Implementation of KNF recommendations and requirements for lending institutions

Implementation of KNF recommendations and requirements for lending institutions

As the Polish Financial Supervision Authority (KNF) assumes oversight of lending institutions as of 1 January 2024, they will have to meet greater requirements in terms of managing not only credit, but also liquidity or interest rate risk. KNF issues recommendations for the entities it oversees; they are a set of good practices and guidelines on managing risks and areas of operations. Such recommendations are issued to commercial banks, cooperatives banks, as well as to savings and credit unions (SKOK).
 

Given the KNF’s approach, we should expect a set of recommendations for lending institutions on, among others, credit risk, interest rate risk or liquidity risk management. The latest information may appear in the KNF’s announcements to lending institutions.
In order for the KNF recommendations and guidelines to be implemented efficiently and effectively at lending institutions, we support our Clients in the following areas:
  • Credit risk management
  • Interest rate management
  • Liquidity risk management
  • Operational risk management
  • Concentration risk management
in terms of:
  • Conducting a gap analysis and gap closure of the management process, including currently binding procedures and risk management methods compared to KNF requirements and guidelines
  • Supporting risk management process modification and implementation of new procedures to comply with KNF recommendations
  • Supporting modifications of the methods used to identify, measure and assess, limit and monitor, as well as report risks in accordance with KNF requirements
In the absence of specific recommendations addressed to lending institutions, gap analysis is currently conducted compared to the existing KNF recommendations for banks, which will also apply to lending institutions, and in particular the following recommendations:

for SKOKs:
  • Recommendation A-SKOK on good practices related to credit risk exposure management at SKOKs
  • Recommendation E-SKOK on good practices related to the management of operational, interest rate, liquidity and concentration risk at cooperative savings and credit unions
for banks:
  • Recommendation C on concentration risk management
  • Recommendation G on interest rate risk management at banks
  • Recommendation M on operational risk management at banks
  • Recommendation P on managing financial liquidity risk of banks
  • Recommendation T on good practices related to risk management of consumer credit exposures  
  • Recommendation R on the classification of credit exposures, estimation and recognition of credit losses and credit risk management
.

Michał Tomczyk

Partner in Audit Department, Polish Certified Auditor
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