June 17, 2020 / 9:11 AM / a month ago

UPDATE 1-Polish central bank warns of coronavirus credit risk

(Adds quotes, details)

WARSAW, June 17 (Reuters) - Access to credit in the Polish economy could be limited by the coronavirus crisis, but the risks of a crunch have been lessened by actions already taken, the central bank said on Wednesday as it told banks to bolster their capital buffers.

Poland, the largest economy in the European Union’s eastern wing, has been hit hard by the pandemic, prompting a government and central bank package of spending, guarantees and liquidity measures worth more than 300 billion zlotys ($76 billion) to cushion the blow to businesses and financial markets.

“Financial support for companies launched in response to the shock of COVID-19 and a strong loosening of monetary policy ... reduce the risk to the solvency of companies and households, which reduces banks’ credit losses,” the central bank said in a report on the stability of Poland’s financial system.

As a result of the coronavirus pandemic, banks, insurers and investment funds should use all profit from previous years to strengthen their capital base, the central bank said.

“Additional funds from retained earnings will allow, in particular, to absorb losses expected as a result of a pandemic, and a surplus of capital will help to sustain lending and the smooth delivery of financial services,” the bank said.

The central bank has cut the cost of borrowing by a cumulative 140 basis points to 0.1% since the coronavirus reached Poland in March. ($1 = 3.9426 zlotys) (Reporting by Pawel Florkiewicz, Alan Charlish and Anna Wlodarczak-Semczuk; Editing by Alexander Smith)

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