Some banks will defend themselves against fintechs, Eurozone in need of reform

Key points

Consolidation of the global banking sector. The head of PFR Paweł Borys believes that in the coming years the number of global banks will decrease. The consolidation of the banking sector will be accelerated by regulations that limit banks’ profitability. Borys noted that the current ROE rate stands at 3-5 per cent while the cost of raising capital amounts to around 10 per cent. If banks want to maintain their status, they have to quickly adapt to changing market conditions, generate capital and efficiently implement new technologies. Borys believes that Poland has a chance to create a pan-European bank, and merging PKO BP and Bank Pekao might contribute to this.

Domestic and foreign capital in Polish banks. According to Borys, increasing the participation of domestic investors has a positive impact on the banking sector, making it more balanced. The sector is also more resistant to external shocks that lead to an outflow of capital from foreign parent companies. During the latest crisis, the average drop in sold loans amounted to 15 per cent while PKO BP, controlled by the Polish capital, recorded a slight increase. Borys forecasts that six or seven large commercial banks and a number of specialised ones will operate in Poland.

Advantages and disadvantages of blockchain. Magdalena Borowik from MinDigi described the biggest advantages and disadvantages of distributed ledger technology (DLT). From the point of view of administrators, blockchain’s greatest weakness stems from its complexity, which – in turn – results from decentralisation. This makes it difficult to manage and control the system. The greatest advantages of the new technology include high security and low failure rate. As an example of blockchain use, Borowik indicated the Ripple system, which reduces transaction costs and is already used by a number of institutions around the world.

Some banks will defend themselves against fintechs. Tomasz Czechowicz, head of private equity fund MCI Capital believes that some banks might successfully compete with financial startups. Banks will have to change their business models so as to maintain an advantage over fintechs. According to Czechowicz traditional institutions are most vulnerable to competition from companies that provide transfer services and offer loans. In this sector, fintechs can become more effective than banks. Czechowicz believes that banks should create CVC funds and fintech accelerators that would allow them to take over the best startups.

The eurozone needs reforms. The future of the eurozone was discussed by Anders Åslund, resident senior fellow at the Atlantic Council, Agata Gostyńska-Jakubowska, senior research fellow at the Centre for European Reform and Leszek Skiba, Undersecretary of State at MinFin. Gostyńska-Jakubowska confirmed that the EU is planning to reform the eurozone. The Eurogroup is doing well, so the changes stand a chance of being embraced by the general public. Åslund, on the other hand, argued that the scale of aid for Greece was a mistake – financing amounted to EUR 350 billion, twice the country's GDP.

Poland miles away from the eurozone. Panellists also talked about Poland's membership in the eurozone. According to Åslund, Bulgaria and Croatia will be next to adopt the single currency. Poland will find adopting the euro most challenging because Warsaw is comfortable outside the eurozone. Owing to this, Poland managed to avoid the crisis in 2009, when the government correctly calculated the scale of the zloty devaluation. Åslund added that in his opinion Finland is the most likely candidate to leave the eurozone because it has the strictest fiscal discipline among the EU member states.