THE COOPERATIVE BANKING SECTOR IN POLAND: DO UE RISK REDUCTION MEASURES AND CAPITAL ADEQUACY REQUIREMENTS AFFECT PERFORMANCE AND STABILITY?

The purpose of this paper is to evaluate the links between regulatory practices and both Polish cooperative banking sector performance and the institutions' stability. Research methods cover the comparative analysis of scientific literature documents and reports as well as statistical data. The paper points out that bank consolidation in the Polish cooperative sector resulted in sharp reduction in the number of banks. The cooperative banks have been forced to reorganize their structures in order to respond effectively to challenges of the globalization trends in the modern banking sector and to adjust to the European regulatory framework. The Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation (CRR) were implemented into the EU to comply with the global standards (i.e. the Basel Committee on Banking Supervision). Findings indicate that the quality of cooperative banks loans granted to SMEs has worsened and the deterioration of basic measures of effectiveness has been observed in the years 2012 through 2016. In the capital requirements of cooperative banks, the requirement for credit risk was predominant, while the average credit risk weights were higher than in commercial banks. The bankruptcy of SK bank (one of the largest cooperative banks) at the end of 2015 and over 2 billion zlotys payment of guaranteed deposits by the Bank Guarantee Fund, highlights the key importance of supervision approaches on banks' liquidity risk and a funding structure.