Transformation of BGŻ into a joint-stock company

In accordance with the act of 1994, the state-owned-and-cooperative BGŻ was trans- formed into a joint-stock company. On 9 September 1994, the Finance Minister, upon arrangement with the president of NBP, issued BGŻ S.A. s articles of association and appointed the first Management Board and Supervisory Board of the Bank. BGŻ s trans- formation into a joint-stock company was preceded by collection of representations from the cooperative banks expressing their interest in transformation of their BGŻ interests into BGŻ S.A. shares. Out of the 1,650 cooperative banks active in Poland, 74% expressed such interest and hence became the founders of BGŻ S.A. The interests of these banks were converted into shares in BGŻ S.A. which were later converted into the shares of an appropriate regional bank. As a consequence, BGŻ S.A. s shares were taken up by regional banks. The remaining 428 cooperative banks that did not express interest in transfor- mation of their interests into BGŻ S.A. shares, in accordance with the act received their interests back according to restated amounts. As a result, the share of the State Treasury in BGŻ S.A. increased from 54% to nearly 66% of share capital91. BGŻ s closing balance sheet became the opening balance sheet of BGŻ S.A. On the date of incorporation of BGŻ S.A. (9 September 1994) its share capital amounted to PLN 22,895,400 and was divided into 150,881 series A registered shares owned by the State Treasury and 78,073 series B registered shares owned by cooperative banks. The nominal value per BGŻ S.A. share was PLN 10092.

Attempts to recapitalize the bank

As a result of the difficult economic and financial situation in late 80s and early 90s, BGŻ found itself in a difficult financial situation and required recapitalization. According to the 1992 audit carried out by Arthur Andersen, the amount of the recapitalization was determined at PLN 1.6 billion. By the end of December 1995, the BGŻ S.A. Management Board adopted and submitted to the President of NBP the BGŻ Structural Adjustments and Financial Recovery Program . The BGŻ S.A. remedial program accepted by NBP was composed of two sub-programs: privatization of the bank and recovery of full credibility; restoring parameters ensuring full security for deposited funds.

Unfortunately the attempts to recapitalize BGŻ S.A. were unsuccessful and the only real- istic way to implement the remedial program was to allocate the generated profits to cover the losses and increase the bank s own funds. The net profits and funds from the additional reserve capital earmarked by BGŻ S.A. in 1995-1999 for execution of the tasks following from the remedial program contributed to reduction of the loss carried forward from PLN 3,173.6 million to PLN 595.6 million. In 1995-1999 BGŻ S.A. generated a total

91. ABGŻ, file no. 1289, BGŻ Report 1994. Calendar of events., op. cit., p. 60.

92. Ibidem.





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