SKOK in the report of the World Bank
The media focus on the Co-operative Savings and Credit Unions (the Polish name: SKOK) on the map of the co-operative movement in Poland. This dynamically developing financial institution, directing its offers to their members (every client becomes a member of a credit union), embraces over 2 million people, which is 15% of households. The clients of credit unions give up the services of other financial institutions. And it – as it turns out – is a step towards a conflict of interests.
Although the Co-operative Savings and Credit Unions should not be competitions for banks because their target group is individuals with low incomes as well as small and micro-small businesses, it was the lobbing of big financial institutions that made the MPs of the Civic Platform hastily prepare a new credit unions bill. The bill was not consulted in various departments and there were no reliable social consultations, and consequently, it contained many errors. And President Lech Kaczynski questioned those errors (72 charges of discrepancy with the Polish Constitution!) and directed the bill to the Constitutional Tribunal in December 2009. He argued that the bill ‘interferes too much in the self-government and independence of the Co-operative Savings and Credit Unions.’ In February 2011 the report of the World Bank, concerning the functioning of credit unions and proposals to regulate and supervise them, ordered by the Polish Financial Supervision Authority that is to conduct state control over credit unions in accordance with the bill, was published. In the news about the report the positive remarks of the authors concerning the functioning of credit unions and their roles in social development were lost.
The diagnosis of credit unions is positive
The authors of the report, diagnosing the functioning of credit unions, stress their roles in family enterprises and for those who run their own businesses. Credit unions were especially merited for their services directed to not-well off people who do not meet bank requirements and thus were excluded from the financial market. The report stresses that in the 18-year-old history of the Polish credit unions the supervision of the National Association of Credit Unions realised the aims of the credit unions, ensured their security and served their development. There were no cases of bankruptcy of the credit unions and no member of the credit unions lost his funds. Over 2 million Poles have savings in the credit unions, which are worth 10 billion zloty. The credit unions have over 1,800 centres in Poland (suffice to compare that the biggest customers bank PKO BP has ca. 1,200). The report confirms that credit unions are a well-organised co-operative sector and the interference in their supervision, accepted in the bill, causes a change of the functioning model of credit unions as a group, which interferes too much in the reciprocal, co-operative system of credit unions. The authors of the report acknowledge that although credit unions are dynamically developing financial institutions they cannot be compared with the banking sector because they function according to different regulations than banks. However, they are competitive towards banks, taking lower margins and offering higher interest rates of deposits. And one must agree with this remark.
Credit unions under special supervision
The authors of the report suggest to amend the self-governmental system of supervision (internal supervision by the National Association of Credit Unions) but the proposals included in the bill, transferring supervision to the Polish Financial Supervision Authority and giving monitoring and controlling tasks to the National Association of Credit Unions, can – according to the authors of the report – cause conflict situations between these institutions (similar tasks), which can result in misunderstandings. The report proposes that the Polish Financial Supervision Authority should supervise only the biggest credit unions and the small ones should be supervised by the National Association of Credit Unions. ‘We have nothing against the external supervision of our credit unions but it should be wise and should not destroy the system of credit unions as such, and this is an exceptionally unsuccessful bill,’ says Wiktor Kaminski, the deputy president of the National Association of Credit Unions. ‘Accepting the same regulations for banks and credit unions must mean granting credit unions the same privileges and rights banks enjoy,’ representatives of credit unions state. Supervision over credit unions without granting them the rights of banks violates the principle of competiveness. Credit unions have limited possibilities to function within their rights and consequently, their income is achieved in other ways. That’s why they are obliged to follow different regulations and use a different system of supervision.
Too much politics in this bill
The bill concerning the co-operative savings and credit unions contains politics but the sector of co-operative activities itself does not exclude the interference of politics. And here are some odd cases:
– the Prime Minister is to decide how to divide the fee to finance the supervision of the Polish Financial Supervision Authority and the National Association of Credit Unions;
- the Prime Minister is to decide about the range of supervision activities;
- the minister of finance is free to shape the saving norms of credit unions (capital, reserves, liquidity, assess management). It is easy to notice how deep the bill allows politics to interfere and the very model threatens the continuity and stability of the functioning of credit unions. These fundamental changes do not include the interests of credit unions and their members.
Without going into details, which are hard to follow by those who are not connected with the banking sector, it is worth remembering that for 18 years the credit unions have built their own system of guarantee of their members’ deposits and paid the costs of its building. Let us use a comparison: the gathered savings the credit unions have more resources than the Bank Guarantee Fund considering the savings of bank customers embraced by guarantees and using the alleged support of the state. Including the credit unions into the Bank Guarantee Fund means new costs covering the guarantee deposit system.
The National Association of Credit Unions suggested to introduce extra rights as far as supervision is concerned, which would respect the independence of the credit unions and their democratic structures. The changes in the functioning of the credit unions suggested in the bill interfere in the very idea of co-operative movement, which the authors of the report of the World Bank have noticed, too.
International network of financial co-operative movement
The credit unions in Poland have built their positions on the financial services market on solely Polish capitals of their members. It was the same in other countries. This fact played a big role during the increasing economic crisis caused by the global financial crisis. Shrinking economy, bankrupting banks, growing unemployment and billions of dollars pumped by states to save banks have been our recent experiences. The crisis has not affected credit unions. What’s more, they form a dynamically growing branch of economy and enjoy bigger and bigger confidence. The credit unions in the United States, that supported the development of credit unions in Poland, have ca. 90 million members. The share of credit unions on the US savings market is 7% and on the lending market – 14%. The share of our credit unions is comparable with that in the USA. ‘The Polish financial co-operative movement is a young movement. It has existed for only some 20 years but within this short period the Polish movement has achieved more than in the other countries boasting of longer traditions dating back to the 1960s and ‘70s. The Polish credit unions give many excellent examples for the international community of credit unions regardless of their age or size,’ said Dr. Brian Branch, Executive Vice President and Chief Operating Officer of the World Council of Credit Unions (WOCCU) during his visit to Poland in January 2011. Another fact testifying about the significance of the Polish co-operative movement is that next year, which the UN proclaimed the International Year of Co-operatives, Poland will host an international conference of the WOCCU.