UPDATE 1-Poland's Glapinski says will defend independence

* Governor says rate cuts would threaten financial stability

* Wants to make bank supervision a responsibility

* Preserving bank stability will be major focus (Adds quotes, details)

WARSAW, May 20 (Reuters) - Poland’s central bank governor-designate Adam Glapinski vowed to defend the bank from political interference on Friday and said cutting interest rates further would threaten financial stability.

Glapinski, an ally of the ruling Law and Justice (PiS) party who on Friday won unanimous approval for his candidacy after a parliamentary hearing, said interest rates have bottomed out in Poland.

“I want to assure you that if I become the next governor, I will make sure that the bank is independent,” Glapinski told a parliamentary panel.

Poland’s main interest rate has stood at a record low of 1.5 percent since March last year. Some representatives of PiS have called for a further rate cut to accelerate economic growth.

“Frankly speaking lower rates would threaten banking sector stability,” Glapinski said.

Lowering rates eats into the profitability of banks, which have seen their profits hurt by a new PiS-sponsored bank asset tax and increased fees for the state bank guarantee fund.


The economics professor and former rate-setter Glapinski said he would support bringing bank supervision under central bank responsibility in order to make the financial system safer.

“Over the next two, three years the main focus will not be on interest rates, but at the stability of the banking sector,” he said.

He said the troubles of European banks meant likely turbulent times ahead for the Polish banking sector, which is currently 60-percent owned by foreign banks, mostly western European.

“It will not be calm,” Glapinski said. “Our banking sector will look different in five years. We have a period of storm and stress. A lot will change ... so we must have trust in financial institutions.”

Glapinski said it would be good to have the Polish banking sector 60-percent domestically-owned, but saw no direct role for the central bank in achieving this aim.

Glapinski is expected to easily win approval from parliament and take over the helm of the central bank after Marek Belka’s six-year term expires on June 11.


As governor, Glapinski may come under pressure to help the PiS government deal with the thorny issue of underwater Swiss franc mortgages taken out by Polish homeowners, analysts say.

Glapinski said on Friday that solving the problem of the mortgages is ultimately a political decision, adding it is too early to assess the costs of a new solution to the issue that is being prepared by the president.

“Fortunately, the solution to Swiss franc loans will be taken outside of the central bank,” Glapinski said. “Each decision is very difficult here.”

The powerful head of PiS, Jaroslaw Kaczynski, has said the central bank must get involved in dealing with the mortgages, according to the pro-government wSieci weekly.

The PiS party is struggling to meet its election promise to help hundreds of thousands of borrowers who have seen their debts skyrocket since the start of 2015, when the Swiss central bank lifted its cap on the franc. (Editing by Andrew Roche)