Remarks on the 30th Anniversary of the Bank Guarantee Fund of Poland

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The Landscape is Changing: Resolution, Reform, and Innovation

 

Remarks by Eva Hüpkes, IADI Secretary General, on the 30th Anniversary of the Bank Guarantee Fund of Poland.

Distinguished colleagues, and friends from Europe and beyond,

A very good morning to you all.

It is a privilege to mark the 30th anniversary of the Bank Guarantee Fund of Poland (BFG). My congratulations to our hosts for their commitment to safeguarding depositors and upholding financial stability – cornerstones of any credible financial system!

I would like to express my gratitude to Mr Maciej Szczęsny, President of the Bank Guarantee Fund Management Board, and his team for hosting our European Regional Committee Annual Conference. I also wish to convey my appreciation to Mr Jurand Drop, Undersecretary of State at the Ministry of Finance in Poland; Mr Rafał Sura, Board Member of the National Bank of Poland; and Mr Jacek Jastrzębski, Chair of the Polish Financial Supervision Authority, for joining us today. Thank you also to Mr Dominique Laboureix, Chair of the Single Resolution Board, for being here and sharing his insightful perspectives on European reforms with us today. Thank you all for being part of this important occasion.

Over the past three decades, and as a member of IADI since 2008, the BFG has demonstrated that depositor protection is not merely a technical arrangement; it is a public policy commitment. It underpins confidence in the banking system – a confidence that must be earned and maintained, especially during periods of stress.

Resolving Banks While Preserving Stability: Lessons from Recent Cases

Recent years have provided tangible illustrations of the BFG’s public policy commitment. Between 2020 and 2022, the BFG resolved four banks – Getin Noble Bank, Idea Bank, and two cooperative banks in Sanok and Przemkowie. In each case, insured depositors were protected without recourse to taxpayers’ money, the continuity of critical functions and services was maintained, and financial stability was preserved, all in accordance with international standards, such as the FSB Key Attributes of Effective Resolution Regimes and the IADI Core Principles of Effective Deposit Insurance Systems.

For Getin Noble Bank, the use of a bridge institution allowed for the transfer of deposits, loans, and accounts to Bank BFG S.A., with shareholders and bondholders absorbing losses. The bridge bank, subsequently rebranded as VeloBank, was sold, ensuring seamless service for its 1.5 million clients.

Idea Bank’s resolution involved the sale of viable assets and accounts to Pekao S.A., with non-performing assets left for orderly wind-down. Again, depositors experienced no disruption, and the transition was completed efficiently.

PBS, the cooperative bank in Sanok, was resolved through a newly created bridge bank, which was later sold to a consortium led by neoBANK. By contrast, Przemkowie Cooperative Bank was resolved through an asset and liability transfer, with primarily customer deposits and related liabilities transferred to SGB-Bank SA. In both cases, insured depositors were protected throughout.

These cases underscore the complex and multifaceted nature of effective bank resolution. They demonstrate how a combination of robust deposit insurance, tailored resolution tools, and strong collaboration among financial safety net participants ensures that financial stability is maintained and losses are absorbed by shareholders and creditors, rather than taxpayers.

A key lesson is the importance of employing resolution tools tailored to the specific circumstances of a bank failure, such as bridge banks or transfer tools. Flexibility in selecting the most suitable tool depending on the institution’s size and systemic significance is vital for achieving successful outcomes. Equally important is the availability of adequate funding to support the implementation of the chosen resolution strategy. Those key themes align with the focus areas of the recent revision of the IADI Core Principles, which emphasise the interaction between resolution and deposit insurance, including the use of deposit insurance funds to support non-payout bank resolution measures subject to appropriate safeguards.

Today’s conference presents a timely opportunity to reflect on lessons from past failures and to consider the evolving role of deposit insurers. The recently finalised revision of the IADI Core Principles and the political agreement on the EU’s Crisis Management and Deposit Insurance (CMDI) Framework represent major steps forward. However, as ever, challenges remain.

As we commemorate the BFG’s 30-year milestone, it is incumbent upon us to look ahead. In a world where the tectonic plates of finance are shifting beneath our feet – driven by technological innovation and persistent uncertainty – we must not only adapt but also be willing to rethink the very foundations of our work. The theme of this conference – “The Landscape is Changing: Resolution, Reform, and Innovation” – captures the magnitude of the task.

The Transformative Power of Innovation

Technology is reshaping professional landscapes across industries. It holds the potential to drive efficiency, broaden access, and enhance resilience. Yet, as with any profound change, it disrupts as much as it empowers.

The futurist Brett King, in his book Bank 4.0: Banking Everywhere, Never at a Bank, predicts that by 2030, banking will become invisible, seamlessly integrated into the fabric of daily life. Imagine a world where your smart fridge pays for groceries via blockchain, or where an AI system approves a loan during your ride with a robotaxi.

Andrew Bailey, Governor of the Bank of England and Chair of the Financial Stability Board, highlighted the potential for faster and cheaper payments through encryption and tokenised central bank money. However, Bailey has also cautioned that if commercial banks fail to innovate, digital currencies could dominate the financial landscape, fundamentally reshaping traditional banking models.

Consider also the potential advent of Central Bank Digital Currencies (CBDCs), such as the Digital Euro. These innovations bring both opportunities and risks. Retail CBDCs aim to complement physical cash and traditional payment systems, enhancing financial stability, particularly during crises. As a direct liability of the central bank, they provide a safe and reliable form of money, mitigating risks like bank runs or liquidity shortages. However, in times of economic uncertainty, a rapid shift from bank deposits to CBDCs could worsen a financial crisis. It is therefore important to design safeguards to ensure these digital currencies support, rather than disrupt, the existing financial system.

Technology is not just reshaping banking; it may be rewriting the rules of our financial systems. In his book The Algorithmic Leader: How to Be Smart When Machines Are Smarter Than You, the futurist Mike Walsh describes an “algorithmic age” where AI and big data are transforming everything from back-office operations to customer interactions, credit decisions, and fraud detection. Ray Kurzweil, in The Singularity Is Nearer, takes this vision even further, predicting that AI will surpass human intelligence by 2029, with blockchain and programmable money globalising finance in ways that defy traditional boundaries. What the future holds is uncertain, but one thing is clear: it will likely surprise us in ways we cannot yet imagine.

Balancing Innovation and Stability: Implications for Deposit Insurance

Innovation holds the promise of a financial system that is more efficient, accessible, and resilient. However, it also brings risks: data breaches, faulty algorithms, and the erosion of trust if these tools are not properly governed. This necessitates rethinking the frameworks that underpin trust and stability – with the financial safety net, of which deposit insurance is a core component, at its centre. The challenge lies in striking a balance between fostering innovation and mitigating its risks through robust regulation, ensuring the financial system remains both dynamic and secure.

For deposit insurers, the rise of fintech, tokenised assets, and AI-driven risk assessments presents both opportunities and challenges. On the one hand, these technologies can enable faster payouts, more targeted interventions, and predictive risk monitoring. On the other, they require a re-evaluation of the scope of protections.

There is a risk that tokenised products and platforms could duplicate existing bank deposits and payment systems, potentially creating parallel structures. How would these systems interact with, or even over time replace, current ones? Would customers enjoy the same protections? How do we safeguard deposits in a world of instant transactions and decentralised finance? Should deposit insurance extend to digital wallets, tokenised deposits, or even stablecoins? What are the necessary design features for such protections? I invite you to follow the ongoing IADI digitalisation webinars, where we explore many of these topics with experts in the field.

The revised IADI Core Principles offer a framework for navigating these questions. They emphasise the importance of regularly reviewing what constitutes an insured deposit. They also stress that any institution accepting insured deposits must be subject to sound prudential regulation, supervision, and effective resolution regimes.

Closing Reflections

As we begin this conference, I look forward to a lively exchange of ideas about both the present and the future. The world around us is evolving at an unprecedented pace, bringing forth new challenges as well as exciting opportunities. It is through meaningful dialogue and a willingness to learn from one another – such as we have here today – that we prepare ourselves to navigate the uncertainties ahead.

I look forward to engaging discussions with all of you.

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