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Seminar at the NBP: discussion on the banks’ ownership structure

Date: 10-12-2012

The seminar of the NBP Economic Institute focused on discussion on the report by Capital Strategy on opportunities and methods to increase the share of locally-controlled banks in the Polish financial system.

The "Report on the optimal structure for the Polish banking system in the medium-term" has been drawn up by Mr Stefan Kawalec and Mr Marcin Gozdek, senior partners of Capital Strategy consulting company. Both authors have wide experience in banking. Mr Kawalec was a Deputy Finance Minister at the beginning of 1990s and was responsible for the reconstruction of the Polish banking sector at that time.

At the NBP Economic Institute seminar held on December 10, 2012, the authors presented key points of the report (at the same time it should be noted that seminars are academic discussions and the views presented therein, in no way reflect the opinion of the NBP). They reminded that as a result of the preferred model of the Polish banking sector privatisation around a dozen years ago , foreign financial groups hold 69% of the assets of banks operating in Poland. Such structure of the sector would have some advantages, since it allowed to strengthen and modernise the sector in a short time, but it may create problems for the Polish economy, both at present and in the future. One of such problems became apparent after the outbreak of the global crisis. In the years 2009-2010, banks controlled by foreign owners reduced the lending for Polish enterprises by 12.5% in real terms, whereas the locally-controlled banks increased corporate lending by 20.6% and the co-operative banks by as much as 35.4%. The current structure of the sector, with a dominant share of the banks controlled by foreign banking groups, may hinder stable financing of public debt and will increasingly reduce the possibility to conduct the local macroprudential policy. Those threats would be less severe, if the structure of the sector was more balanced, with a strong position of locally-controlled banks. The authors of the report argue that the share of the banks controlled by foreign financial groups in the system should be ultimately reduced by half, to approx. 30-35%, over the next 10 years. The authorities should officially adopt the strategy of “domesticating" a part of the banking sector.

The authors of the report do not provide simple solutions for changing the structure of the sector, such as the purchase of domestic banks from foreign corporations by the state. They argue in favour of the creation of a system encouraging the corporations intending to sell their bank in Poland to perform the transaction through the stock exchange, while at the same time limiting the voting rights from shares for individual shareholders to 10%. Such dispersed ownership structure is predominant in the Western European and Anglo-Saxon banks. A dominant share in those banks is often held by foreign shareholders, as it is the case with e.g. Deutsche Bank, but there can be no doubt that it is a German bank, safeguarding the economic interests of Germany.

Most participants of the seminar who took part in the discussion (they included not only the representatives of the NBP, but also of the Polish Financial Supervision Authority and the academic circles) did not question the main purpose of the report. However, they pointed to the weakness of some arguments presented therein and voiced concerns about the feasibility of the proposed strategy.

– - It is feasible, provided that the state authorities will get involved , argued Mr Kawalec.

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