Experts on overregulation in the banking sector – 138th mBank-CASE Seminar

“The issue of overregulation in the banking sector has recently been widely discussed due to the fact that nowadays domestic and international legislation covers almost all areas of banks’ activities. Until now, this problem has been analyzed mainly in reference to some particular bylaws. I, on the other hand, would like to assess the burdens laid on the Polish banks, to conduct an inventory of a kind, if you will” – said dr. Mieczysław Groszek, Vice-president of the Polish Bank Association, who was the keynote speaker during the 138th mBank-CASE Seminar “An assessment of direct and indirect liabilities of Polish banks AD 2015” which took place on 28 May 2015.

According to dr. Groszek, banks’ operations are shaped by both domestic and international regulations. The latter can either be implemented into particular countries’ legislative systems (e.g. directives) or become immediately enforceable as laws (e.g. regulations issued by European Commission). One of the most important acts that was adopted into Polish legislation is the Payment Service Directive. The act, in the form of “Ustawa o usługach płatniczych”, has serious consequences for banking sector because it opens the payment services market for non-bank entities. Granted, it does break banks’ monopoly, but it also results in sharing customers’ credit history with wide range of companies and makes possible for them to initiate payments. Consequently, the Polish Financial Supervision Authority and Polish Bank Association have both opposed this solution – he explained.

As for the domestic factors, dr Groszek pointed out the increase of the obligatory customers’ contributions required to apply for a mortgage (which currently stand at 10%, but is supposed to rise to 20%). In his view the higher limit will surely result in a drop in demand for this product and thus lead to a decrease in banks’ profits, although he did express a belief that both banks and customers will eventually adjust to the new reality. Another important problem, as far as dr Groszek is concerned, is a limitation of the sale of insurance by banks, which will have an impact on the volume and structure of their income, as well as risk management model. Moreover, dr. Groszek discussed the so-called “Anti-usury laws” (Pol. Ustawa antylichwiarska), which in his opinion impairs banks’ competitiveness in relation to entities that do not have to comply with these rules. He also mentioned new personal bankruptcy laws, which make the period banks need to advance a claim even longer.

As dr. Groszek proved, excessive burden on banks that mostly takes the form of too many regulations and inappropriate solutions, may result in lower profitability and therefore a need to increase volume of operations and rise fees and commissions, as well as in banking sector consolidation, and cuts in the workforce. It may also cause a decrease in attractiveness of banks for investors and thus limitation of resources to fund the economy.

Witold Skrok, Vice-president of Alior Bank Management Board, commented on the presentation of the keynote speaker. During the lively debate that ensued after the presentations, the participants to the seminar asked what impact new regulations will have on consumers protection and banks’ operations.