McCreevy warns Poland over bank powers

Charlie McCreevy, the European Union internal market commissioner, has warned the Polish government that recent moves to curb the powers of the central bank may “put at risk the stability of the financial system”.

In a toughly-worded letter sent to the Polish finance minister earlier this month and seen by the FT on Tuesday, Mr McCreevy criticises a new law that takes away the bank’s powers as a banking industry supervisor and hands it to a new commission.

“I am deeply concerned about the impact that this new law might have on the independence and effectiveness of financial supervision in Poland,” the letter warns.

“In particular, I am concerned about the new appointment and dismissal procedure for the members of the Financial Supervisory Commission, which risks placing undue political control over supervisory operations.

“I also fear that these reforms might put at risk the stability of the financial system and hinder Poland’s ability to deliver on the commitments it has made.”

Mr McCreevy points in particular to an important piece of EU financial legislation known as the capital requirements directive, which forces European banks to adopt the new Basel II capital adequacy ratios.

The commissioner also asks Zyta Gilowska, the Polish finance minister, to provide an assurance that financial supervision “remains free of political interference” and “lives up to the letter and spirit of internationally accepted standards of governance”.

Poland’s finance ministry said it had received the letter and planned to send a response to Mr McCreevy on Wednesday. Lukasz Dajnowicz, a spokesman for the new commission, said that it was too early to be critical of the body. “These institutions have to be judged by their actions,” he said.

The decision by the ruling Law and Justice party to rush through the creation of a unified regulator for the pensions, securities and banking sectors was criticised by the International Monetary Fund, the National Bank of Poland and many local economists, who worried about political interference.

Of the commission’s seven members, six are chosen by the prime minister or the president, currently the twin brothers Jaroslaw and Lech Kaczynski, with only the central bank president remaining beyond direct political control.

Work on creating the commission accelerated this spring, when the central bank, headed by Leszek Balcerowicz, refused to back the government’s opposition to allowing a merger of two Polish banks – BPH and Pekao SA – owned by UniCredit, the Italian financial group.

Source:www.ft.com