CORPORATE GOVERNANCE IN THE COOPERATIVE BANKING SECTOR IN POLAND

Agnieszka Alinska,Anna Szelagowska

doi:10.18371/fcaptp.v1i28.163681

Agnieszka Alinska, Anna Szelagowska

Open Access

https://doi.org/10.18371/fcaptp.v1i28.163681

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Abstract

The corporate governance principles in the cooperative banking play crucial role in complementing institutional supervision and supporting internal controls. This paper discusses the selected issues of corporate governance in the cooperative banking sector in Poland. It outlines the contemporary challenges of corporate governance principles in the Polish cooperative banking sector related to external and internal supervision of banking activity. In addition, this paper aims to answer the question whether and to what extent the Polish cooperative banks have adopted the recommendation of the Polish Financial Supervisory Authority with regard to corporate governance in the banking sector and the extent to which internal rules for the organization of these banks affect the efficiency and effectiveness of the market. As a result, the following hypothesis was put forward: implementation of the corporate governance principles in the Polish cooperative banks has not contributed significantly to the improvement of their efficiency and has not enhanced the institutional supervision and internal controls in the cooperative banks. According to the authors, despite the existence of corporate governance principles in all Polish cooperative banks, there is still problem with the effectiveness of these institutions. Cooperative banks in Poland have experienced the phase of lethargy since 2013 and reported weaker and weaker financial results. Having in mind the fact that in 2015, that is after 14 years of stability in the sector, one of the Polish largest cooperative banks, SK-Bank, got bankruptcy, nobody predicted this event. It concludes that when it comes to the corporate governance principles the management bodies, regulators as well as supervisors require more effectively cooperation. The results in this paper confirmed that the model of credit cooperative movement adopted in Poland requires implementation of a couple of basic changes that are directly related to the utilization of the principles of a good corporate governance. The current corporate governance rules in Polish cooperative banks lead to having standardised governance without any substantial improvements and promoting better governance.

Highlights

The World financial crisis has revealed many imperfections and inefficiencies of the banking supervision and the banking sector corporate governance, which, in consequence, has contributed to the loss of public trust in the financial market institutions, including banks
Two years after introducing "The Corporate Governance Principles for Supervised Institutions" by the Polish Financial Supervisory Authority, all cooperative banks developed and offered the modification of the principles adapting them to the scope and scale of their operations
The model of credit cooperative movement adopted in Poland requires implementation of a couple of basic changes [Alińska, Szelągowska 2016, p.117—131], that are directly related to the utilization of the principles of a good corporate governance

Summary

Introduction

The World financial crisis has revealed many imperfections and inefficiencies of the banking supervision and the banking sector corporate governance, which, in consequence, has contributed to the loss of public trust in the financial market institutions, including banks. Two years after introducing "The Corporate Governance Principles for Supervised Institutions" by the Polish Financial Supervisory Authority, all cooperative banks developed and offered the modification of the principles adapting them to the scope and scale of their operations. They provided the explanations for reasons not to comply with some of the recommended principles. The scope of decision making and activity of such banks' owners/customers directed at achieving objectives resulting from corporate governance seem to be less important in practice It is, systemically essential element of management and stability maintenance, in the cooperative banking sector but the entire financial system. The number of participants of the protection systems is constantly rising — from among 559 cooperative banks, 470 already participate in IPS

Conclusions

Findings

Differentiators of Cooperative