the rightto a labour court trial and a civil trial for violation ofpersonal rights. The most important aspect,however, is the proactive building of anenvironment in which bullying simply will not havea chance to occur.

Internal HR departments, legal departments andexternal labour law advisors have many tools toprevent and respond to such situations

at an early stage -- primarily through soft HR tools,well-written internal policies, codes of ethics andpolicies on conflicts of interest. Accusations ofmobbing often overlap with the private lives ofemployees, which cannot be interfered with by theemployer. However, with the help of a good policyon conflicts of interest, the employer can react tothe transfer of relations from private life toprofessional life at an early stage.

In anti-mobbing procedures as well as inaccusations of mobbing, it is extremely importantto maintain impartiality, therefore, at every stageit’s worth obtaining expert opinions and involvingexternal advisors on labour law in the proceedings.

Speed Business Meeting

5 November 2019 at the Warsaw Marriott Hotel

The British Polish Chamber of Commerce togetherwith 11 other chambers of commerce: Belgian,German, French, Swiss, Spanish, Canadian,Ukrainian, Portuguese, Scandinavian, British,Dutch and Irish organised the Speed BusinessMeeting, which took place on 5 November 2019 atWarsaw Marriot Hotel.

This year's meeting was attended by over 300participants who had access to the company'soffer and make new business contacts, withpotential business partners, customers, suppliers,distributors and investors.

We look forward to meeting you during next SpeedBusiness Meetings!

BPCC HR Review: how to keep thebest employees in a company

27 November 2019, InterContinental Hotel,Warsaw

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In recent years, the most pressing issue facingBPCC members have with the question of what todo to retain the most important capital that eachcompany has – its employees. The situation on thelabour market is currently a huge challenge – newinvestments continue to move into Poland,unemployment is very low, so good employeesreceive many offers, often financially tempting.

Are companies, however, doomed to an outflow oftheir best employees? The BPCC, together withmember firms, ABC London Group, Dehora,Kinnarps, Linklaters and the Wellness Institute, hasbeen answering this question throughout BPCCHR Review. A roadshow taking in four cities,Kraków, Wrocław, Poznań and Warsaw, the HRReview was attended by representatives of over200 companies from across Poland.

Key messages for employers

Employer are able to build a strategy to retain thebest employees, as long as they take into accountthe trends and possible tools that are available tothem.

Ewa Stelmasiak, the founder of the WellnessInstitute, presented an overview of macro trendsaffecting the way that employees perceive theworld of work. On the one hand, life hasaccelerated significantly, many spheres of life havebeen mastered by new technologies, on the otherhand, we are dealing with a growing awareness ofthe health and the well-being of employees. Thisshift in outlook has dramatically changedemployees' expectations of what it means to be agood employer. Above all, it has strengthened theneed for purpose and leadership in wellness, aswell as co-creating and personalising the

work environment. Karina Kreja, internationalconcept manager at Kinnarps, talked about trendsin the work environment. The offices where weused to spend five days a week from 9am to 5pmare becoming history. Many employees take theopportunity to work from home as a matter ofcourse, they also work from other places – cafes,transport hubs or hotels. As a result, the offices ofthe future must become more flexible and open tothe needs of employees, and employers shouldlisten to them carefully when building a workenvironment.

Of course, employers have within their reach toolsthat can be actively supported to understandemployee needs. Piotr Kędzierski from ABCLondon Group show on the example of the ITmarket at which stages of employment anemployee loses motivation and what hard toolsand solutions can be used to keep an employee inthe company. By offering the kinds of benefitsusually associated with full-time employees on apermanent contract, employers can make movingemployers more difficult for freelance ITcontractors. Łukasz Chodkowski, managingdirector of Dehora in Poland, talks about theexperience of introducing flexible working time.Self-rostering, the ability to link employees’preferred hours to production plans via smartalgorithms, gives employees the feeling that theemployer trusts them and gives them moreinfluence over the schedule, reducing absenteeismand boosting productivity. Monika Krzyszkowska-Dąbrowska and Łukasz Burakowski, lawyers fromLinklaters, provide an overview of the solutions thatappear on the market. Interestingly, many of themare not recognised at all as benefits by labour law –in such cases, it is worth relying on legal expertisewhen building employee benefit programmes.

During all four of the HR Review events, the BPCCconducted a survey of companies regarding theircurrent practices and solutions that they use torecruit and retain employees. The report basedupon this questionnaire will be presented in Londonon 15 January will offer an up-to-date overview ofthe way companies in Poland are dealing with

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the challenges of record low unemployment, andwill be of value to potential inward investorsconsidering the Polish market.

Chairman's Note

by Antoni F. Reczek OBE, chairman of the board,BPCC

Dear members and readers,

As of 1 January 2020, the BPCC will beginoperating as a Polish employers’ organisation.

This long-planned change will result in loweroperating costs, and will result in tax relief underthe not-for-profit scheme that benefits employers’organisations. The legal change results fromBPCC members voting unanimously to restructurethe BPCC from an English company limited byguarantee to a Polish employer’s organisation atthe Annual General Meeting on 29 May 2019. TheBritish Ambassador in Warsaw and the PolishAmbassador in London remain our honorarypresidents.

This is a formal process and will not change theway the BPCC works with its members; eachchamber member will receive individualcorrespondence about it in 2020.

On the membership side, the passing year hasbeen busy, with a number of other events that areof great importance. In April, the Council of BritishChambers of Commerce in Europe (COBCOE)merged with the British Chambers of Commerce(BCC) to form a truly global chamber network. TheBPCC has been active member of COBCOEsince 1997, winning its Chamber of The YearAward four times. Since the merger, we haveengaged in shaping the BCC’s internationalnetwork which currently consists of 55 Britishchambers worldwide and 52 regional chambersacross the UK. BPCC staff will be assisting in thedevelopment of the communication process

among the international and UK chambers,emphasising the network’s reach to our membersand partners.

On 1 July 2019, the BPCC took over the rotatingpresidency of the International Group of Chambersof Commerce (IGCC), representing theinternational investor community in Poland, untilthe end of 2019. The grand finale of our Presidencywill be on 17 December 2019 with an investor’sbriefing: Poland’s performance in 2020 DoingBusiness report, which we deliver jointly with theWorld Bank.

On 4 September 2019 we supported the launch ofEconomic Relations Between Poland and theUnited Kingdom – an Exceptional and EnduringPartnership report at the Krynica Economic Forumin partnership with the British Embassy andseveral BPCC members.

In 2020 at the age of 28 (the BPCC wasestablished in 1992) we feel young and passionateabout what we do, yet with the necessaryexperience and expertise to act effectively. Weplan to engage with you more strongly than ever,so please follow our media announcements. Westart the year with our Burns Supper celebration,an evening of poetry reading, sword dancing,bagpipes and Scottish specialities accompanied bya hand-picked selection of whiskies. This time it’sour Wrocław office that will host the event, soplease join us there on 30 January 2020 tocelebrate.

We encourage you to use your membership tomake the most of our policy groups. As a member,you can access all activities in Warsaw, London,Kraków or Wrocław. Our vibrant and dynamicnetwork across Poland and the UK is all aboutsupporting your business.

Last but certainly not least, we wish everyone anenjoyable time with family and friends during thecoming Christmas season and every success in2020.

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We look forward to seeing you soon!

Poland stands at the digitalcrossroads

Piotr Ciski, managing director of Sage Poland,talks to Michael Dembinski, the BPCC's chiefadvisor, about the state of Polish small- andmedium-sized businesses, and why they are ata turning point.

"It's a special moment – two forces are comingtogether, which will have a huge impact onPoland's SMEs. One is digitalisation – Poland isnowhere near the top league when it comes tobusiness digitalisation. It's currently in 25th placeout of 28 EU member states. Over 85% of PolishSMEs are not fully digitised.

"There are reasons behind this. In the past, thePolish labour market was very deep;entrepreneurs could ‘enjoy’ the benefits of a highunemployment rate – you didn’t have to digitalisewhen you could take on an extra pair of hands. Buttoday, the Polish economy is creating more workthan its labour market can supply. Ukrainianemigrants are coming to work in Poland to fill gaps,so the time to subsidise lack of IT systems isover."

Mr Ciski's message to Polish entrepreneurs isstark: "Don’t complain about the labour market –salaries will continue to grow, get used to it." GDPgrowth and demographics are making rapidchange inevitable. "An economic slowdown willmake going digital more difficult. This is the last callto automate repeatable processes in yourenterprise. We are behind, now is the time to catchup."

"Many old-fashioned businesses are asking how todigitalise. The global economy is lapping at theirfeet. 'What should I start with? How should I start?',they are asking. 'Why should I change? I’ve beensuccessful so far...' The quick answer is 'It has tobe well-delivered and repeatable'."

"There is a need to change to stay competitive inPoland and globally. Unless you are deliveringever-more complex, more advanced solutions,someone, somewhere will take your place."

The second force – my second message – is thatPolish entrepreneurs need to get ready for legalchanges and for TaxTech. "Tax is getting digitaland becoming more complex. There used to beone tax declaration to be completed, once a month.Now there’s one per transaction. Declarations arebecoming more detailed, offering ever moregranularity. The future will be real-time taxreconciliation. Every transaction will have its ownelectronic reflection. This is real time reporting, andit will require a big change in accounting mentality."

From 1 April, new regulations will make mandatorythe integration of sales and accounting systems."This will be big burden on business, a bit like theimplementation of JPK – Single Audit File (Tax) – first big corporations, then mid-sized firms, thensmaller ones, finally micro-businesses employingone to nine employees. The Polish government'sfuture financial needs will require the tax system tobe sealed, and not leaking. The way this willhappen is that each transaction needs to beassigned to a category to the Ministry of Finance –not into the accounts systems but in the salessystems. This will affect vendors of salesplatforms and makers of digital fiscal registers(kasy fiskalne). Bridges will need to be builtbetween specialised sales systems to reconciletransactions generated out of the accounts system– and this will have to be done quickly to allow forsales made after 1 April to comply with the newrequirements."

"Tax is quite advanced in Poland in terms of thetechnology. Here, Poland is one of top countries.But it should learn from the UK certain ways ofinteraction between the tax authorities, theentrepreneur and the tax software companies. Weare rapidly moving from physical audits, when taxinspectors would enter buildings to look at thebooks, to purely digital interaction. This requires aculture change. A revolution.

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"In the past, a bill would go from the Ministry ofFinance, through Sejm, and become law. The chieffinance officer would then have 30 days to learnhow to fill in the monthly tax declaration accordingto the new rules. But today, there is anintermediary sitting between the authorities and theentrepreneur, a third player in a triangle – the taxsoftware company. Sage is one such intermediary.Thirty days is not enough time to prepare thetechnology for a new online tax declaration form.Three months is needed. How fast can taxsoftware companies adopt the new law into newsystems?

"Yet the status of tax software companies such asourselves is not recognised at all – how well do thelegislators understand the systems and goodwillbetween ourselves and our clients? A cooperatingculture is needed. It is the prime responsibility ofthe Ministry of Finance to educate the businesscommunity as to forthcoming changes. Countriesleading the way here are the UK and Portugal,where the implementation of SAF-T firstestablished close cooperation between the financeministries and tax software companies.Certification here is key – software that is certifiedby the Ministry of Finance as being up-to-date withthe latest changes.

Successful succession

We have talked about the demographic aspect ofthe labour market. But there's another importantdemographic turning point ahead, coinciding withthe forces of digitalisation and regulation. Between1988 and 1990, 1.4 million businesses were set upto fill the void left by the collapsing state sector."Today, many of those first-time, first-generationPolish entrepreneurs are looking to give up theirbusinesses and retire. For Polish independentfamily businesses, succession is a hot topic. Forsome business owners there will be a natural path,but for many others, their children may have othergoals, and so these entrepreneurs will have toseek outside help."

"More than ever, the Polish entrepreneur needs to

be guided, like a ship avoiding a collision course.But who stands ready to help? There is a bigproblem with trust. Many business owners are notready to let an outsider into their business. In theUK, with its traditions of openness in business, it'smuch easier. There are many mentors willing tohelp, and many consultancies specialising inworking with SMEs. In Poland there is a shortageof consultants ready to help, especially in smallertowns outside the big cities.

"For Polish family businesses there's a spectrumof advisors – decide what colour you need, defineyour business model, document your workflow,manage your production. Pan Kazimierz knowshow to run your production line, but one day hemight not show up your the factory. So hisknowledge, his recipes for your production linesystem need to be replicated into your systems sothat one day, you can substitute them for the lackof such a guy.

"Small consultants might be ex-Big Four in regionalcentres, freelancers with the capacity to take on upto a maximum of three clients. But generally, thePolish economy needs smaller, cheaper, moreagile consulting companies to guide SMEs throughthe automation processes. Consultants havetended to be expensive; entrepreneurs still see littlevalue in external advice, education is needed.

"In Poland today, business angels are eitherlooking for the big deals or for new businesses withthe potential to quickly scale up. Existing small andmedium-sized businesses in traditional sectors ofthe economy are of little interest to them. And thereare not enough consultants, mentors or businessangels to go around.

In Germany , there is a natural process ofconsolidation going on. A good example can beenseen within the network of Sage resellers; as onereseller considers retiring from the market,neighbouring resellers look to grow their customerbase by acquiring the businesses whose ownersare leaving the market. This is not happening inPoland.

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"The main indicators of the economy do notchange – GDP, inflation, unemployment. Butbusiness models do change. Polish entrepreneurshave to decide how to invest and what to invest in.How to digitise. Find your hotspot and drive yourideas. If Poland is to be successful andcompetitive as a nation, its small- and medium-sized business must deliver complex goods andservices in a fast-changing global economy. Thebest business model can be nicely replicated."

Forecasts – economy, markets,innovation

Adam Uszpolewicz, chief executive, AvivaPoland, talks to Michael Dembinski, theBPCC's chief advisor, about the economy, theintroduction of employees' capital plans andhow technology is shaking up the financialservices sector.

Prospects for 2020

"It's getting increasingly difficult to forecast. For anumber of years everyone expecting a recessionto happen – something big, or a meltdown – kepton saying: 'it hasn’t happened this year, so maybeit will happen next year.' The doomsayers are nowlooking at 2020 this way, but I think we’ll see moreof the same, a mixed picture for the economyoverall. Starting from the two largest economies,the US and China – the trade war outcome is notyet decided. Presidential elections in the US haveusually been a good thing for the economy; anincumbent president stimulates the economy towin votes, while a new president presents newpolicies which also boost the economy overall. TheUS is in reasonably good shape. China, however,is slowing, but the sheer size of its marketsuggests that there’s no big crisis expected there.Europe presents a mixed picture. There’s a pick-up visible in Germany, which had been slowingdown, but then the last quarter was slightly up.Germany will adapt to changing conditions, itshould show slight growth next year. Franceshould do well, Italy less so. The

big question is the UK and Brexit; our ownestimates are that the UK economy will growslightly.

"Poland’s growth will slow down, despite thegovernment’s programmes to boost consumptionsuch as 500+, 13th pensions and other handouts.These will initiate growing inflation above NationalBank of Poland targets. The World Bank expectsheadline inflation to hit 3.5% by the end of 2020 –the highest of any advanced economy. Growthnext year will be around 3%, not as high as thisyear. Plans to raise the minimum wage to 4,000zlotys a month in 2023 will further increaseinflationary dangers. So there will be someturbulence ahead in Poland, but no single trend.The world economy will grow but at a lower pace;there is no meltdown coming in 2020.

PPK first tranche – participation rate 'a worry'

The first tranche of Polish auto-enrolmentschemes (PPK) has been implemented, coveringall companies with over 250 employees. Thistakes in a total over three million employees, a bigpart of the Polish economy. Next year, PPKs willencompass firms employing between 50 and 250people, and in 2021, it will be firms employing up to50 people and smaller, so a few more million tocome.

"There has been a fiercely fought battle betweenproviders of PPK plans. It is a very competitivemarket, with prices of asset management fees wellbelow the maximum allowed. But participation inPPK plans is a worry. Anecdotal evidence is thatopt-outs are high, higher than either thegovernment or the industry had expected. Wethought around 30% of employees would opt out,but the reality is 50% or more. In the UK, Australiaand New Zealand, opt-out rates are in single digits.But in Poland, there have been constant changesin the pension system over the past 20 years,which have led to a decline in trust. In particular the‘disappearance’ of 51% of the second pillar assetsfrom individual accounts to ZUS over five yearsago, means that trust is low. There has

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been no massive effort from government or thepensions industry to educate at the local level. Theoverall sense of putting money away is met withscepticism among many Poles. The governmentand industry have been disappointed by the finalamount of money in the system. People who’veopted out can re-enlist at a later stage, but aconcerted effort is needed, a media campaigninvolving government, the industry – and agents atthe local level, of whom Aviva has over 2,000. Theaim is to get employers to know how PPKs canbenefit their employees. Otherwise when furthertranches are rolled out, participation rates cannotbe expected to rise. SMEs need convincing thatthis is something good for their employees; it's notan easy process, dealing with thousands ofsmaller employers.

Market position

"Aviva predominates in two segments – lifeinsurance and asset management. We are also inthe top ten in general insurance. Across life andgeneral insurance, ranked by profit rather thanpremium, Aviva is a number two insurer in Polandafter state-owned PZU. In asset management it isthe second-biggest pension fund in Poland, andnumber five among mutual fund companies.

"Our impact on the economy is significant –Aviva’s companies in Poland employ over 5,000people, as employees or agents, and Expander,Poland’s largest financial advisor, which is 100%owned by Aviva, brings the total to well over 6,000.Aviva is an investor through several vehicles, alllocal companies. It is the biggest pension-fundcompany, and the second-largest investor on theWarsaw Stock Exchange with significant stakes inthe Top 100 listed companies, and with smallerstakes held by our mutual fund companies. Ourassets across the group total more than 40 billionzlotys, most of which are invested in the WSE, soit’s a big boost to the WSE and in the Polisheconomy. Aviva also invests in Polish real estatethrough funds managed from London – mostly inretail malls, offices and other commercialproperties, but also residential

ones, such as Zlota 44, the prestigious building inthe centre of Warsaw, where Aviva was a projectinvestor. So we are significant overall in the Polisheconomy. We are a big investor in Polishgovernment bonds – the biggest UK investor in thePolish market.

Public-sector finances

"Polish government bond yields have been goingdown as everywhere, but they have recentlypicked up, as inflation and yields go hand in hand.The government is not very active on the market,as the budget is close to balanced; there is onedanger to the government’s issuance activity, andthat is Poland’s carbon footprint. Poland has a poorreputation; the lion’s share of the Polish economyis still powered by coal; I do expect that institutionalbuyers of Polish government bonds from somemarkets will become increasingly demanding as toPoland’s green credentials. Poland has to take thisseriously and address its energy balance in theeconomy.

"Local authorities' finances are in relatively goodshape. Every zloty invested in infrastructureshould have a multiplier effect. I am not afraid forthem – local economies will be booming,increasing their tax base to pay off debt – I don’tsee a crisis coming. But local authorities will haveto find new ways to balance the books as there aretougher times ahead. We're living in an era ofcheap credit; but cheap money will become lesseasily available. Plus the EU budget for the nextseven years will be decided next year. There islikely to be significantly less earmarked for Polandthan in 2013-2020, with money going south ratherthan east, and the UK no longer contributing to thebudget. Reduced EU funding for local and regionalprojects in Poland may hurt the financial health oflocal authorities, but it's too early to forecast.

FinTechs' presence in insurance

"FinTech is a popular buzzword, but start-ups arestill at the fringe of financial services. Their biggestimpact has been in payments,

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PayPay, Revolut or Klarna, a Swedish start-up.These have had a marked impact on consumersand have forced banks to lower their fees. But sofar in the world of insurance we have yet to seestart-ups making a similar impact. Insurance is avery complex market, above all it has verydemanding regulators, who are sceptical of start-ups' ability to handle underwriting and customerdata responsibly. In particular, data privacy.Facebook’s attempt to launch its owncryptocurrency, Libra, would have turned thesocial-media giant into a money issuer – butregulators had serious doubts about thecompany’s credibility in data protection. Certainly,the big techs will make an impact in insurance, butnot on their own. They will likely team up withestablished players just like Google with Citibank,Apple with Goldman Sachs, or Amazon withTravelers, they will offer aggregator services. Noneof them will become an insurer, but consumers willbe able to buy insurance through them. The scalewill affect the market. They will offer pricecomparison – their size and reach will help, butultimately, they will remain intermediaries. We willsee a lot of start-ups in niches; helping with dataanalysis, handling fraudulent claims, offering videoinspection of damage.

"Innovation is about turning technology into a viablebusiness. The next three to five years will causehuge disruption, changing the way we do business– but in the world of insurance, I see evolutionrather than disruption of existing business models.

"Where the useful technology exists, we arepiloting solutions. It's still quite expensive – buteconomies of scale are vital if it is to be affordableto the mass market. A water-leak detector that canclose off water at the mains, for example. Sensors,cameras – these will cost a few hundred poundsper household, people are not happy for theirpremiums to increase, but this is the future, whichwill see far more tech in it than the way we dobusiness today. One example is video inspections– you call the claims department through video,click on a link – connect the phone to the claimsinspectors who will assess

the damage in real time. Payments can be madequickly.

"Blockchain-based smart contracts also have apart in the FinTech future. Again, they are not verycommon yet in the insurance industry. Oneapplication that might quickly become popular isflight-delay insurance – this is easy toindependently confirm. As soon as that happens –in real time – payment can be made, literally beforeyour delayed flight has even touched down. Butwhere data is not so easily obtained, it will nothappen. Look at car insurance – Canadian police,for example, can make available to insurers theirrecords of bad driving. In Poland, the police won't. Ithink that over time, the use of smart contracts ininsurance will grow, as people’s trust in them willincrease.

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Documents

Issue No. 41bpcc.org.pl/contact-magazine/issues/31.pdf · Agnieszka Skorupińska and Patrycja Białko from law firm CMS Poland take a look at proposals from Brussels that will steer