Polish bank heads urge steps to avoid lending slump
WARSAW, Jan 6 (Reuters) - Bank lending in Poland may fall by nearly three quarters this year, leading to a slump in demand unless the authorities take steps to prop up credit growth, the heads of the country's two biggest banks warned on Tuesday.
In an article in the Dziennik newspaper, Pekao BAPE.WA CEO Jan Krzysztof Bielecki and PKO BP PKOB.WA Chief Executive Jerzy Pruski said Polish banks will have a significantly smaller amount of funds for new loans in 2009, with deposits failing to make up for the shortage of outside funding.
Due to the global financial crisis, Polish banks cannot also rely on their foreign owners, which control some three quarters of the sector's assets, to provide them with needed liquidity, as was the case in the past, they said.
"It cannot be ruled out that credit growth in the Polish banking sector may fall from around 145 billion zlotys ($47.7 billion) (in 2008) to just 40 billion," Bielecki and Pruski wrote.
"Such a scenario -- with other factors being equal -- would lead to a collapse in demand within the economy."
Polish banks saw their profits surge over the last two years, driven mainly by a rapid increase in household borrowing, but have been forced to rein in lending in recent months as they found it increasingly difficult to obtain financing.
The central bank has taken steps to ease the money market squeeze by cutting interest rates by 1 percentage point and offering a raft of other measures, including currency swaps.
Bielecki and Pruski said the central bank should take more long-term actions, such as cutting the level of required reserves to 2 percent from the current 3.5 percent to free up cash available to lenders.
It should also consider buying back the central bank's securities earlier, which would increase the amount of cash available for making loans by almost 8 billion zlotys and allow banks to lend against the collateral of credit liabilities. (Reporting by Piotr Skolimowski; Editing by Rupert Winchester)
