Jacek Jastrzębski, Chair of Komisja Nadzoru Finansowego spoke at the 15th Congress of Banking Law and Financial Technologies, organised by the Banking Law Students’ Association from the Faculty of Law and Administration, University of Warsaw. He also took part in a discussion panel: ‘The future of the banking sector: opportunities and challenges for banks’.

As a preliminary point, he mentioned profits of the banking sector: ‘10 billion of net profit in the first quarter is one-fifth more than in the corresponding period of the previous year, which makes us look at our banking sector with optimism, despite certain risk factors. Of course it’s a nominal result: we know where such results come from structurally, and this is why it’s not something that can make us let out guard down or forget that such factors might cause the results to deteriorate. However, at this moment this gives us the basis to look at our banks with peace and optimism’.

Jacek Jastrzębski said that in their business banks should consider an approach based on sustainable banking: ‘For me personally, the word ‘sustainable’ originally means something that can be considered as a thing that can continue over a long period of time. So defined sustainability may apply to both climate-related matters and matters related to how the financial sector arranges its relations with customers. If the relations are arranged in a way that allows them to continue over a long period of time, it means the relations are sustainable. This is linked to the main theme we as supervisory authority have long tried to convey: we believe that jointly with the banking sector we should look for the best points of balance between the benefits and risks to financial institutions and their customers. In our view, such sustainability will allow the business models to continue over a long period of time. This is what we can see in the customer relations that went wrong. This is the case not only in the banking sector, as we have seen customer relations in other markets, for example the insurance industry, where certain experiences preceded the experiences of the banking sector.’ 

Jacek Jastrzębski added that the approach to customer and establishing customer relations should focus on building a long-term relation: ‘So that the relation doesn’t end once the commission income is generated through the sale of a product, followed by figuring out how to mitigate the legal risk related to what has been sold to the customer.’ 

The Chair said that demographic issues should be considered both as a challenge, an opportunity and, in a sense, a threat: ‘In fact, an important demographic change is taking place and that change transforms the needs of main customer groups. This is strongly related to the fact that new groups of customers will be increasingly mindful of climate-related factors. It’s a hypothesis, as we will see how life verifies it: young people are more idealistic, they want to invest in green sustainable solutions that support energy transition. Later, as they grow older, their preferences may change and they may abandon the idealism of the years of their youth. I think that a certain trend will be seen, though, and next generations entering the financial market will recognise more the importance of factors traditionally classified as ESG factors, i.e. factors related to climate, social matters and quality of governance.’ 

Speaking about new customer groups, the Chair of the KNF stated that the supervisory authority supported the plans and intentions of the banking sector to make the first contact with a bank as friendly to young customers as possible: ‘We know that the first serious contact a young person has with a bank is often related to a mortgage loan. We support the initiatives aimed at ensuring that the first customer experience is improved to the maximum. So that it is as pleasant and encouraging to continue the relation as possible. This includes initiatives of the banking sector that we appreciate and support and that focus on creating a standard loan agreement. This is how the quality of the experience of the first serious contact with the banking sector can be different from the quality of the experience that young customers must face not being able to go through a complex documentation concerning the first mortgage loan’, the Chair said. 

Another point addressed by the Chair of the KNF was technology: ‘From the financial sector’s point of view, technologies such as AI or machine learning, AI in particular, can become a revolution. I see it both as a challenge and an opportunity. Our responsibility – both as representatives of the banking sector and the public – is to make sure that we don’t sleep through this revolution and that we can figure out ahead of time what potential this revolution can unlock. We don’t know if the scale of this revolution is going to be similar as in the case of the Internet or computers but we have to consider this as an option. It’s no coincidence, I guess, that we have two bank IT and Technology Directors on this panel. It’s a transformation that has started before our very eyes and continues. IT matters at banks transform from a support function into a core business function’, the Chair said. 

The Chair also mentioned lending activity: ‘On one hand we’re told that regulatory burden or risks or legal risks are something that reduces the banks’ ability to develop their lending activity. But what concerns us and our peers in the banking sector is the limited interest in, and the limited demand for, loan, particularly investment loan. It’s a challenge, as it must be changed in the long run. We should reflect together on what can be done to induce the demand for investment loan. We, as the financial regulator, have to make sure that the lending activity is safe but, on the other hand, we’re aware that a part of our mandate is to support market development. We have certain hopes regarding EU funds, as part of Poland’s National Recovery and Resilience Plan, that could become a driving force if appropriate programmes are designed, e.g. the financing of one’s own contribution with those funds. Today we can see that the banking sector operates with record-low deposit-to-loan ratios. Banks show huge excess liquidity but it’s not good news in the context of business and economic perspectives for the entire country’, the Chair said.

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