Financial Services in Poland

An Expert's View about Financial Industry Support Services in Poland

Posted on: 30 Sep 2010

Polish banks and insurance companies will also continue to invest in automation and information technology.This creates opportunities for all suppliers aiming at the financial services sector

Financial Services ? Poland Sector Report Financial Services Poland Produced by: Slawek Morawski, Warsaw Iwona Bogacz, Warsaw Last revised 30/09/2009 Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation and Skills and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published September 2009 by UK Trade & Investment. Crown Copyright © Financial Services ? Poland Table of Contents OVERVIEW 3 CHARACTERISTICS OF THE MARKET KEY METHODS OF DOING BUSINESS 8 MORE DETAILED SECTOR REPORTS 10 PUBLICATIONS 10 EVENTS 10 CONTACT LISTS 11 Page 2 of 13 Financial Services ? Poland OVERVIEW Key characteristics of the market include: ? A populous and increasingly sophisticated market ? Presence of a large number of foreign law firms including many UK firms and UK/Polish partnerships. ? The planned privatisation of the Warsaw Stock Exchange. ? New legislation to facilitate the implementation of PPP projects. ? Retail banking: widespread foreign ownership of retail banks; large number of physical retail bank branches, growing availability of internet banking and almost universal use of payment cards as opposed to cheques. ? Recent changes to pensions legislation improving consumer information and choice but militating against the largest players. OPPORTUNITIES With a population of 38 million people and 3.5 million business entities Poland creates huge opportunities for all segments of the financial services sector. Polish banks and insurance companies will also continue to invest in automation and information technology. This creates opportunities for all suppliers of new equipment, technologies or professional services aimed at the financial services sector. The Polish market should be also considered as an attractive one for companies who would like to start operations in all segments of the financial services sector. One of the most attractive and promising sub-sectors seems to be the development of Public Private Partnerships. UKTI publishes international business opportunities gathered by our network of British Embassies, High Commissions and Consulates worldwide. These opportunities appear in the Opportunities portlet on the relevant sector and country pages on the UKTI website. By setting up a profile you can be alerted by email when relevant new opportunities are published. New or updated alert profiles can be set in My Account on the website. CHARACTERISTICS OF THE MARKET The Banking Sector The Polish banking sector has undergone a fundamental transformation since 1989. The National Bank of Poland (NBP) has relinquished its commercial activity and acts as a central bank. Most banks in Poland operate as multi-purpose institutions. They are involved in various types of deposit taking and financing activities, offering a wide range of banking services both to retail and corporate clients. Many of them are also active on the capital market through their own brokerage houses. Today the Polish banking system comprises the NBP, 53 commercial banks (including four mortgage banks and six banks set up by motor manufacturers to provide credit to support their Page 3 of 13 Financial Services ? Poland sales), 579 small farmers? co-operative banks and 22 branches of foreign credit institutions. Commercial banks have an 89.1% share of the total assets of the whole sector (of which 66.6% owned by banks with majority stake of foreign capital) followed by 5.6% share owned by branches of foreign credit companies and 5.5% share owned by co-operative banks. The total assets of the whole sector stood at 982 billions at the end of 2008. The State Treasury is the majority stakeholder in 3 banks. There is only one British bank operating in Poland ? HSBC which focuses on investment banking and serving commercial customers. The major players include such banks as: Pekao S.A., PKO BP, BRE Bank, BZ WBK, Bank Handlowy, ING BSK, Bank Millenium, Kredit Bank, GE Money Bank, Raiffeisen Bank, BGZ and Getin Bank. The banking sector employs about 181,000 people (2008). The network of bank units expanded and reached 14,698 (1,200 more than in December 2007). The value of credit rose from PLN427bn in 2007 to PLN593bn. There has also been a rapid growth in the value of loans contracted by private households; from PLN254bn two years ago to PLN368bn last year. Mortgage loans accounted for PLN194bn, with PLN134bn denominated in Swiss francs. The value of deposits was PLN100bn lower than the value of loans. The net profits of the whole sector rose by 7.9 percent and reached PLN14.7bn. Most large banks and more and more small ones offer their services through the Internet. Banks in Poland issue all types of plastic cards. At the end of 2008 there were 31.08 millions cards on the market. The most popular are debit cards (20.97 millions), followed by credit cards (9.7 million) and charge cards (0.4 millions). There were 14,174 ATMs installed at the end of 2008. The Insurance Sector th Poland was the 11 largest insurance market in Europe in 2008. The value of premiums collected by Polish insurers in 2008 was PLN 60 billion (EUR 16.9 billion) which meant 36.6% growth compared to 2007. The life insurance sector collected PLN 40 billion (up 50%) and non- life sector PLN 20 billion (up 11%). The premium collected by insurers constituted 4.7% of the Polish GDP. The average Pole spends about PLN 1,500 on insurance per year. Before 1989 the Polish insurance market was monopolised by two state owned companies: PZU ? on the domestic market and Warta ? in foreign trade insurance and travel insurance. Since then the situation has changed dramatically. At the moment there are 66 insurance companies operating in Poland (33 life insurers and 33 non-life insurers). The Polish insurance sector is dominated by foreign companies that own 77% shares in life insurance and 80% in non-life insurance companies (54 companies have foreign share holders). Germany is the largest investor in both life and non-life insurance segments. In life insurance strong position have also companies from the UK (Aviva), USA (Amplico Life) and the Netherlands (ING, Aegon). A few of the largest insurers dominate the market. In the life insurance segment the five key players (PZU Zycie, AVIVA Polska TUnZ, ING TUnZ, TUnZ Warta and Aegon) have 70% of the market share. In the non-life insurance sector, the five leading companies (PZU, Warta, Ergo Hestia, Allianz and HDI Asekuracja) have 71% of the market share. Page 4 of 13 Financial Services ? Poland The strongest insurance company is Poland in both insurance segments is a former state firm PZU/PZU Zycie. The company was partly privatised a number of years ago but the Polish Treasury owns the controlling stake in the firm. The Polish insurance sector employees about 30,000 people. Insurance companies also sell their products through 55,000 insurance independent agents. It should be also added that above 500 insurers are running their business in Poland on the basis of the so called notification, according to the principle of single European passport. There is no institution in Poland which keeps statistics concerning the notified insurers. The Pensions Sector The Polish pension system in its current form was introduced by the Polish government in 1999. The system consists of three pillars of which first two are mandatory: Pillar 1 is managed by the social security office ZUS (a government organisation) to which pension contributions are paid. Each employee has an individual account at ZUS. Pillar 2 consists of open-end pensions funds (OFEs) which are managed by private financial institutions (PTEs). Participation in pillar 2 scheme is obligatory for everyone born after 31 December 1968. At the end of 2007 there were 13,138,758 members of OFEs and the value of the 14 OFEs operating in Poland was PLN 140bn. The funds managed by PTEs were invested in the following way: bonds (59.89%), shares of companies listed on the stock exchange (34.67%), bank deposits and bank securities (2.88%), treasury bills (1.78%) and other types of investment (0.8%). Since the beginning, PTEs have played an important role in the domestic financial services market especially that they have been allowed to invest only 5% of their assents abroad. The largest pension funds are managed by Commercial Union (Aviva), ING Nationale Nederlanden, PZU and AIG. Pillar 3 ? Within this pillar contributions are paid by employees or their employers on a voluntary basis. The money can be invested in three ways: a group investment employee life insurance agreement with an insurance company, an agreement with an investment fund or an rd employee pension fund. The 3 pillar pension scheme has not been a great success in Poland. In the 10 years of its existence, 1,019 pension funds have been established but they have attracted only about 312,000 individual participants contributing about PLN 2,663 million. This year brought revolutionary changes in pension law. The changes relate mainly to the operation of OFEs/PTEs. In August, commission on OFE premiums was capped at 3.5% (down from 7%). The regulations proposed foresee the possibility of joining OFEs by post and online which will remove the need for large numbers of door to door collectors (currently a workforce of some 120,000). Charges for migration from one fund to another will also be abolished and a comparison of the performance of particular funds prepared by the Social Insurance Office (ZUS) will prepare, which will make it easier for future pensioners to choose between them. Another change is that from 1 January 2010 fund management fees will be capped at the level chargeable on a total fund of PLN 45bn. The change will make growth beyond this level unattractive to fund operators and will be particularly damaging to the biggest players. The Warsaw Stock Exchange The Warsaw Stock Exchange (WSE) started to operate on 16 April 1991. At the end of 2008, its shareholders included 35 entities. These were banks, brokerage firms, an Exchange company and the State Treasury. The State Treasury's stake was 98.82%. Page 5 of 13 Financial Services ? Poland The task of the WSE is to organise public trading in securities. The Exchange provides a concentration of buy and sell offers in one place and time in order to designate prices and execute transactions. The trading system of the Warsaw Stock Exchange is order-driven. This means that to determine the price of a security, a list of sell and buy orders is drawn up in a form of public order book. These orders are matched according to strict rules and transactions are executed during trading sessions. To improve the liquidity of trading brokerage firms can fulfil the function of market animator by placing buy and sell orders on the public order book (pursuant to an appropriate agreement with the Exchange). The following instruments are traded on the Warsaw Exchange: shares, bonds, subscription rights, allotment certificates, investment certificates, and derivative instruments: futures, options and index participation units. There are 373 companies listed there (335 listed on the main market, including 25 foreign ones and 38 listed on parallel market). The market value of companies listed there is almost 98.5 billion Euro. In 2008 the capitalisation of WSE was over PLN 267 billion (almost 76 billion Euro; slightly more than half of the 2007 capitalisation) and 33 new companies were listed in 2008. In many aspects, the Warsaw bourse is closer than other regional markets to the leading Western European stock exchanges. The average value of a WSE bluechip is still several times lower than that of its counterparts from global markets, but at the same time comparable or even higher than that of an average bluechip from medium-sized European bourses. The dynamic development of capital market culture in Poland and sharp increase in the number of listed firms observed since 2006 have created favourable conditions for the WSE to make the next developmental steps. In April 2009 the Polish Treasury Minister announced plans to privatise the Warsaw Stock Exchange. The invitations were sent to four potential investors: the London Stock Exchange, Deutsche Boerse, Nasdaq OMX and NYSE Euronext. This means the long-planned privatisation process has been initiated before the amendment to Law on Financial Instruments entered into force (that law included some provisions related to privatisation of WSE, but was referred by the President to Constitutional Tribunal because of doubts about provisions related to the National Bank of Poland). After this first stage of privatisation the State will retain 25% plus one share in WSE and the investor will get at least 51% of the shares. In the next stage the Treasury would like to float WSE shares. The Treasury estimated the value of WSE at PLN 2 billion (almost 0.5 billion Euro) before the financial crisis. The Legal Services Market The legal profession in Poland is split into advocates and legal advisers. Legal Advisers are historically the legal counsels in former state-owned companies. Once Poland emerged from the communist world, negotiations for them to join the advocates broke down and they created their own National Council of Legal Advisers. They specialise today in commercial, transactional work, also open to advocates, and cannot undertake criminal or family law matters which are reserved to the Advocates? profession. Page 6 of 13 Financial Services ? Poland Poland successfully implemented the 98/5/EC Establishment Directive. International law firms are present and active in the market and have so far found no overly onerous administrative or bureaucratic obstructions to legal practice. British law firms were among the first foreign companies to open offices in Poland at the beginning of the 1990s. They not only actively supported British and other foreign firms that decided to start their business activity in Poland, but also actively contributed to the development and transformation of the Polish economy as well as development of the Polish legal sector. A characteristic of the Polish market is the huge presence of foreign law companies either through branch offices in Poland or by co-operating very closely with Polish firms. As mentioned above the law sector comprises of the two following profession: Advocates Poland's nearest equivalents to English barristers but they do not enjoy the same near-exclusive right of audience before any court, nor do they rely entirely on work referred to them by other lawyers. As well as representing clients in court, they can give clients general legal advice and may draft documents. Advocates are not allowed to advertise their services and can only practise as self-employed practitioners. They have no legal immunity, either in respect of the advice they give or of their conduct as legal representatives in court. Polish advocates working for foreign law firms in Poland do so on a consultancy basis and local advocates are either sole traders or working in association with others. Polish advocates must have a law degree, undergo a period of apprenticeship (three years and six months of which at least six months must be spent in a court, public prosecutor's office, notary office or other institution as directed by the District Bar Council) and than pass the bar examination in order to qualify for this professional rank. The district Bar Council decides who is to be registered as an advocate. An advocate can practise his/her profession in an advocates' office, Bar Associations or through a registered partnership, civil law partnership, professional partnership or limited partnership with the exclusive participation of advocates or advocates and legal advisers as well as foreign lawyers. The sole object of the partnership's activities must be the provision of legal services. There are 8,000 advocates in Poland but not all of them currently work as advocates. Legal advisers They give legal advice and represent clients in court (apart from criminal and family matters). They constitute the majority of qualified lawyers working in the Polish offices of the international law firms. A legal adviser can practise his/her profession in a legal advisers' office, be employed by a commercial enterprise or through a registered partnership, civil law partnership, professional partnership or limited partnership with the exclusive participation of advocates or advocates and legal advisers as well as foreign lawyers. The sole object of the partnership's activities must be the provision of legal services. After acquiring a degree in law, a candidate for becoming a legal adviser must undertake a set period of legal practice/training (3.5 years) before being eligible to sit their regulatory body's professional entrance examination. Their professional conduct is regulated by their particular regional professional association, which maintains a list of its members. There are about 20,000 legal advisers in Poland of which 9,000 are employed and 8,000 work in their own offices. Page 7 of 13 Financial Services ? Poland The PPP market in Poland As the funds that are available to local governments or EU funding are not sufficient to meet all the country?s investment needs, there is a widespread and increasing interest in public-private partnership in Poland as a means of implementing public investment projects. The needs of public entities arise from the EU requirements to upgrade the whole infrastructure to European standards as well as from new challenges associated mainly with the preparation of the sport infrastructure and relevant facilities required for EURO 2012 Football Championships. In view of the above, the market value of public-private projects in Poland between 2008-2012 is estimated at Euro 40-50 billion. As many as 45% of public entities surveyed in 2007 planned to cooperate with private entities in executing public tasks in future. PPP projects are regulated in Poland by legislation which first came into force in 2005. However, its complexity and lack of political will discouraged entities from reaching for this solution. As a result no projects were undertaken under the PPP scheme. This situation changed significantly at the end of February 2009, when the government introduced amendments to the legislation. The current law is more flexible, more investor-friendly and gives more room for negotiations, so that both parties can find the most appropriate way to co-operate. Another change is the support for PPP coming from central government; a clear signal that this is the way forward. Taking into consideration the above, the following sectors offer the most significant opportunities for development of PPP projects: transport, social housing, healthcare, prisons, sport and recreation sector. KEY METHODS OF DOING BUSINESS Language and business culture Many Polish managers and directors are familiar with general West European business etiquette and culture, negotiation techniques, etc. A lot of Polish businesspeople are young, well educated, fluent in English and with a very flexible business style. This especially applies to people employed in the financial services sector. When meeting someone for the first time in a business environment, there is a need to introduce yourself using both first and last name. Shaking hands is a habit in Poland. This is followed by exchange of business cards. In general, there is not much difference between business meetings in Poland and elsewhere in Europe. Coffee and tea are offered at the beginning of a meeting. Protocol at meetings is usually relaxed, but this also depends on the size of an organisation you are visiting and the position of the people you are meeting. The only major difference is that the formality level in Poland is higher than in the UK. When addressing senior management in Polish companies, you should use "Dear Mr Last Name" or "Dear Mr President" rather than "Dear First Name". When your relationship with local contacts develop you can take a less formal approach in this respect. Page 8 of 13 Financial Services ? Poland No negotiating style can be said to be specifically Polish. As with other aspects of business in Poland, much depends on the age and amount of international experience of the person you are dealing with. The key to success in negotiation is clear communication and language understanding. Poles can be voluble and gesticulation is an integral part of conversation here. However, little significance is placed on specific gesture and you do not need to worry about inadvertently causing offence. Polish businessmen wear suits for business meetings. Dressing well for a meeting is expected as it shows your counterparts that you value the opportunity to meet them. Lunch or dinner meetings are becoming increasingly common, but they are used more as a way to cement good relations than to hammer out details. As in many other countries, the person who proposes such a meeting will pay the bill. Contracting and payment In order to launch products on the Polish market, UK companies should identify appropriate local business partners who would be interested in co-operation. The most popular payment methods are pre-payment and cash against documents. Letters of Credit are not popular due to the high banking cost involved. International contracts signed by Polish importers with foreign suppliers usually refer to ?Incoterms 2000? and deal with such issues as who pays for transport, responsibility of loading and unloading goods, risk of shipment, arbitrage etc. However, business partners are free to negotiate specific terms of their contract such as price, quantity, specification of goods, payment conditions, etc. There is even more freedom when creating and signing domestic contracts between local companies. Typically, payment terms between supplier and retailer are 90 days. However, this might vary depending on the market position/strength of both partners. The same relates to discount given to retailers, participating in the costs of promotion in retail outlets etc. Prices quoted by a wholesaler/distributor to retailers include VAT. The supplier also covers the cost of transport. There is no standard contract to be followed with potential agents or distributors and precise terms very often depend on which party is the most interested in securing the relationship. Other background information on doing business in Poland can be found on UKTI?s website. Simply go to the country page where you will find information on: ? Economic background and geography ? Customs & regulations ? Selling & communications ? Contacts & setting up ? Visiting and social hints and tips Page 9 of 13 Financial Services ? Poland MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services which can help UK companies doing business overseas including: ? Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, contacts and support during your visits overseas. ? Export Marketing Research Scheme. Advice on market research and help to contact subsidised market research administered by the British Chambers of Commerce on behalf of UKTI. Contact your local International Trade Advisor if you are interested in accessing these services, or for general advice in developing your export strategy. When considering doing business in Poland, it is essential to obtain legal, financial and taxation advice. For further details, please contact: Slawek Morawski Senior Trade and Investment Adviser British Embassy Ul. Kawalerii 12 00-468 Warszawa Tel: +48 22 3110214 Fax: +48 22 3110313 PUBLICATIONS The Polish Information and Foreign Investment Agency (PAIiIZ) publishes information on Polish PPP and Insurance sectors on its website EVENTS UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? a chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates Find out if you are eligible to apply to attend this event, and more about the support UKTI can offer, on the UKTI Market Entry web page. Page 10 of 13 Financial Services ? Poland Details of TAP events can be found in the Events portlet on the Poland page. Other Market Visit Support may be available via your local International Trade Advisor. CONTACT LISTS Mr Slawomir Skrzypek, President Narodowy Bank Polski (National Bank of Poland) Ul. Switokrzyska 11/21 00-919 Warszawa Tel: +48 22 6531000 Fax: +48 22 6208518 Mr Slawomir Kluza, Chairman Komisja Nadzoru Finansowego (The Financial Supervision Commission) Plac Powstancow Warszawy 1 00-950 Warszawa Tel: +48 22 2624111 Fax: +48 22 2625111 Mr Krzysztof Pietraszkiewicz, President Zwiazek Bankow Polskich (The Polish Bank Association) Ul. Kruczkowskiego 8 00-380 Warszawa Tel: +48 22 4868180 Fax: +48 22 4868100 Mr Jan Grzegorz Pradzynski, President Polska Izba Ubezpieczen (The Polish Insurance Chamber) Ul. Wspolna 47/49 00-684 Warszawa Tel: +48 22 4205105 Fax: +48 22 4205107 Mr Ludwik Sobolewski, President Page 11 of 13 Financial Services ? Poland Gielda Papierow Wartosciowych (Warsaw Stock Exchange) Ul. Ksiazeca 4 00-498 Warszawa Tel: +48 22 5377314 Fax: +48 22 6281754 Mrs Joanna Agacka-Indecka, President Naczelna Rada Adwokacka (The Polish Bar Council) Ul. Swietojerska 16 00-202 Warszawa Tel: +48 22 5052500 Fax: +48 22 5052508 Ms Agata Kubalska, Director Krajowa Rada Notarialna (The National Notary Association) Ul. Dzika 19/23 00-172 Warszawa Tel: +48 22 6357840 Fax: +48 22 6357910 Mr Maciej Bobrowicz, President Krajowa Izba Radców Prawnych (The National Chamber of Legal Advisers) Al. Ujazdowskie 18 lok 4 00-478 Warszawa Tel/Fax: +48 22 6228428, 6220588 Mr Adam Szejnfeld, Deputy Minister Ministry of Economy Plac Trzech Krzyzy 3/5 00-507 Warszawa Tel: +48 22 6935254 Fax: +48 22 6934023 Page 12 of 13 Financial Services ? Poland Ms Irena Herbst, President Fundacja Centrum PPP (PPP Centre) Ul. Polna 24 lok.7 00-630 Warszawa Tel: +48 22 8257076 Fax: +48 22 8750768 UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. Page 13 of 13
Posted: 30 September 2010