Polish Banking System Research Articles

Foreign Capital in Polish Banks – Its Contribution to Systemic Risk and Level of Concentration

Theoretical background: An important source of systemic risk in the banking system is the ownership structure, especially the ratio of foreign capital, which affects not only the results of individual banks but also the situation of the entire sector during the financial crisis. The effects of foreign capital engagement in a local banking system not always have to be exclusively positive. In particular, this refers to the systemic risk contribution of foreign capital in the national banking system as well as foreign capital concentration and potential systemic risk transfer through foreign capital. These threats are becoming especially important for the Polish banking sector, where foreign capital to assets ratio – despite its gradual decrease since 2008 – is still higher than 40%. Purpose of the article: The aim of this article is to assess foreign capital systemic risk contribution in the Polish banking system and the scale of threat posed by possible transfer of this risk through foreign capital. Research methods: Two methods were employed in this study, i.e. (1) supervisory measure of individual banks’ systemic risk contribution, including the guidelines of the European Banking Authority, and (2) SRISK% measure, which shows which part of the systemic capital shortfall is generated by which bank. The systemic capital shortfall, on the other hand, is defined as a sum of additional own funds necessary to meet the regulatory minimum should a 40% fall of total capitalisation of the banking system occur within the subsequent 6 months. At the same time, owing to the application of both of the above methods, we could draw on their strengths while eliminating the identified weaknesses. Main findings: Our analyses did not indicate that the level of foreign capital concentration in the Polish systemically important banks may contribute to systemic risk transfer through foreign capital. Although all Polish banks owned by foreign capital, identified as systemically important, are subsidiaries of the banks which – in their home countries – are also considered as systemically important, their contribution to the Polish systemic risk is generally a few times lower than systemic risk contribution of their parent institutions, with the exception of one bank, which should be carefully monitored by the Polish financial safety net. The rising systemic risk contribution of the banks owned by foreign capital and identified as systemically important in the Polish banking system should not be a matter of concern thanks to the diversified share of individual banks in it. The conclusions drawn in the study are important both in terms of the policies adopted by the safety net institutions and from the point of view of further improvement of systemic risk measures, especially those assessing the contribution of individual banks to this risk.

PUBLIC INTEREST IN THE BANKING SYSTEM REGULATION

This paper deals with issues related to public interest and Polish banking system regulation. It brings several general arguments regarding the actual legal regulation of the banking system, raises questions about the reasons for such detailed regulation, and discovers the public interest in the banking system law. In addition, the author explains what has changed in the architecture of the entire financial market after the global financial crisis of 2008. In the middle part of the paper, several important facts about the functioning of the banking safety net can be found. To be more precise, the activity of the central bank, financial supervision, bank deposit guarantee system, as well as protection of consumers are mentioned and analyzed.

The privilege for borrowers in the form of the so-called “credit holidays” during the COVID-19 pandemic. A few remarks

The “Credit Holidays ”is quite an interesting institution that has been regulated by law. In the period of the spread of the COVID-19 pandemic, bearing in mind the difficulties in repaying liabilities to banks, initially on the part of the Polish Bank Association and the banks themselves, there were proposals to postpone repayment of principal and interest instalments or principal instalments. In this way, “non-statutory credit holidays” were created, and it was up to the lender and the borrower to specify the necessary contractual changes. As part of the so-called “anti-crisis shields” have been introduced into the legal system. First, the interference of the legislator provides for the possibility of postponing the repayment of credit obligations to entrepreneurs. These regulations introduced the possibility, not the obligation, of applying the “credit holidays” to the bank’s customer. However, it was an effective and desired instrument to help entrepreneurs. Under the so-called “Anti-crisis Shield 4.0”, obligatory “statutory credit holidays” aimed at consumers were introduced. The adopted legal regulations indeed cause some interpretation problems, but undoubtedly this legal institution will be a permanent element of the Polish banking system.

Corporate green investment imperative and risk of a credit crunch in Poland

Purpose: The main subject of the article is a phenomenon that is increasingly common in countries of the global economy referred to as the so-called credit crunch. The study analyses the reasons that favour the escalation of risk of a credit crunch in the banking systems. The main objective of the article is to expose them as widely as possible, combining it with verification of the determinants of a credit crunch. Design approach: The empirical research conducted in this study focuses on the Polish banking system. For the first time the credit crunch was observed there in the second half of 2008. It was then that lending to households decreased by 25% and to enterprises by as much as 33%. In the Polish banking system, a drop in the volume of loans to enterprises has been observed for a long time, favouring the increase in risk of a credit crunch. Findings: The article evaluates the potential risk of a credit crunch in the Polish banking system pointing out their links resulting from the implementation of the new climate policy in the European Union as well as the COVID-19 pandemic. This is caused by the fact that during the COVID-19 crisis, credit rating of Polish enterprises decreased significantly, causing partial restrictions or even elimination of bank loan in industries threatened by the crisis. Research implication: The Polish economy is facing a significant challenge of meeting the EU criteria for limiting CO2 emissions, which will force domestic enterprises to invest considerably in environmental protection and will increase their demand for debt financing, including bank loans. Banks are preparing for green lending to the Polish economy which signifies a strong transition of loans to investments which meet the taxonomy criteria and are therefore subject to climate objectives. Practical and social implication: Industry risk will determine lending of Polish enterprises under the conditions of the European Green Deal. Green financing of investments of Polish enterprises is therefore becoming a significant potential cause of increasing risk of a credit crunch in the Polish banking sector. Originality/value: Presentation of the enterprise credit dilemmas in the conditions of financial instability of the global economy in the perspective of credit-crunch in Poland is a novel, original and contemporary subject. The diagnosis of the determinants of this threat has facilitated their positioning relatively to the risk of credit-crunch in the Polish banking sector. The results of this analysis underline the risks in this sector and the consequences of introducing European taxonomy of green investments as factors limiting credit actions and enterprise credits in banks.

ДЕТЕРМІНАНТИ КОНКУРЕНТОСПРОМОЖНОСТІ БАНКІВСЬКОГО СЕКТОРУ ПОЛЬЩІ ТА УКРАЇНИ

Анотація. Присвячено дослідженню детермінант конкурентоспроможності банківського сектору національної економіки на основі порівняльного аналізу функціонування банківських систем України і Польщі. Проведено дослідження, використовуючи таку методику: порівняльний аналіз інституціональної ефективності банківського сектору України і Польщі; порівняльний аналіз рівня концентрації банківського сектору України і Польщі; порівняльний аналіз мікроекономічної та макроекономічної ефективності банківського сектору України і Польщі; порівняльний аналіз соціальної ефективності банківських секторів обох країн щодо їхньої фінансової інклюзії. Результати дослідження засвідчили вищий рівень конкурентоспроможності польської банківської системи, що відображається у її стабільному функціонуванні протягом тривалого періоду часу, стійкості до криз і надмірних ризиків, ефективній системі пруденційного нагляду, розвиненій інституційній структурі, близькій до потреб ринку, а також динамічному зростанні банківського фінансування національної економіки та доступності банківських послуг для бізнесу і домогосподарств. На відміну від польської банківської системи, українська банківська система в останні роки пережила глибоку кризу і значну кількість банкрутств банків, високу частку непрацюючих кредитів, проблеми з ліквідністю тощо, а тому з метою її порятунку значної концентрації державного капіталу в банківській системі, високих процентних ставок і як наслідок значного зменшення частки банківського фінансування національної економіки і наявність значних бар’єрів для доступності банківських продуктів для споживачів. Визначено, що ключовими детермінантами конкурентоспроможності національного банківського сектору є такі: наявність розвиненої інституційної структури банківської системи; запобігання монополізації та надмірній концентрації банківського сектору; наявність ефективно функціонуючої національної системи банківського нагляду і регулювання; формування державної стратегії розвитку банківського сектору на засадах ключового гравця національної фінансової екосистеми і забезпечення виконання банківською системою її основних функцій в економіці та суспільстві. Ключові слова: банківський сектор, банківська система, конкурентоспроможність, інституційна структура, концентрація, фінансова стабільність, макроекономічна та мікроекономічна ефективність, соціальна ефективність, фінансова інклюзія. Формул: 0; рис.: 10; табл.: 0; бібл.: 27.

MANAGING INTELLECTUAL ASSESTS AND SECURITY IN THE CONTEXT OF TECHNOLOGICAL PROGRESS ON THE EXAMPLE OF BANKING SECTOR COMPANY

The management of intellectual assets and security has always been an important issue for business activity especially in sensitive industries like the banking sector. Nowadays, it may prove to be a priority, essential for the proper and efficient functioning of the company. This is primarily applicable when non-material resources constitute a strategic value of an organization which is also its reputation and trust. The main goal of the paper is to systematize and analyze the potential threats to intellectual values and security of the company as well as to indicate comprehensive methods of managing intellectual assets in the face of technological progress followed by the case – study of the Polish banking industry company with regard to protection of its non - material assets. The approach applied in the paper is of descriptive-empirical nature. The research methods involved in this paper are: induction, deduction, literature studies, and case-study together with an expert interview. The method of critical and comparative analysis was used in relation to the views presented in the literature. The article ends with a brief presentation of the research findings.

Development of a successful microfinancing system

The article aims to answer the following research question: “How were actors mobilized to form a network for promoting microfinancing system in a transforming country?”. For this case study, we employ the actor-network theory (ANT) as a lens and interpretation tool. We used the focus research, in-depth interviews, and analysis of documents as sources in our study. The article shows how the different purposes of each actor can affect or hinder the achievement of benefits for all actors. We pointed to the goals and problems they had to solve, as to create a network to reach the primary goal which was the creation of a sustainable market economy in Poland. The focal actors (government, SMEs, banks, NGOs) had to create the microfinancing network, which works quite successfully. It enables access to capital to entrepreneurs who would not get it from banks. However, unethical acts, committed by some actors may cause the system to collapse or change in the future, as actors will adopt different goals and new actors will join in. A change in the method of the guarantee funds’ financing, limitation of EU financial resources, changing needs of entrepreneurs, further transformations of the Polish banking system - all these events may result in the creation of a new network of connections and a new system.

A Non-Linear and Disaggregated Approach to Studying the Impact of CSR on Accounting Profitability: Evidence from the Polish Banking Industry

Corporate social responsibility (CSR) is now extensively promoted in the European Union and highly desired by stakeholders. However, from a manager’s point of view, the question of whether or not corporations should conduct CSR activities is controversial because of the accompanying high cost and uncertain benefits. The vast empirical literature appears to be rather inconclusive with respect to the question of whether CSR business engagement creates or destroys financial performance (FP). This study suggests that the inconsistent findings may be due to the use of aggregated CSR measures and a linear approach, as well as the omission of the industry or country context. Thus, the purpose of this study is to provide an updated assessment of the relationship between CSR and FP. Based on content analysis, we developed four individual CSR disclosure indices, corresponding to the environmental, human resources, product and customers, and community involvement dimensions, instead of an overall CSR composite score, and we examined their impact on accounting-based measures. We applied both linear and non-linear approaches. Data from Poland’s banking industry for the period 2008–2015 provided the background for this study. Our results confirm the existence of a U-shaped relationship between human resources and FP, and an inverse-U-shaped relationship between FP and community involvement, and FP and product and customers. This study contributes not only to the CSR literature by providing new insights into this relationship between CSR dimensions and FP, but it also offers policy suggestions for both bank managers and government regulators.

Payment account with basic features and its significance in the reduction of financial exclusion in Poland

Motivation: The Payment Accounts Directive (PAD) constitutes an important regulation of the financial services market in the European Union resulting from premises of a social nature. Regarding the level of financial exclusion, Poland is third from the bottom in the European Union. Directive 2014/92/EU foresees an introduction of a payment account with basic features as a solution increasing the level of banking penetration ratio in the Member States. The changes introduced in the Polish Payment Services Act (PPSA) seem to be heading in this direction. Aim: The aim of this article is to evaluate the objectives of the aforementioned Directive and Act in the context of practical possibilities of achieving the basic objective of the regulations, i.e. the reduction of financial exclusion scale. An assessment of whether the implementation of the PAD in the Polish banking system will require considerable expenses and changes in the banks’ market offer constitutes an additional objective of the article. Such an assessment requires taking into consideration the problems occurring both on the supply side, that is banks, and on the demand side, that is their customers. Results: The limited functionality and also attractiveness of a payment account with basic features, clearly shaped by the provisions of PAD, indicate that it is a solution aimed at a small group of consumers with low income and also low payment needs. Simultaneously, the emphasis indicated in PAD on the comparability of fees on payment accounts and on creating a commonly accessible service of transferring a payment account by consumers (as a consequence of easier comparison of account fees with its functionality in the offer of various providers) indicates that using a payment account with basic features may be of temporary character.

THE IMPACT OF THE MARKET CYCLE ON THE VALUE RELEVANCE OF BOOK VALUES AND EARNINGS IN THE BANKING INDUSTRY: AN EVIDENCE FROM POLAND

The paper aims at the empirical investigation of the impact of the market cycle on the value relevance of book values and earnings in the banking industry. unlike most prior studies, the paper directly examines the influence of cyclical fluctuations in investors’ sentiments on the informativeness of these key accounting variables. Moreover, the study enhances the literature on the value relevance of banks’ financial reporting by providing an empirical evidence from the emerging capital market ofPoland. The examined sample covers all domestically-based commercial banks listed on the Warsaw Stock Exchange over the period 1997–2016. The empirical evidence based on the analyses of parametric and non-parametric correlation and regression indicates a significant impact of the market cycle on the value relevance of book values which markedly increases (decreases) in the periods of bull (bear) market. In contrast, the informativeness of earnings seems to be driven primarily by factors other than investors’ sentiments. The results of the research indicate that the course of the market cycle is partially driving the fluctuations of the value relevance of book values of equity and net earnings in the Polish banking industry. There is a need for further investigation of the impact of market cycles on the value relevance of accounting data, not only in the context of the banking sector.

Ewolucja regulacji prawnych w bankowości spółdzielczej w Polsce

Cooperative banking in Poland has more than 150 years of tradition, going back to the period of Partitions. The first Polish credit associations and cooperatives were established in Greater Poland in the years 1861–1862, in the fashion of credit cooperatives for farmers established by Friedrich Raiffeisen and the so-called cooperative “people’s banks” associating craftsmen, that were founded by Franz Schultze. In 1899, on the territory of the Austrian Partition, small credit institutions, the so-called “Stefczyk Savings Unions” (“Kasy Stefczyka”), were created, associating mainly farmers, In the period of the Second Polish Republic (1918–1939), Polish Agricultural Bank (Polski Bank Rolny) was established in Warsaw (1919). The bank’s task was to provide financial backing for agriculture, and in 1921 it was transformed into State Agricultural Bank (Państwowy Bank Rolny), only to become Agricultural Bank (Bank Rolny) in 1948. It was replaced by Food Economy Bank (Bank Gospodarki Żywnościowej), called into being in 1975 as a financial head office for cooperative banks which originated from saving and loan cooperatives. In the period of the Polish People’s Republic (1952–1989), state-cooperative banking was in place. The system and economy transformations that took place after 1989 caused crisis and the necessity of state intervention in the Polish cooperative banking. In the years 1990–1994 efforts were made to fix the cooperative banking system through implementation of the Act of June 24, 1994 on restructuring of cooperative banks and Food Economy Bank and on amendments to certain acts. Food Economy Bank was transformed into a joint-stock company as a bank of the National Association of cooperative banks. Besides, nine regional associations were established in the form of a joint-stock company of cooperative banks, which became shareholders of the national bank. The system and functioning of cooperative banks are currently governed by: Banking Law Act of August 29, 1997, Cooperative Law Act of September 16, 1982 and the Act of December 7, 2000 on functioning of cooperative banks, associating thereof and associating banks. The structure of cooperative banking was based on the division into cooperative banks and associating banks. Two associations of cooperative banks are currently operating in Poland: Bank of the Polish Cooperative Movement (Bank Polskiej Spółdzielczości S.A.) with its seat in Warsaw and Cooperative Banking Group – Bank (Spółdzielcza Grupa Bankowa – Bank S.A.) with its seat in Poznań. All the cooperative banks are covered by the Bank Guarantee Fund and under supervision of the Financial Supervision Authority. In 2015 the Act of December 7, 2000 on functioning of cooperative banks, associating thereof and associating banks was amended due to the changes implemented in the European Union Law (the so-called CRD IV/CRR package). Financial security of cooperative banks was increased through establishment of the Institutional Protection Scheme (IPS). Cooperative banks are an important element for development of the entire Polish banking system. Therefore, the financial supervision over the entire system of banking and Cooperative Savings and Credit Unions (SKOK) should be conducted in appropriate manner.

Consequences of the restructuring of loans in Swiss francs in Poland in the light of consumer protection

Aim: The subject of the paper is to discuss the consequences of the changes in the legislation on mortgage loans in Swiss francs, proposed by the Polish Sejm in August 2015, to the situation in the banking sector and the economy. The topic is important because of the potential impact of such changes on Polish banking industry, and indirectly lower GDP growth rate. Design: The article tries to assess consequences for the sector in next 5 years using set of quantitative and qualitative indicators. Author utilized literature review, experts’ opinions selection, and desk research on statistics data. Conclusions / findings: The author concludes that legislators proposal will bring negative impact of PLN >1 bn net income of the banking industry a year in next 5 years. However, if the legislation will be passed according to KNF’s feedback, most of these costs will be mitigated due to spreading banks’ losses over many years. The paper might be interested to banking and public sector analysts, as it brings a new opinion in the ongoing discussion. However, it is one of several voices in the public debate. Originality / value of the article: The paper brings implications to the legislators and public sector observes, serving as an independent analyze of the topic. Its main limitation is lack of granular quantitative losses estimation for banks, based on a scenario approach, which could add more value added to banking analysts, helping them benchmark their internal assessments.

Valuation of Residential Premises for the Purposes of Securing the Receivables of the Creditor in Poland

The study presents an analysis of the theoretical and practical issues connected with securing the receivables of creditors, in particular the principles connected with the appraisal of real property value used for the purposes of granting loans in Poland. The scope of research included the basic elements of the functioning and organisation of the Polish banking system, legal forms of securing debt receivables and the principles of real property valuation for universal and mortgage banks. Additionally, the authors have conducted an analysis of the number and amount of loans granted in Poland in the years 2009 – 2016

Przekształcenia polskiego systemu bankowego w latach 1989–2014

The banking system in Poland after 1989 was one of the fastest growing components of the national economy. Transformations it underwent adapted it to the requirements of market economy. It has a well-developed regulatory sphere composed of an independent central bank, financial market supervision and institutions guaranteeing bank deposits. A large share of foreign capital in the transformation of the commercial banks had a significant influence on the change of ownership relations for the benefit of investors from outside Poland. The banking sector presents a rather low level of concentration. Its financing potential compared to the more developed countries is quite weak. Also, the scope of financial intermediation remains at a lower level than the European average. It can be argued that, while Polish banks are relatively small, they are well capitalized and secure. The stability of the Polish banking system has been verified positive during the recent financial crisis

Role of National Culture of Foreign Investors in the Area of Credit Risk Management: Case Study of Polish Banking Industry

Role of National Culture of Foreign Investors in the Area of Credit Risk Management: Case Study of Polish Banking Industry

Trends in the Polish Banking System's Liquidity Risk Measured by Basel III Standards

Basel III liquidity proposals are still work in progress as new versions of regulations appear, but general shape of two major new liquidity ratios (short term LCR – liquidity coverage ratio and medium-term NSFR – stable funding ratio) seems to be established. In the paper LCR and NSFR measurement in time is proposed to assess changes in systemic liquidity risk in Poland.Estimations of two Basel ratios for years 1996-2012, based on the data on aggregate banking system from National Bank of Poland, reveal that both ratios gradually deteriorated throughout most of this period. The ratios stabilized in 2008 – probably a combined result of banks' reaction to financial crisis abroad and new regulations. It seems that on average Polish banks can meet Basel's liquidity requirement. However, reverse stress test for LCR uncovers that currently an average Polish bank would withstand a run-off of no more than 20% retail deposits – while fifteen years earlier similar stress test would show that banks were able to endure even 60% run-off rate. Also, net cash capital surplus present in the system at the beginning of the analysed period has practically disappeared, even if favourable Basel weights for mortgage loans are taken into account.

Związek między efektywnością i rentownością banków komercyjnych w Polsce

Ocena efektywności banku może być przeprowadzana na wielu obszarach: organizacyjnym, finansowym czy też kosztowym. W artykule podjęto próbę oceny efektywności polskiego sektora bankowego oraz potencjalnego związku pomiędzy rentownością a efektywnością działających na terenie Polski banków komercyjnych w latach 2000-2012.W kolejnych punktach artykułu wskazano na ważne miejsce wskaźników rentowności w ocenie działalności banku. Przedstawiono wskaźniki ROE i ROA oraz zaprezentowano relacje między nimi. Biorąc pod uwagę poziom wskaźników ROE i ROA badanych banków wyodrębniono wśród nich banki rentowne i nierentowne.Zaprezentowano nieparametryczną metodę badania efektywności Data Envelopment Analysis (DEA). Przy wykorzystaniu metody DEA obliczono miary efektywności technicznej banków objętych analizą. W grupie piętnastu rozpatrywanych banków, cztery z nich okazały się efektywnymi w całym okresie badawczym.Przeprowadzona ocena związku w oparciu o współczynnik korelacji Pearsona wykazała bardzo słabą (dla ROE) oraz słabą zależność dodatnią (dla ROA) pomiędzy poziomem rentowności i efektywności banków. Test istotności współczynnika w obu przypadkach, wskazał na brak podstaw do odrzucenia hipotezy zerowej o braku zależności między analizowanymi cechami.Wykorzystanie zmodyfikowanej macierzy BCG pozwoliło zidentyfikować najlepsze podmioty w grupie badanych banków ze względu zarówno na wysoki średni poziom efektywności, jak i rentowności.

Maturity Mismatch in the Polish Banking System and its Impact on the Economy

In the article maturity mismatch in the Polish banking system is estimated based on the publicly available data. Then the impact on the economy is discussed.Based on Polish central bank’s data it may be estimated that between 1996 and 2012 the maturity gap increased significantly – average residual maturity of assets exceeds 6 years in 2012 (less than 2 years in 1996), while that of liabilities remains below 1 year. The gap between assets and liabilities is even wider if we take into account the fact that due to legal constraints practically all deposits in Poland are callable.Growing maturity mismatch in a particular bank may result in higher credit, liquidity, legal, model, interest rate and other risks. Risks accepted by banks may then propagate through the economy, which may lead to financial instability. Increasing gap affects monetary aggregates; additional imbalances catalyze asset bubbles, e.g. a boom in house prices. Also, it could be claimed that maturity mismatch distorts the economic incentives through lowered interest rates.Special case of the maturity mismatch is constituted in Poland by foreign currency denominated mortgages funded with short-term local currency deposits and hedged with short-term swaps.

Competition, Concentration and Foreign Capital in the Polish Banking Sector (Prior and During the Financial Crisis)

The aim of the study is to estimate the level of competition and concentration in the Polish banking sector in 1997-2009 (prior the financial crisis and during the crisis). In this paper the Panzar and Rosse model (P-R) and the Lerner index (LI) have been used for the evaluation of competition. Concentration in the Polish banking industry was analysed by using concentration indices (k bank concentration ratios (CR5) and the Herfindahl-Hirschman indices (HHI)). Empirical analysis shows that the degree of competition in the Polish banking market in the period between 1997-2007 followed a slight upward trend. Results demonstrated also a slight decrease in competition in 2008-2009, caused by financial crisis. This results are confirmed by the Panzar and Rosse model (P-R) and the Lerner index (LI). The same channels (prior the financial and during the crisis) which had an impact on changes in the competition of banking sectors in the euro zone countries, had an impact on the Polish banking sector due to the involvement of the capital from the euro zone. It might also mean that that increase of foreign participation stimulated competitive pressures. Furthermore, foreign capital was positively correlated with concentration indices.

Measuring Systemic Risk in the Polish Banking System by Means of the Risk-Based Balance Sheets Method

Abstract The complex connections, spillovers and feedbacks of the global financial crisis remind how important it is to improve the analysis of risk modeling. This article introduces a new framework for mitigating systemic risk by using a risk-adjusted balance sheet approach. In this regard, the analysis of individual banks in Poland shows potential risk which could threaten all the financial system. Traditional banking models do not adequately measure risk position of financial institutions and cannot be used to understand risk within and between balance sheets in the financial sector. A fundamental subject is that accounting balance sheets do not indicate risk exposures, which are forward-looking. The paper concludes new directions for measuring systemic risk by using Merton’s model. It shows how risk management tools can be applied in new ways to measure and analyze systemic risk in the Polish banking system.