Poland’s credit unions are concerned debate about the tiny lenders’ financial stability, playing out in the heat of an election campaign, will trigger hysteria among their 2.2 million clients.
The institutions, which allow clients to become part owners, deposit savings and take out loans, have received 3.2 billion zloty ($854 million) in aid from the nation’s banking rescue fund since 2013, when the financial-market watchdog gained authority to regulate them. Finance Minister Mateusz Szczurek stirred the discussion last week, saying credit unions, known as SKOKs, resisted meeting safety norms required of commercial lenders and “falsified” earning statements, likening them to financial “pyramid” schemes.
“Pressure on SKOKs may result in panic among our clients,” Andrzej Sosnowski, the head of SKOK Stefczyka, the biggest credit union, told reporters in Warsaw on Tuesday. “Destroying institutions such as credit unions wouldn’t serve the country well.”
The country’s 50 credit unions, which jointly have 6 percent of Polish bank assets, are the latest lenders to come under pressure from politicians in the run-up to a general election on Oct. 25. An index of Warsaw-listed banks sunk to a two-year low on Monday after a plethora of proposals by both the government and the main opposition party to force lenders to pay for converting $38 billion in Swiss mortgages into zloty as well as plans to boost taxes on the industry.
In a country where foreign owners hold 62 percent of bank assets, SKOKs have sought to become a locally-owned banking alternative, winning clients largely in rural areas and smaller towns. The dispute comes as the ruling Civic Platform’s popularity lags that of opposition party Law & Justice, a group which supports credit unions and criticizes commercial lenders for charging Poles the “highest fees in Europe.”
More than half of the nation’s credit unions may need restructuring, Andrzej Jakubiak, chairman of the country’s financial-market supervisor, said last week. With 11.8 billion zloty in deposits, SKOKs had a negative capital of 444 million zloty and a solvency ratio of minus 3.8 percent on March 31, according to the regulator’s data. Financial statements published by SKOKs show lower losses and more capital.
Restructuring of the credit unions is “a significant challenge in the short- and medium-term” for the local banking system, the central bank said in its financial stability report on Wednesday. The condition of SKOKs “remains difficult and rehabilitation processes need to be intensified.”
The banking regulator placed two more credit unions under forced administration to help their revamp on Wednesday, while the country’s Constitutional Tribunal started a two-day meeting to examine complaints related to supervision of credit unions.
“Turning out the light doesn’t make the husband thinner or the wife more beautiful,” Szczurek told a parliamentary committee during a debate on SKOKs on July 23. “Falsifying reality with special rules or distorted financial statements doesn’t change anything, a pyramid remains a pyramid.”