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Prof. Małgorzata Zaleska Małgorzata Zaleska, a member of the Management Board of the National Bank of Poland (NBP), professor at the Institute of Banking and Insurance, Warsaw School of Economics, and Vice-Chair of the Committee on Finance, Polish Academy of Sciences.
T
raditional banking is primarily about taking deposits and granting loans. Close to it is - more risky - investment banking. For years, the debate has been going on whether these two types of banking should be separated or could be carried out simultaneously by one entity. Now, in response to the crisis, a tendency is back to separate traditional banking from investment activities. Such a trend may be observed in some EU countries such as France or Germany. It also should be mentioned that the Polish Financial Supervision Authority drafted a proposal for organizational change in that area. That may be somewhat surprising, since there are no investment banks in Poland. Given the above, the Polish banking sector should be considered primarily in terms of traditional but also modern banking, taking into account new distribution channels for banking products. Of course, this does not mean that banks operating in Poland only take deposits and grant loans. Nevertheless, this is their dominant activity, on which I would like to focus here. Let’s start with Polish household deposits, which amounted to PLN 548 billion at the end of 2013. Deposits in zlotys were dominant and accounted for 91%, while deposits in euros constituted 5% of all household deposits. The challenge for the financing of the banking activity is that the deposits are largely short-term - up to one year. On their basis banks provide long-term loans -for several decades. It is obvious that banks change valuation dates, and in the case of the Polish banking sector it is a large-scale transformation. It should also be noted that there are basically no incentives to invest savings for a
70 :: polish market :: 5 /2014
“The total amount of loans to households at the end of 2013 was PLN 556 billion, including PLN 336 billion, in mortgage loans which are predominantly foreign currency loans denominated in Swiss francs.” long period in the Polish banking sector or in the tax system. No wonder that Poles choose short-term investment. While discussing making savings by Poles it is worth mentioning seasonality. The analysis relating to the past five years indicates a significant increase in savings in December, and a decline in April. It is therefore not true that October is a month of savings in Poland. Talking about household loans, it should be noted that their value does not differ significantly from that of household deposits. The total amount of loans to households at the end of 2013 was PLN 556 billion, including PLN 336 billion in mortgage loans, which are predominantly foreign currency loans denominated in Swiss francs. These have been characterized by small increments in recent
years. On the other hand, a significant increase is also palpable in housing loans denominated in Polish zlotys (by 121% over the past five years). Moreover, housing loans have been fairly well repaid, because the share of loans in the total amount of unsettled loans is slightly more than 3%. A systematic deterioration is to be noted, however, in the quality of these very loans. Perhaps, once again in the history of banking, a rule will prove true that the housing loan portfolio breaks down at about the seventh year of its life cycle. But the poorest quality is that of the consumer loan portfolio, as nearly 15% of the loans is not repaid on a regular basis, though this has improved recently compared to 2011 when the rate was 18%. Seasonality can be observed in relation to consumer loans: Poles incur them primarily in May, which may indicate that their needs are increasing in the spring time. A clear decline in the demand for that kind of loans can be seen in January, which may be surprising considering that the earlier month is associated with Christmas spending. Less surprising is the growth in demand for housing loans in May due to a flourishing construction season. It is also worth mentioning that the cyclical nature of saving and borrowing is consistent, i.e. a decrease in deposits in April is followed by an increase in demand for loans in May. Given all the above, it is important that people knowingly use banking products. They can be helped by financial education. It should be remembered that an aware customer is a more difficult partner for banks than a customer who does not have sufficient banking knowledge. ::