Mark Twain once said that a banker is someone who lend you an umbrella when the sun is shining, but wants in right back when it starts raining. Would you say these words are accurate during times of crisis?
Banking was fundamentally different two centuries ago. For years, many clients have been receiving not only the proverbial umbrella (loans) but also the keys to the bank (payment cards, internet accounts). The competences of millions of customers are significantly greater than in the past. Using banking services, customers can reach for various sources of information, consulting services, and an arsenal of protective legal and economic measures.
However, the prevalence of banking services, with the current, still relatively weak economic and legal culture of our society means that number of controversial cases is not small, but happily improving. Looking at banking through the prism of non-performing loans volume over the last three decades, it is clear that this level has decreased substantially, which indicates an improvement in banks’ credit risk management even during the worst financial crisis. It also shows that customers are conducting their businesses better. That is, the proverbial umbrellas did not have to be taken away too often. As proof that this phrase is not only untrue, but also unfair, let’s see the level of regularity of home loans in Poland. Over recent years, banks have granted millions of them (there are now nearly 2.5 million active home loan agreements). More than 97.5 percent of customers repay these loans without any problems and termination is a last resort. The value of real estate, machinery, vehicles and various devices purchased on loan has increased strongly. It is a capital that has been multiplied by millions of Poles. And yet, in recent decades we have had rainy seasons: periods when crises (mainly external) have had a significant impact on our economy.
Many people are being exposed to instability and financial uncertainty. How has the approach of banking institutions to credit decisions changed? Have expectations towards the borrower changed?
In a environment of persistently high economic growth, low unemployment and significant social transfers, banks’ lending policies tend to be softer as creditworthiness persists and there are less difficulties in paying liabilities. In the case of companies, economic prosperity is of great importance, but regional, national or sectoral economic policies often determine the relevance of decisions (about economic choices made). Support or insurance programmes run by public or public-private development institutions play an important role in fledgling countries. In Poland, this important role is played in particular by Bank Gospodarstwa Krajowego, the National Fund for Environmental Protection and Water Management, The Agency for Restructuring and Modernisation of Agriculture and Korporacja Ubezpieczeń Kredytów Eksportowych, created during the period of transition with a strong involvement of banks.
In the last year, at the Polish government initiative, the Polish Development Fund has become an important ally of entrepreneurs. It was PDF and BGK, together with the banks, that created an efficient and well-functioning infrastructure to support companies directly and indirectly affected by the epidemic. However, we have to be ready for the period of restructuring and modernisation of thousands of companies, and this means that we need solid discussions, consideration of various programmes and scenarios for the development of beneficiary companies. In this case, the tightening of credit policy by banks in situations of increased economic and legal risk is justified by the responsibility for the security of the accumulated deposits.
More and more respected authorities around the world are warning about irrepressible rising of inflation. Previous increases of public debt have almost always ended in high inflation. What is your opinion on this?
It is not easy to answer the question of future economic processes in conditions of such a strong global and regional economic connections and so many problems that need to be solved. The impact of the great monetary and fiscal interventions undertaken by governments and central banks in recent years is not clear. Central banks have lost some of their independence and are more involved in the implementation of economic programmes. Nor is there clear aftermath of the dynamic development of information technologies, robotisation and automation and their impact on the transformation of economies.
At the same time, the increase in entitled attitudes of societies (sometimes justified) exposes economic policy of many countries to the risk of exceeding the level of public debt acceptable to the investors and losing investment credibility.
What business suport facilities are being offered by the financial sector? What can you easily get funding for and what are banks reluctant to fund?
There is a wide range of services offered by banks and affiliated companies. Bank financing is the most widespread form of supporting or developing entrepreneurship in our country. Promising projects, with well-developed business plans and reliable security are willingly funded by banks. Guarantees and bonds provided by specialised institutions may make it easier to obtain funding. In the coming years we can count on banks being more open to financing and co-financing EU and domestic project under agreed development and modernisation programmes. Banks will be involved in the implementation of the National Recovery Plan and the European Green Deal. However, restrictions on funding ‘dirty technologies’ with significant carbon footprint have been known for some time. Restrictions in this area will probably be stronger in the coming years because the scale of health and natural costs is too great.
Polish banking sector is one of the most innovative in Europe. What is the importance of technological progress in the business models of financial institutions? How does it affect the efficiency of banks?
Polish banks have been among the most efficient in Europe for many years. Unfortunatelly, I say this with regret, in Poland there has been created a hostile and dangerous regulatory system for banks and their customers, which leads to the degradation of financial institutions, accelerated concentration, withdrawal of investors and the reduction of ability to finance the economic development. The excessive charging banks and their customers the costs of restructuring SKOK and the destructive bank tax penalising their lending activity are measures weakening the positive impact of banks on the course of economic processes. The environment of very low interest rates further complicates the whole situation.
The declining profitability of Polish banks since 2012 negatively affects the pace of their technological modernisation, as well as the acquisition and maintenance of the best, experienced staff. I hope, however, that the truth about the need to modify the policy towards banks will reach those responsible for shaping regulatory policies. Polish companies and citizens need a strong, stable and efficient banking sector. Many Polish private companies see their development opportunities in maintaining stable cooperation with the organizationally and capitally diversified domestic banking sector. Many clients appreciate the high competitiveness of the Polish banking market.
The dangers of cyberspace have increased significantly. How do banks protect themselves from data leaks and digital threads?
The relationships and successes between banks and their customers rely on mutual trust. Therefore, we pay great attention to the security of deposits, business turnover and compliance with banking secrecy and personal data protection. Polish banking sector through solid day-to-day cooperation, efficient infrastructure companies and partnering with the Police is among the safest in Europe. In order to maintain this high level of security, we have set up a Banking Cybersecurity Centre, we conduct extensive information and education activities among customers. Let us remember that customers have received ‘keys to the bank’ and can carry out many banking operations themselves – this requires competence and responsibility.
2020 was a surprisingly good year for capital markets. In times of crisis, the capital market has shown that it is the backbone of finance stability. What adjustments do you anticipate in 2021?
There are many capital market specialists, and I look at its development with care. For many years I have been hearing about new development strategies and for years we have been witnessing, after the Administration changes, the building of further strategies, omissions and instability of solutions. Being on the capital market requires the specific competences of participants, regulators and advisers, and particularly the perception of risk. This means that there is a need for a long-term approach to investing and to be aware of the possibility of loss. I recommend benefitting from expert consulting, patiently building this important segment of the economy and creating stable conditions for mobilising and efficient allocating the capitals needed for the economy, including placing issue of covered bonds.
The Polish Bank Association celebrstes its 30th anniversary this year. Which challenges did you find the most difficult for PBA over the years?
For many years, there was an issue with developing and agreeing on a Polish banking system development strategy, ensuring the security of deposits, preventing the use of banks for criminal purposes, but mainly the ownership structure and modus operandi and the place of supervision of banks and financial market. I remember the turbulent debates after the PBA’s request for NBP autonomy, the establishment of Monetary Policy Council and the implementation of collegiality of professional, depoliticised banking supervision. Some of the solutions modified by power-hungry politicians have proved to be somewhat defective.
It is still a major challenge for Polish political elite to understand the role of banks in the social market economy and the importance of the strength and stability of banks as the part of common good in building a prosperous future for Poland and its people.
Many politicians and administrations are still not invested enough to seriously debate about the financial system, but also about the role of private enterprises and capital in our country. It is easier to operate with simplifications and fake-news in public and political discourse. Unfortunately, some authorities do not actually fulfil their role, and instead of taking care of compliance with competition rules and proper relations between consumers and companies, they seek popularity and power. In the longer term, this will prove detrimental for everyone.
How do you see the future of Polish banking in this situation?
The fate of banking companies is inextricably linked to the situation of customers, citizens, companies and local administration. However, in fledging country, as evidenced by the result of research in many countries, successful economic and social development depends on the pace of development and the strength of banks and companies affiliated with them. This means that banks’ potential needs to grow slightly faster than GDP. It is estimated that the optimal credit-to-GDP ratio for companies is 70%. This level is significantly lower in Poland.
We should also remember that we have many years of seeking the development of the market behind us. After reaching 90%, raising the level of wealth of Poles it is time for a more tailored offer and actions taking current and future challenges of civilization into account. Meeting these challenges requires a good country development strategy and close cooperation between the various institutions and the banking system. I think we will face such challenges, but we will need to change the state actions and revise the policy towards the banking sector so that its potential and talents can be used well.
President of the Polish Bank Association.
Graduated from the Faculty of Natural Sciences at the University of Wrocław and Postgraduate Studies in Banking and Finance at Warsaw School of Economics. Since 1991 associated with the ZBP as Director of the Office and then Director General of the ZBP. Since April 2003 President of the chamber.
Member of the Bank Guarantee Fund, Secretary of the Supervisory Board of Credit Information Bureau. Member of the National Centre for Research and Development
Member of the. President of “Promyk Słońca” Foundation. Vicepresident of “Teraz Polska” Chapter.
Founder and co-founder of banking infrastructure enterprises and of Polish Institute of Directors.