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

KEY RATING DRIVERS
IDRS, SENIOR DEBT, SUPPORT RATING AND SUPPORT RATING FLOOR
Bank Gospodarstwa Krajowego's (BGK) IDRs, senior debt rating, Support Rating and Support Rating Floor reflect Fitch's view of an extremely high probability of support from the Polish state (A-/Stable), in case of need. This view is predominantly based on BGK's policy role, which in turn is underpinned by its 100% ownership by the government. BGK is the only Polish bank with state bank status.

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

Although the debt of BGK is not guaranteed by the Polish state, according to Article 3 of the Law on BGK, the state can provide capital, including through subordinated debt or by contribution in kind, and provide liquidity support to BGK. The ministry responsible for public finance shall provide BGK with its own funds to ensure the fulfilment of BGK's duties and that the bank maintains adequate liquidity.

Recent changes in the BGK act reference CRR/CRD IV, and introduce a need for a formalised agreement between BGK and Ministry of Finance covering the procedures, terms and conditions of capital and liquidity support to be provided to the bank is case of need. According to article 3 of the BGK law, the commitment of the state satisfies the credit protection requirements, within the Articles 213-215 of the Regulation No 575/2013, granted by the State Treasury. Based on that premise local currency receivables of commercial banks due from BGK carry a zero percent risk weight.

Apart from capital and liquidity commitments as per Article 3, BGK's short-term liquidity is supported by a committed deposit line from the Ministry of Finance. The unutilised part of this line is included in calculating liquidity ratios in line with CRR/CRDIV requirements.

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

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

BGK's funding comes predominantly from the public sector. The bank also receives funding from international financial institutions (around PLN2.8bn as of end-3Q15), has an active senior unsecured programme of up to PLN10bn (PLN5.8bn outstanding as of end-3Q15) and an unutilised up to EUR1bn EMTN programme guaranteed by the state.

BGK is not subject to bankruptcy law. It can only be liquidated, with all liabilities of the bank taken over by the state on the liquidation date.

Fitch does not assign a Viability Rating to BGK due to the bank's policy role and its limited scope for commercial activities unrelated to the policy role.

RATING SENSITIVITIES
IDRS, SENIOR DEBT, SUPPORT RATING AND SUPPORT RATING FLOOR
BGK's ratings are sensitive to changes to the Polish sovereign ratings and to a change in its status as a policy bank. Fitch does not believe that the state's strong propensity to support BGK is likely to change in the foreseeable future.

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

The rating actions are as follows:

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