• Professor George A. Bermann, Columbia University School of Law, 435 West 116th St., New York, New York, 10027, USA
• Professor Julian D. M. Lew, 20 Essex Street, London WC2R 3A, United Kingdom
• Michael E. Schneider, Lalive Avocats, 35, Rue de la Mairie, 1211 Geneva 6, Switzerland
|Glossary of Defined Terms and Abbreviations|
|Abris||Abris Capital Partners|
|Abris CEE||Abris CEE Mid-Market Fund L.P.|
|Abris Fund I||Abris Capital Partners Fund I|
|Alior Bank||Alior Bank S.A.|
|AnaCap||AnaCap Financial Partners III LP|
|APC||Polish Administrative Procedures Code|
|AQR||Asset Quality Review|
|Banking Act||Polish Banking Act of 29 August 1997|
|BESI||Banco Espirito de Investimento S.A. Spólka Akcyjna|
|BGK||Bank Gospodarstwa Krajowego|
|BIT||Bilateral Investment Treaty|
|BOS||Bank Ochrony Srodowiska S.A.|
|DSS||Dolnosqlaskie Surowce Skalne Spóslka Akeyjina|
|DSS Bonds||Bonds issued by DSS and purchased by PBP Bank on 12 April 2011|
|Euro Bank||Euro Bank S.A.|
|FDD||Financial Due Diligence|
|Financial Trading Act||Act on Trading ion Financial Instruments|
|FM Bank||FM Bank Spólka Akcyjna|
|FM Bank PBP||FM Bank PBP Spólka Akcyjna|
|IDM||Dom Maklerski IDM Spólka Akcyjna|
|IFC||International Finance Corporation|
|Innova||Innova Capital Sp. z.o.o.|
|IPO||Initial public offering|
|June Plan 2013||Remedial Plan of June 2013|
|KNF||Komisja Nadzoru Finanswego|
|Lone Star Funds||Lone Star Fund IX (US) LP, Lone Star Fund IX (Bermuda) LP, Lone Star Fund IX Parallel (Bermuda) LP|
|Meritum Bank||Meritum Bank ICB Spólka Akcyjna|
|PBP Bank||Polski Bank Przedsiçbiorczosci Spólka Akcyjna|
|PL Holdings||PL Holdings S.a.r.l.|
|Poland||Republic of Poland|
|Porto Group||Porto Group Holdings Limited|
|Project Berlin||Plan to market FM Bank PBP mobile banking business|
|SCC||Stockholm Chambers of Commerce|
|SPA||Sale and Purchase Agreement dated 12 March 2010 between WestLB Bank AG, PL Holdings and Abris CEE|
|TFEU||Treaty on the Functioning of the European Union|
|Treaty||Reciprocal Protection of Investments between Poland and the Government of the Kingdom of Belgium and the Government of the Grand-Duchy of Luxemburg 19 May 1987|
|VCLT||Vienna Convention on the Law of Treaties|
|VDD Report||Vendor Due Diligence Report|
|Warsaw Receivables||Amount owed to FM Bank PMP by the City of Warsaw as compensation for a forced sale of property|
|WestLB Bank Polska||WestLB Bank Polska Spólka Akcyjna|
• the measures taken against it lacked any factual or legal basis under Polish law
• the measures did not genuinely pursue any legitimate aim or public purpose
• the measures were manifestly disproportionate
• Claimant had violated no provision of Polish law
• Respondent never raised any concerns about Claimant’s alleged failure to meet certain financial commitments made in June 2010 before imposing the measures
• Respondent denied Claimant an effective administrative or judicial remedy for purposes of challenging these measures prior to the forced sale deadline of 30 April 2015.
• Mr. Krzysztof Góral ((Góral ws")
• Ms. Iwona Koztowska ("Kozlowska ws")
• Ms. Iwona Kozlowska ("Kozlowska 2d ws")
• Mr. Marek Kulczycki ("Kulczycki ws")
• Mr. Krzysztof Kulig ("Kulig ws")
• Mr. Wojciech Kwasniak ("Kwasniak ws")
• Mr. Wojciech Kwasniak ("Kwasniak 2d ws")
• Mr. Maciej Stańczuk("Stańczukws")
• Mr. Maciej Stańczuk("Stańczuk2d ws")
• Dr. Andrew Caldwell of Berkley Research Group ("Caldwell op.")
• Dr. Andrew Caldwell of Berkley Research ("Caldwell 2d op.")
• Prof. Grzegorz Laszczyca ("Laszczyca op.")
• Prof. Marek Szewczyk and Dr. Ewa Szewczyk ("Szewczyk op.")
• Mr. Józef Wancer) ("Wancer op.")
• Prof. Piotr Zapadka ("Zapadka op.")
• Prof. Fryderyk Zoll and Dr. Marcin Spyra ("Zoll & Spyra 2d op.")
• a declaration that Respondent has breached Article 4(1) of the Treaty
• an order requiring Respondent to pay damages to the Claimant of no less than PLN 1,888,413,217
• an order requiring Respondent to pay compound post-award interest on the amount that the Tribunal awards to the Claimant in damages
• an order requiring Respondent to pay all the costs of the arbitration, including all the fees and expenses of the Arbitration Institute of the Stockholm Chamber of Commerce and of the Tribunal and all the legal costs and expenses incurred by the Claimant, with compound post-award interest on the amount that the Tribunal awards to the Claimant as costs
• an order of such other relief as the Tribunal deems appropriate
• a declaration to the effect that the Tribunal is without jurisdiction to adjudicate the present dispute
• a declaration that Respondent bears no liability to Claimant on the basis of an alleged breach of Article 4(1) of the Treaty
• an order requiring Claimant to pay all the costs of the arbitration, including all the fees and expenses of the Arbitration Institute of the Stockholm Chamber of Commerce and of the Tribunal and all the legal costs and expenses incurred by the Respondent, with post-award interest on the amount that the Tribunal awards to the Claimant as costs
• an order of such other relief as the Tribunal deems appropriate
that the SCC did not manifestly lack jurisdiction over the dispute, that the seat of arbitration was Stockholm, Sweden, and that the advance on costs was fixed at €426,000, to be paid by the Parties in equal shares.
Rather, the Tribunal considers that, under the present circumstances, the shared interest of all in the complete integrity of this proceeding can be satisfied by reminding counsel that the Tribunal operates on the firm assumption that the parties and their counsel would not and will not engage, directly or indirectly, in witness intimidation. The Tribunal further considers the parties and counsel to have made an implied commitment to that very effect. Should any such intimidation nevertheless be shown to have occurred, the Tribunal will draw appropriate inferences.
• assessing the financial situation of banks, including analysis of their solvency, asset quality, payment liquidity and financial results
• examining the quality of bank management systems, in particular risk management and internal control systems
• examining the compliance of credit, cash loans, letters of credit, bank guarantees and sureties and bank securities with the applicable regulations
• testing security and timely repayment of credit and cash loans
• examining whether the limits referred to in Article 71 of the Banking Law are respected, and evaluating processes for identifying, monitoring and controlling exposure concentration, including large exposures
• examining compliance of the operations of the banks with the KNF’s standards regarding acceptable risk in banking operations, risk management, including the adaptation of the bank’s processes of identifying, monitoring and reporting risks to the type and scale of the bank’s operations
• assessing the estimation, maintenance and review of the internal capital of banks.
• permits for the establishment and entry into operations of banks
• decisions approving the appointment of the members of a bank’s management board
• recommendations reflecting best practices
• orders to banks to take certain remedial measures in response to violations of banking regulations
• sanctions, ranging from cash penalties, to suspension of management board members, restrictions on a bank’s business, and revocation of a banking license, to appointment of a receiver in bankruptcy.14
• shape of the Bank’s corporate bodies
• financial support available from Claimant to the Bank in the event of a threat to the Bank’s liquidity
• adequacy of equity
• policy on "outsourcing"
• reinvestment of dividend and profit
The analysis of the Bank’s financial data indicates a considerable deterioration in its economic and financial position, shown mainly by the considerable worsening of financial results observed since Q4, 2010. In 2010, net profit was at a level of PLN 4 million, compared to PLN 23 million in 2009. The adverse trends regarding the financial result were more pronounced this year. The Bank has suffered losses since the beginning of 2011. At the end of Q1 2011, the accumulated net loss was PLN 1.7 million, which, according to the information provided by the Bank, arose from lower revenues in the early months of 2011 in connection with the process of ownership transformations, the implementation of a new strategy and the reconstruction of the Bank’s loan portfolio and client database. At the end of June 2011, the net loss declined to a level of PLN 205 thousand, but, according to data as at the end of this July, the loss increased again to a level of over PLN 2 million, mainly because of increasing operating expenses....
In the presented financial forecasts, in 2011, the Bank assumed that net profit would be achieved at a level of PLN 13.6 million, which is influenced by a considerable increase in the loan portfolio up to a level of PLN 1.3 billion (actual at the end of June of this year being 23%), an increase in the interest result to the amount of PLN 28.3 million (actual at the level of 7%) and operating expenses at a level of PLN 43.3 million. As at 30 June 2011, most of the amounts forecast in the financial plan were not achieved in a manner that ensures the achievement of the target profit at the end of 2011.68
• continuation of the present model
• maintenance the corporate profile, but modification of the business model
• merger with a retail bank
• introduction of a new investor
• dissolution of the Bank
While the second option had the advantage of being achievable more quickly, discussion at the Supervisory Board meeting revolved mainly around the third and fourth.115
The idea of merger, as presented by the Bank, in fact, means preserving the split into two banks, and not into two divisions, and deprives the Bank of the synergy effect in terms of both business and costs. The operation of the merger of the two banks should lead to a full integration of the processes of future operations, including risk management, so that the merged Bank operate[s] as an integrated whole. Moreover, the Bank has presented an approximate schedule for the merger of the banks, failing to specify the expected operation’s time framework, which needs to be supplemented. At the same time, the presented development diagram of the separated parts, including the retail area, within the indicated corporate structures, indicates the intent of the non-merger of both institutions.133
Works on the transaction were stopped, because during the commercial due diligence investigation, the shareholders of Meritum Bank decided, that due to a significant concentration of both deposits and credits, the PBP Bank business model is less stable and more prone to fluctuations, and thus bears a higher risk than the other entities. This risk associated with the PBP Bank business model outweighed the potential positive contribution which could result from the merger of Meritum Bank and FM Bank, and led to the decision of the shareholders of Meritum Bank on the withdrawal from the project.153
In any event, at a meeting on 25 July 2013, the merger talks collapsed.154 On the same day, Mr. Boksa so informed the KNF.155
• Mr. Maciejewski: President of the Management Board
• Mr. Stańczuk: Deputy President of the Management Board
• Michal Zielke: Deputy President of the Management Board
• Stefan Swatiçkowski: Deputy President of the Management Board
• Krzysztof Jaczewski: Deputy President of the Management Board
• Jarostaw Lejko: Deputy President of the Management Board
The appointment of two management board members, including the president, shall require the approval of the Polish Financial Supervision Authority. The application for such approval shall be submitted by the supervisory board.197
In addition, in its commitments as investor, Abris undertook to consult with the KNF when filling positions in the Management Board.198
an impact on the efficacy of executing the remedial plan by making a change to the position of Management Board President, which forms a deviation from the remedial plan accepted by KNF, [a change that] may not just adversely affect the introduced conditions for stable management but may also pose a threat to the proper execution of the remedial plan in the financial and economic area.
• issuance of "opinions" by the Supervisory Board that amounted to binding instructions and reflected arrogation to the Supervisory Board of management decisions belonging to the Management Board
• conclusion by the FM Bank PBP of two contracts for services rendered by acting President Mr. Lachowski that were part of his business activities
• conclusion by the FM Bank PBP of a contract for legal services contracts with Mr. Lachowski and with a law firm, one of the partners of which (Wojciech Fabrycki) was a member of the Supervisory Board
Failure to implement the foregoing recommendations may lead to KNF applying the supervisory measures provided for in Article 138 Section 3 and Article 141 Section 1 of the entitled Banking Law.232
This admonition is issued for the following reasons:
1. Performance of banking activity in breach of the regulations, resulting in irregularities in the management system, including the risk management system and the internal control system, including in particular the following:
1.1. Article 70 sec. of the Act entitled Banking Law of 29 August 1997 - failure to perform an assessment of the debtor’s creditworthiness, and granting a loan to a client that is not credit worthy without implementing detailed measures of securing loan repayment or presenting a business recovery plan whose performance would - in the bank’s opinion - ensure achievement of creditworthiness within the specified time period.
1.2. KNF’s Resolution No. 258/2011 of 4 October 2011 in terms of lack of the following:
1.2.1. analysis of the impact of interest rate changes on the capital’s economic value for the bank’s portfolio - which amounts to breach of § 13 sec. 7 of the resolution,
1.2.2. adjustment of the system of internal limits to the scale and complexity of conducted operations - which amounts to breach of § 17 sec. 1 of the resolution,
1.2.3. assessment of operational efficiency of the internal audit unit - which amounts to breach of § 41 sec. 2 of the resolution,
1.2.4. review of the internal capital estimation process in 2012 - which amounts to breach of § 51 sec. 1 of the resolution.
1.3. KNF’s Resolution No. 386/2008 of 17 December 2008 in terms of taking into account in:
1.3.1. the basic and supplementary provision - the liquidity of commercial papers, despite lack of market analyses confirming the accepted estimates of their value - which amounts to breach of § 6 sec. 4 of the resolution,
1.3.2. the basic liquidity provision - the State Treasury bonds designated to be traded according to nominal price - not in the amount attainable in 7 days -which amounts to breach of § 1 item 4 of Attachment no. 1 to the resolution.
1.4. Attachment no. 1 item 5 of the Finance Minister’s Regulation of 27 January 2011 in the matter of requirements for the calculation systems kept in the entities subject to the mandatory guarantees system - the Bank Guarantee Fund’s calculation system was not included in critical applications.
1.5. Act of 16 November 2000 on Combating Money Laundering and Financing Terrorism in the scope of the following:
1.5.1. lack of periodic verification of assessment of the measures related to prevention of money laundering and financing terrorism - which amounts to breach of Article 8b sec. 3 of the act,
1.5.2. failure to send information on a timely basis to the General Inspector of Financial Information - which amounts to breach of Article 12 sec. 2 item 1 of the act.
1.6. Finance Minister’s Regulation of 21 September 2001 in the matter of defining a model transaction register, the manner of keeping it and the procedure for delivering data from the register to the General Inspector of Financial Information - in terms of erroneous and untimely recording of data in the transaction register - which amounts to breach of § 2 sec. 2 of the regulation.
2. Failure to implement the recommendations related to asset quality, market risk and capital adequacy issued by KNF on 25 March 2013 after a comprehensive inspection conducted in FM Bank SA (letter DIB/SPK/7110/125/16/2012/2013/MG) concerning, among other things, the following:
2.1. analysis of revenues and costs incurred by clients applying for loans as part of the express offer, including in particular analysis of revenues and costs incurred by clients,
2.2. periodic verification of the applicants’ representations on the amount of income, on the basis of an adequate sample,
2.3. review of the client economic and financial standing at least once a year,
2.4. development of stress tests designated for estimation of change of the Bank’s economic value, assuming a sudden and unexpected interest rate change by 200 business points,
2.5. acceptance of assumptions for stress tests that take into consideration the Bank’s activities related to deposits and credits and which ensure adequate risk assessment,
2.6. formalizing the rules for conducting stress tests implemented in the capital planning process.
Where this is justified by the requirement of prudent and stable management of a domestic bank, in view of assessment of the financial standing of an entity, including the founder of a domestic bank, which has obtained, directly or indirectly, the right to exercise votes at a general meeting at levels specified in Art. 25, para. 1, or has become, directly or indirectly a domestic bank’s parent company, due to possible impact of this entity on the bank, in particular, when it is proved that the entity fails to respect the commitments referred to in Art. 25h, para. 3, or the commitments referred to in Art. 30, para. 1b.238
Analysis of the evidentiary material gathered during the pending administrative proceeding, the progress in the execution of the Remedial Plan giving consideration to the Bank’s economic standing and the findings of the comprehensive inspection conducted in the Bank according to its status as at 30 June 2013 do not point to material deviations from executing the objectives and assumptions adopted by the Bank and laid down in the Remedial Plan. Accordingly, a receiver in the FM Bank PBP SA would be groundless and pointless.246
Repealing the decision in the part relating to the order to dispose of the bank’s shares is connected exclusively with formal and legal issues and does not change the fact that PL Holdings s.a.r.l. and Abris-EMP Capital Partners Limited did not meet their investor commitments towards the KNF, which, in the KNF’s opinion, had a negative influence on the prudent and stable operations of the bank.
When taking the decision, the KNF was guided by the need to limits its legal risk. Issuing both decisions together evidently entailed an additional risk of litigation.259
• have been convicted of a fiscal offence, or
• have been found responsible for documented losses at his or her place of employment, or
• have been prohibited from performing business activities, or
• have failed to guarantee the sound and prudent management of a bank or to have not been adequately educated.265
Although it may occur - which the lawmaker himself does not exclude - that both administrative resolutions under analysis are issued by the regulatory authority on the same date, these administrative decisions may in no way be treated as the same from the legal point of view, and should be treated as autonomous and separate acts.283
a) The disputes between one of the Contracting Parties and an investor of the other Contracting Party shall be subject to a written notification accompanied by a detailed memorandum sent by said investor to the relevant Contracting Party.
b) Within the meaning of this Article, the term "dispute" refers to the disputes with regard to the expropriation, nationalization, or any other similar measures that affect the investments, and in particular, the transfer of an investment to public ownership, putting it under public supervision, as well as any other deprivation or restriction of rights in rem by sovereign measures that might entail consequences that are similar to those of expropriation.
c) Said disputes shall, as much as possible, be settled amicably between the two parties involved.
The arbitral organization shall make its award on the basis:
-- of the national law of the Contracting Party that is a party to the dispute, in the territory of which the investment is located, including the rules regarding conflict of laws;
-- the provisions stipulated in this Treaty;
-- the terms of any special commitment that might have been made regarding the investment;
-- the generally accepted rules and principles of international law.
The investments made by investors of one of the Contracting Parties in the territory of the other Contracting party may be expropriated or subject to other measures of direct or indirect dispossession that have a similar effect only if the following conditions are met:
(a) the measures are adopted in the public interest and in accordance with due process;
(b) they are neither discriminatory nor contrary to a special commitment as stipulated in Article 7, paragraph 2.; and
(c) they are accompanied by provisions that stipulate the payment of compensation.
Art. 70. Effective application of penalties and exercise of powers to impose penalties by competent authorities.
Member States shall ensure that when determining the type of administrative penalties or other administrative measures and the level of administrative pecuniary penalties, the competent authorities shall take into account all relevant circumstances, including, where appropriate:
(i) the gravity and duration of the breach;
(ii) the degree of responsibility of the natural or legal person responsible for the breach;
(iii) the financial strength of the natural or legal person responsible for the breach, as indicated, for example, by the total turnover of a legal person or the annual income of a natural person;
(iv) the importance of profits gained or losses avoided by the natural or legal person responsible for the breach, insofar as they can be determined;
(v) the losses for third parties caused by the breach, insofar as they can be determined;
(vi) the level of cooperation of the natural or legal person responsible for the breach with the competent authority;
(vii) previous breaches the natural or legal person responsible for the breach;
(viii) any potential systemic consequences of the breach.
Claimant observes that Directive 2013/36/EU also requires that the addressee of supervisory measures taken by competent authorities be informed that it has a right of appeal (art. 72) and a right of judicial recourse (art. 55). Claimant also cites various procedural and substantive protections guaranteed by the European Convention of Human Rights.361
I do not consider that any of those purported justifications demonstrate a failure by PL holdings and Abris as majority shareholders, let alone one that justified the adoption of severe measures against them under the Banking Act. In particular, none of the reasons directly engaged the legal responsibility of the majority shareholder...379
[T]he KNF was aware that the situation, where the key investor could not exercise its voting rights on shares, in the long term, would have a negative influence on the situation and thus on the value of the Bank.
To that extent, the voting rights ban contributed to whatever operational difficulties the bank was experiencing.388
Art. 3(1). Each of the Contracting Parties agrees to ensure, within its territory, that the investments made by investors of the other Contracting Party receive fair and equitable treatment that precludes any unjustified or discriminatory measures that could hinder the management, the maintenance, the use, the possession, or the liquidation of said investments.
Art. 4(1). The investments made by investors of one of the Contracting Parties in the territory of the other Contracting Party may be expropriated or subject to other measures of direct or indirect dispossession that have a similar effect only if the following conditions are met.
A party is deemed to become indirectly a parent undertaking of a domestic bank or to take up or acquire shares or voting rights on shares of a domestic bank indirectly when it becomes a parent undertaking of a party that directly becomes a parent undertaking of a domestic bank or directly takes up or acquires shares or voting rights on shares, and also a party that takes actions as a result of which it will become a parent undertaking of a party that is a parent undertaking of a domestic bank or that holds shares or rights on shares in a domestic bank.409
• the principle of the rule of law
• the principle of explaining
• the principle of active participation of the parties in proceedings
• the principle of disclosure of the proceedings to the parties
• the principle of inspiring trust in public authorities
• the principle of two instances
• the principle of weighing public interest and the equitable interest of the parties
• the principle of impartiality
• the principle of material truth420
[T]the administrative proceedings and KNF’s decisions were a result of a few years’ poor management of the Bank, disregard or ignorance of the Investor’s commitments and improper or negligent implementation of supervisory decisions. This process began long before the instigation of the administrative proceedings, which were the last act of the drama.421
A. Does this Tribunal have Jurisdiction to Decide the Present Case?
(i) Is Claimant an Investor within the Meaning of the Treaty?
(ii) Does Poland’s Accession to the EU deprive this Tribunal of Jurisdiction?
B. Did Respondent Violate its Obligations to Claimant under the Treaty?
(i) Did Respondent Expropriate Claimant’s Investment?
(ii) Did Respondent Satisfy its Obligations of Compensation under the Treaty in Connection with the Expropriation?
(iii) Did the Measures Taken by the KNF Comport with the Principle of Proportionality?
(iv) Was the KNF’s Treatment of Claimant Seriously Procedurally Unfair?
(v) Is Claimant Barred from Relief due to Failure to Exhaust Available Legal Remedies?
C. To What Relief, if any, is Claimant Entitled?
(i) Is Claimant Entitled to Recover Damages from Respondent and, if so, in what Amount?
(ii) Is Claimant Entitled to Recover Interest from Respondent and, if so, in what Amount?
D. How Shall the Costs and Fees Associated with this Proceeding be Allocated as
between the Parties?
[a] treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject-matter and: (a) [i]t appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or (b) [t]he provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time.
Because EU law and the BIT relate to the same subject-matter and because both the BIT’s substantive protections and its dispute resolution provisions are incompatible with the intra-EU investor protection under EU law, the BIT is terminated, and the authority of the Tribunal to adjudicate the present dispute is lacking.
• was taken in furtherance of a legitimate and substantial public interest and was a suitable one for serving the legitimate and substantial public interest invoked
• was necessary, in the sense that no less drastic measure would have sufficed
• was disproportionately severe for the Investor, compared to the purposes meant to be achieved (i.e., proportionality stricto sensu)
Financial support provided by the Applicants in an event posing a threat to the Bank’s liquidity: The Applicants, acting as a shareholder in the Bank will ensure that the Bank’s liquidity, capital position and solvency ratio remain at a satisfactory and stable level for the Bank to be able to discharge its financial obligations. The Applicants as Bank shareholders will take the above actions in particular in a situation posing a threat to the Bank’s liquidity or a need to strengthen its capital position or a need to provide the Bank with sufficient own funds.482
The Claimant violated this commitment by failing to increase the Bank’s share capital when the Bank did not meet the KNF’s liquidity standards,483 and, as admitted by Mr. Gieryński, the liquidity standards were violated as early as 30 April 2012.484 This situation lasted for a year. Despite calls from the Management Board,485 Claimant, invoking a number of excuses - including difficulties with its co-shareholder IDM -refrained from taking the needed action. Claimant did not, as it asserts, react promptly to problems that the KNF brought to its attention. For example, once the DSS bonds problem surfaced, Claimant was dilatory, for nearly a year, in taking remedial steps, such as purchasing the bonds.
The fact that as of the date of this decision KNF has not accepted the updated remedial plan submitted by the Bank on 14 August 2014 continues to be of significance. The Bank was advised that the findings of the analysis on the updated remedial plan indicate that it cannot be accepted in the form presented to KNF as a remedial plan within the meaning of Art. 142 section 2 of the Act entitled Banking Law. In particular, the forecasts pertaining to the rate of growth in the level of profit earned and the credit portfolio evoke doubts and reservations.... Considering the foregoing KNF could not recognize that the assumptions made in this respect by the Bank guarantee the achievement of one of the overriding objectives of the remedial plan, i.e. to cover the Bank’s losses from previous years. The updated remedial plan does not afford the opportunity to assess the accepted assumptions as forming a basis for the safe and stable development of the banking activity conducted, and thereby as providing for permanent improvement in the Bank’s economic and financial standing.492