Poland banking: Public dis-service


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Like many truly bad ideas, state ownership of banks is a concept that refuses to die.

No matter how many times taxpayers end up footing the bill for patronage, cronyism, lack of accountability or sheer incompetence, there will always be politicians prepared to argue – and voters ready to believe – that banks are better in public hands.

In western Europe, high-profile disasters in countries such as Germany and Austria have recently made mainstream politicians wary of advocating public-sector banking, except as a last resort.

Further east, however, the idea is enjoying a renaissance. Since coming to power in late 2015, Poland’s nationalist Law and Justice Party (PiS) has embraced it with enthusiasm. 

In its first two years in government, PiS sponsored the acquisition of three banks by state-controlled insurer PZU, including the successful challenger bank Alior and second-place player Bank Pekao. As market leader, PKO BP, was never fully privatized, this means around 30% of banking assets in Poland are now under state control. 

According to PiS politicians, the acquisitions were necessary to reduce levels of foreign ownership in the Polish banking sector. 

Western banking groups, they argue, will never truly have the interests of Polish companies and consumers at heart. At best, they will take profits out of the country. At worst, they will fail to support the local economy at times of stress. 


Mateusz Morawiecki, Poland’s new prime minister and himself a former Santander banker, has described the idea that capital has no nationality as a fallacy and deplored Poland’s dependence on foreign firms.

Of course, in theory the need to ‘repolonize’ Poland’s banking sector is not an argument for state control. When no private individuals or institutions are in a position to step up, however, it is easy to present it as the only option. 

It is also fairly easy, for the moment, to depict the Polish model of state control as benign. The acquisitions of Alior and Pekao made commercial sense for PZU, a company with surplus capital to put to work. 

Meanwhile, PKO BP has thrived in public hands, undershooting some of its private-sector rivals in profitability but matching them in growth and innovation. Both firms should also be subject to some degree of market discipline, thanks to large free-floats.

There are, however, still plenty of reasons to be wary. PKO BP’s strong performance is not necessarily an advertisement for state ownership. Thanks to stringent pre-crisis regulation and strong post-crisis economic growth, Poland’s banks have had a fairly easy ride over the last decade. 

What is more, for most of that time, state-controlled enterprises were under the aegis of the economically liberal Civic Platform government rather than the statist PiS, which has already shown a healthy appetite for interference.

A post-election cull saw senior managers across the sector replaced with party loyalists, qualified or otherwise. Supervisory boards have been stuffed with political cronies. Plans for the future of state banks seem to fluctuate with internal PiS power shifts.

From here it is a small step to directed lending – and from there, when times get tougher, an even smaller step to bad debts and bankruptcy. Public-sector banking is a seductive idea but one that too often ends badly. It is time to consign it to history.