Contemporary challenges for financial stability Zdzisław Sokal Kijów 2013 April 16 th.
Contemporary challenges for financial stability • A stable macro-economic characteristics of the financial market • Sources of financial instability • Macroeconomic instability indexes • Microeconomic instability indexes • The financial stability in Poland • The draft resolution in the EU and Poland • Summary
Accounting transparency „disclosures" Legal system Managment, corporate, governance Macroeconomic features of the financial system stable Network security Market structure Supervision and control
Proprietortship and contract rights Practical recovery contracts Legal system Adequate bankruptcy low Colletaral estimating and establishment
Proper classification of loans, realistic estimation of assets Regular publication of information about creditworthiness Availability of objective rankings Accounting transparency disclosures Permanent mechanism for reviewing, audit Publications of credible macroeconomic indicators
Release of managers for bad performance Requirement of capital adequacy and realistic risk assessment Management and corporate governance Widespread use of effective risk management systems Enforcement of criminal liability of managers and internal control
A significant share of foreign financial institutions in all sectors Open of financial sector for most skilled players Limits of concentration of financial sector Full set of possible use of financial instruments Market structure An efficient and secure payment system and settlement Liquid interbank market and the capital Share of state sector in whole assets
Information of risk management through regular inspections Transparency , political and financial independence of the supervisory authority The use of internationally recognized standards (Basle Committee, and the FSF) Right to obtain information and application effective sanctions Supervision and control Qualified staff adequately paid Cooperation between authorities supervision The right strategy for insolvency
Charging shareholder losses Too big , to fail ? Lender of last resort Network security Open and transparent system of deposit guarantee Stringent conditions of use of public resorces Clear division of responsibilities between the different participants
Sources of financial instability • • • Sources of macroeconomic: inappropriate selection of instruments of macroeconomic policy Inflation, Liberalization of the financial Sources arising from the specifics of the financial sector • corporate governance and management • infrastructure and market discipline, • supervision and prudential regulations Feedback effects
Indicators of instability macro: • Inflation> 5% • Government deficit / GDP> 2% • The public debt / GDP> 50% • The deficit on the current account market> 5% of GDP • Short-term flows> 50% of the current default account deficit • Capital inflows / GDP> 5% • The ratio of short-term debt to reserves> 1
Microeconomic volatility indexes: • The share of private debt to GDP > 100% • Real growth in real private sector debt > 20% • Return on investment • Bad debts - less than the cost of credit > 10% of the total commitment, • The average cover bad debt reserves created - descending • Capital adequacy ratio <8 % (Basilea IIII-9%) • The average return on assets of financial institutions - low and declining • Market capitalization (% of GDP)
NBP Liquidity Supervision macro MF Regulations Recapitalisa tion Financial Stability System of Poland FSA Supervision Regulations BFG Withdrawals Resolution
The Ministry of Finance Bank insolvency Squeeze-out shares Guarantees SP Opinion NBP Opinion KNF Consent GM Opinion NBP • The legislative initiative • Impact on the staffs of the Supervisory Board at BGK • The Law on the recapitalization of financial institutions Opinion KNF Opinion BFG
National Bank of Poland • Macro Analysis • Payment and settlement system • Living Loan / technical facility and refinancing • liquidity support • No possibility of acquisition of shares of banks • Support of refinance loan in recovery proceedings • Monitoring the stability of the national • Participation in the Financial Stability Committee • Support Credit Guarantee Fund • SP credit support after the warranty
Draft resolution Monitoring Early warning • • capital requirements • liquidity standards • Limits on large exposures • reporting requirements • inspections • contingency plans • Stress tests • • Implementation of contingency plans Increase of capital by shareholders Larger reporting requirements Replacing the board Repair program Appointment of a guardian receivership Limit of activity Resolution Sale of Business Bridge bank Administrative proceedings resolution The redemption or conversion obligations Separation of assets Public interest The threat to the continuation of activities No public interest Bankruptcy court liquidation Insolvency
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