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Balancing Growth, ESG, and Security: Key Challenges Facing Polish Banks

FINANCEBalancing Growth, ESG, and Security: Key Challenges Facing Polish Banks

The ability to finance Poland’s economic growth, Environmental, Social, and Governance (ESG) concerns, and cybersecurity are the main challenges for the Polish financial sector. Participants at the “Risk and Capital Management” conference highlighted the need for stronger regulatory stability and increased cooperation between banks and regulators in response to current economic conditions. Speakers also drew attention to the financing needs of Poland’s energy transition and the capital needs of the region related to Ukraine’s reconstruction. The strategic partner of the event is the consulting firm Deloitte.

The fourteenth edition of the conference organized by the Center for Strategic Thought as part of the European Financial Congress addressed the challenges facing the Polish banking sector. Conference attendees discussed topics including the impact of regulatory changes on the ability to finance economic development, the role of banks in implementing ESG, and the opportunities and challenges associated with the development of modern technologies.

The first debate addressed the current state of the Polish banking sector and its involvement in the transition of both the domestic and global economy. The debate participants emphasized that a key challenge for Central Europe will be the reconstruction of Ukraine, which is estimated to require funding exceeding $400 billion. Attention was drawn to the low attractiveness of the Polish financial sector for foreign investors. The presenters argued that combining these factors could make it difficult to draw foreign funds to Poland.

“In the coming years, the Polish economy will require capital amounting to hundreds of billions of zlotys annually to return to a path of dynamic growth. Current risks and the likelihood of new challenges persuade participants in the financial sector to allocate resources to manage them. Identifying the biggest risks to the Polish financial sector and taking steps to neutralize threats are thus becoming increasingly important. Only in this way will we be able to use limited resources to finance further economic development,” said Przemysław Szczygielski, Leader of Services for the Financial Sector in Poland and Managing Partner of the Risk Advisory Department in Poland and the Baltic States, Deloitte.

The conference attendees noted that the Polish banking sector is in a favorable moment. A high-interest-rate environment, they believe, provides an ideal time to develop a plan of action to prepare the industry for changes in conditions. Experts stressed the key role of the regulator, who is responsible for ensuring the predictability and stability of the law. They emphasized the clarification and stabilization of issues such as index reform would not only benefit banks but also their customers. As a result, customers can expect better terms and lower loan costs.

Representatives of the leading financial institutions and the banking sector participating in the conference also discussed the role of the financial industry in implementing ESG solutions. In their view, these matters currently represent some of the most important challenges, particularly in the financing of the energy transition. The scale of this transformation and the capital needed to carry it out is evidenced by the estimated valuation of the entire process for Poland, reaching 1.6 trillion zlotys.

Debate participants indicated that the situation of banks and their ability to finance various investments is tied closely with legislative activities. They also pointed out several factors that pose the greatest challenge for entrepreneurs. The presenters identify the rapidly growing number of regulations, the need to standardize ESG reporting requirements, and the need for financial institutions to support the transition among them. They emphasized that the decarbonization of the economy is an opportunity for the Polish financial sector to attract foreign capital, which requires a broad dialogue and an understanding of the expectations of various parties.

“The involvement of the banking sector and the capital market in financing the transition is crucial for its success. New financial instruments are needed to support sustainable investments, as well as support for enterprises in this process. Additionally, financial institutions and investors need reliable ESG information from enterprises – both to meet regulatory requirements and to manage risk. A proactive dialogue between different parties is crucial, leading to the development of appropriate practices both in terms of raising funds and reporting on ESG,” said Anna Kowalewska, Partner, Sustainability Consulting CE, Deloitte.

As digitization of the global economy progresses, cybersecurity is becoming an increasingly big challenge for different sectors, including banking. According to data cited during the panel, the estimated cost of cybercrimes committed worldwide in 2023 alone reached $8.15 trillion. Currently, most attacks (about 60 percent) are carried out using social engineering methods such as phishing, vishing, or smishing, which involve the use of false emails, phone calls, or text messages.

The bank representatives and supervisory institution representatives participating in the discussion also pondered whether the use of artificial intelligence and generative AI is a chance or a threat for the sector. On one hand, using this technology can make it easier for criminals to create false messages and better target attacks. On the other, it is much easier to detect falsehoods and identify threats. Thanks to artificial intelligence, financial institutions can also analyze a massive amount of data from logs and devices monitoring the proper operation of the banking infrastructure. These tools can then be used to predict and identify actions that could threaten bank customers. Panelists stressed that the key issue is a two-pronged approach: developing AI in a way that properly identifies threats to the security of the sector and educating customers about combating cybercrime. Only in this way can the advantages of modern technologies be maximized while minimizing the risks associated with them.

“Observing global trends in cybersecurity and counter-fraud, we noticed how important it is to combine different types of data sources to build a broad sectoral data exchange platform. This applies to areas such as anti-money laundering – in terms of customer identification, transaction monitoring, fraud, and cybercrime. Only in this way will we be able to create the appropriate infrastructure to respond comprehensively to the growing scale of cybercrime. Remember, the human factor is one of the biggest challenges for data security. Our role and that of banking sector representatives are to develop solutions that will ensure maximum safety for the end user by using modern technologies,” said Paweł Spławski, Partner, Risk Advisory, Financial Services, Deloitte.

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