Poland’s new financial services regulator, the Financial Supervision Authority (FSA), was supposed to be regulating the country’s banks by the end of this year, but the government is trying to delay the transfer because of increasing disagreements with the authority’s chairman.
Stanislaw Kluza says the government is trying to undermine his authority, calling its actions “very dangerous”. The government would like to keep banks under the supervision of the central bank for an additional five years.
“There is an attempt to seize control of supervisory policy,” says Mr Kluza. “They are trying to avoid the intent of the legislation which created the authority.”
The FSA already supervises listed companies, pensions, insurance and brokerages. The shift in the government’s position on adding banks has a lot to do with the job that Mr Kluza has done since he was appointed to the agency last year.
First impression
Initially, he was seen as a loyalist of the prime minister Jaroslaw Kaczynski, and one of the few respected economists to have joined Mr Kaczynski’s Law and Justice party government.
When Mr Kluza was made finance minister in June 2006, Mr Kaczynski went out of his way to praise him, calling him a future star in his government. At the time, the party was engaged in a war of words with the central bank, then headed by Leszek Balcerowicz, the acerbic architect of Poland’s shock therapy economic reforms which transformed it from a socialist to a market economy in the early 1990s.
Mr Kaczynski and his party blamed Mr Balcerowicz for pauperising Poles during the transformation. His resistance to government pressure to block a merger between two Polish banks owned by Italy’s UniCredit further inflamed relations between the central bank and politicians. The party also blamed Mr Balcerowicz for being too hawkish on interest rates.
Opposition criticism
During the fight, the government rushed through legislation creating the FSA, despite criticism from opposition parties, economists and institutions such as the International Monetary Fund. Their worry was that Poland’s financial industry was not mature enough to warrant the amalgamation of separate regulators, and that the legislation left the FSA open to political interference.
When Mr Kluza was replaced at the finance ministry by Zyta Gilowska, the current minister, he was given the job of heading the FSA. But he quickly proved to be more independent than his political patrons had predicted.
One of the FSA’s first actions was to consider whether Jaromir Netzel, a little-known lawyer from the Gdansk area, was an appropriate choice to head PZU, the government-owned insurance company. Despite Mr Netzel’s strong political backing from senior levels of Law and Justice, Mr Kluza voted against him.
Change of position
Meanwhile, Mr Balcerowicz was replaced in January by Slawomir Skrzypek, a loyalist of Lech Kaczynski, Poland’s president and the prime minister’s twin brother. The Kaczynski brothers see Mr Skrzypek, who only has an MBA and is widely seen as under-qualified to head the central bank, as being a safer pair of hands than Mr Kluza.
The government’s change of position on the powers of the FSA has prompted a similar about-turn on the part of the opposition. Now the liberal Civic Platform party supports the idea of bringing banks under the FSA’s umbrella, a scheme it had earlier opposed.
“In a perfect world we would not have changed, but we have to deal with the world as it exists,” said Adam Szejnfeld, a Civic Platform MP, stressing that banks would be safer under Mr Kluza’s eye than under Mr Skrzypek’s.
Mr Balcerowicz, now back in academia, maintains his old position that the central bank is better suited to regulating banks, as has the IMF. “I stand by what I said last year when the authority was being created,” says Christoph Rosenberg, senior regional representative for the IMF. “One fundamental objective of any law setting up such an agency is to ensure that its activity is independent of any government’s political agenda. Without such assurances, undue interference could weaken banks, hurt investor confidence in the zloty and even result in financial crises.”
The bank has also claimed that changing supervisors would cause many experienced regulators to leave, and would potentially interfere with commercial banks’ ability to conform to European regulations.
The final outcome of the power play between the central bank and the FSA will be determined by the result of snap parliamentary elections, which were held on October 21.
