The SGB Protection System is the first Polish Institutional Protection Scheme established on 23 November 2015 by SGB Affiliation of Cooperative Banks and SGB-Bank S.A., the Affiliating Bank of the SGB Affiliation.
The protection schemes are a form of cooperation between cooperative banks, well-tested over years in Western European countries. For instance, in Germany IPS has been existing since the 30’s of the previous century and ensuring security to cooperative banks with no need to use public aid. Most cooperative bank groups in Western Europe is organized as institutional protection schemes.
The legal basis to set up the scheme was the Regulation (EU) No 575/2013 of the European Parliament and of the Council and the Law on the Functioning and Affiliations of Cooperative Banks, and the Affiliating Banks. The organizational details were specified in the SGB Protection Scheme Agreement (“Agreement”).
The Scheme is headed by a managing unit in the legal form of a cooperative (shortened name: IPS-SGB). Its participants are all the banks which set up the Scheme (“Participants”).
The Scheme was established for the purpose of mutual guarantee of liquidity and solvency to avoid bankruptcy of each of the Participants.
The achievement of the Scheme goal is possible through collection of funds by all the Participants, of which financial aid can be provided in case of a threat of losing liquidity or insolvency of any of the Participants. The aforementioned funds are deposited in the Aid Fund administered by IPS-SGB.
By signing the Agreement, the Participants gave their consent to: apply common risk classification and monitoring principles, inform each other about incurred risk and subject to preventive measures or sanctions applied by IPS-SGB against Participants taking too high risks.
Apart from monitoring the risk incurred by individual Participants, IPS-SGB carries out the Scheme as a whole risk assessment and is responsible for the preparation of aggregated financial statements.
The increase in the safety level of the Scheme banks is reflected in the principles of establishing the supervisory and regulatory standards. Among others, they concern: individual exemption of all Participants from the obligation to meet the LCR Standard determined in the Capital Requirements Regulation (CRR) in return for meeting it at the aggregate level, application of the zero percent risk weight to exposures to other receivables of Participants, no deduction of holdings of own funds instruments of the Participants, if they have significant investments. The aforementioned preferences allow the Bank to use their business potential to a larger extent, and therefore, to raise business profitability.