Private Banker International sits down with nine senior executives in Warsaw to host a hard-hitting debate surrounding regulation and the impact it has had on central Europe
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Gregor Swietlik Go deeper with GlobalDataHead of Product Development (mBank Private Bankind&Wealth Management) |
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Rafal Patzer Bancassurance Team Manager (Deutsche Bank) |
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Radoslaw Kielbasinski How well do you really know your competitors?Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge. 
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Andrzej Zabek Head of private banking (BNP Paribas Bank Polska) |
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Grazyna Witkowska-Mrozek Director (Banque Privee Espirito Santo) |
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Michal Glasenapp CEO, business development director (Partnerzy Inwestycyjni) |
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Andrzej Ros?aniec Head of private banking (Citi Handlowy) |
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Mariusz Pawlak Partner (Lorek Pawlak Family Office) |
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Ton Kentgens Global Business Development (Ortec Finance) |
Mark Foxwell, Global Editor, Private Banker International: In terms of central Europe and other European countries, do you think Poland is keeping up with regulation? Word on the street is that Poland isn’t as advanced as other European countries?
Swietlik: In fact, we are inundated with regulation. Mostly because the regulator doesn’t understand what the real risks are. For example, almost any message that we send to the client can be construed as advice. If we pre-select a group of clients for some mailing to tell them we have a new offer, add a new fund manager and some new funds in our offer, we can be penalised because it can be considered investment advice given to a client. There is a lot of regulation; it is not always in the right place.
Zabek: I have to agree with this, quite controversial, but, I believe, a true opinion. It’s not really the fact that we are more regulated than the other countries, but the quality of regulation is high and quality is not necessarily what the regulator is looking for. The market is developing very fast, I understand that. We face a new reality every day.
Mrozek: I participated in a presentation organised by the KNF a few months ago and was actually proud of the fact that we are so well regulated.
Zabek: Did you know this regulation was created about the exercise of selling gold through the bank? This regulation comes from the Middle Ages, it’s the same concerns that generic brokers generally have, these points of sale, they still exist. To change regulation takes time.
Foxwell: To what extent has recent regulation changed the business model?
Ros?aniec: All of us need to invest a lot. In the past, we were selling the product based on generic investment advice. If you wanted to have a proper advisory service, you need to change it. We needed to change the status of the bank to provide investment advisors and advising services. You need to invest in people and in capital, you need to have a license in investment advisors. All that means costs, we have to bear it to be able to offer the client the best possible advice. I don’t think all of the banks have been through that process yet, but most of us have. The costs were high.
Swietlik:For us we carry out many transactions by phone. And it starts getting difficult because when you finish taking orders from the client you have to apologise and tell him please hold on for the next minute while I redo all that. It bothers the client.
Mrozek: I am also a supervisor of a very small enterprise. The question is: how do the family offices and the small wealth managers manage all these requirements? For me it’s obvious that it’s changing the business model in terms of competition etc. You cannot have only one department or division, which is only Mifid regulatory.
Glasenapp: We don’t have a hard division, but for example we have a lawyer who is monitoring the regulation. This is a person who makes sure all our internal regulations are complying with all this regulation. 5 years ago we had one paper, but now we have 10 papers. And we should fulfill it with a client. I try to encourage clients that it’s good for them.
Foxwell: Has Mifid materialised in the way you expected it to? Does it scale in a uniform way to the size of the bank or wealth manager, the cost, the burden of Mifid. Is it a linear cost in other words?
Swietlik: It depends. We are distributors, but the products are usually provided by factories, fund managers, interest companies and so on. Some costs depend on your approach. You can give uniform rules and tell your partners ‘Look this is my style of working, if you want me to sell your products you have to accept it.’ Then you don’t get incremental costs when you take on new partners. However, if you are more open architecturally and you are more open to accept what your partners do, then unfortunately your costs are somewhat higher when your product range broadens.
Zabek: Regulation leads us to the fact that the banking industry, including private banking, needs to be more and more industrialised. Otherwise, if you don’t reach the economy of scale its very hard to cover the costs of the structure, you have to hold or you run the serious risk that someday someone will come and penalise you for not acting correctly. So, when I read the newspapers about the kind of penalties the KNF fine the other institutions, there is nothing funny about it.
Kielbasinski: From a perspective of Dutch private banks, they made a questionnaire around the costs of recommendation. It was revealed that, in five years, the costs for regulation tripled and they are still increasing. So the situation was worse than they expected. And its still increasing.
Patzer: The regulations for our local offices are coming from Germany. We are compliant with the local law, but some things were strictly more forward than the options that are from Germany. As I told you this risk classification is something that we get initially. We are also looking at the product code, which is the global solution for all Deutsche Bank offices, and we are not able to put customers’ investments into specific asset classes. This comes from the global offices too, and looking at the time and the costs we are bearing by implementing those changes, I cannot measure them but I see how much effort and work we put into being compliant and how many things become stricter and more time consuming for me to implement in new products. Because I have to ask so many institutions inside the company before having the product on board, something that I didn’t have to do before. Looking from the product perspective, spending a lot of time getting the product and the asset class compliant with the regulations is most important.
Patzer: If you are global, if you act globally, you have to be compliant on all the markets. For example; FATCA compliance. If we want to be FATCA compliant, it has to be everywhere, Poland as well. So it means we have another angle that we have to look at as well, its not only K&L, but there are also other regulators who want us to be compliant.
It’s funny. The way you see many banks deal with FATCA, they just don’t do business with American clients. Many banks chose that route just to get rid of FATCA.
Foxwell: What are your views in terms of the client in regards to regulation?
Zabek: Speaking precisely about FATCA, it’s not the responsibility of the Polish to find the good offer. If you take the first definition of the US person, that’s everybody I think. Having family in the States, you can be a US person. Now it’s getting out of the focus, so becoming more and more reasonable. So yeah, sometimes the regulation is helping and protecting the client. But sometimes too much protection means they are limited. As I said, this is the frustrating part. I could do something, make some money, but I cannot.
Patzer: I think the funny conclusion of all this regulation is that it does not protect the client. It protects the institution, not the client. That’s why regulation is not improving the market, as much as just increasing the cost for the client. I don’t know a single client that has read a ‘can’t’ agreement, the client reading information or something like that. So I think regulation is increasing the cost for the client.
Kentgens: When you look at what we develop, we make something that is advisory, which leads to discussion with your client. On the background, you are compliant, that’s nice. You know if you talk to your compliance officer, you’re compliant. But in the front, we don’t show this to clients, we ask them the questionnaire, but the whole process is about managing the goals of the clients and making sure that they recognise the regulatory compliance questions.
Patzer: I agree on the global basis. You can agree when you look at the process, the discussion with the customer. But when you go in detail into the sales talk on the product you’re getting into so many poor regulations. Regulations that are not good for the client. Regulations that are on the table for every one of us.
Buying an investment product is like investing in nuclear power or buying technology. It’s getting to the point that investing in products is signing a death contract. It’s showing that the customer is doing such a wrong thing investing, the risk behind the products are so huge that he shouldn’t even attempt.
Swietlik: I disagree with you. My wife is a teacher; she has lots of friends who are not good with numbers. Because they know what I do I am called to clean up messes with mortgage contracts and investment structures and so on. Many clients, especially on the written level, believe that your banker is your friend; he is there to help you, to advise you, and to help you find the best solution. So they will sign anything which is given to them because they think this person is acting in their best interests.
Patzer: True, but the question is: ‘Is the way that regulations are being done protecting them?’ The answer is no. Over-regulating is not a method to help people understand the risks of the products they are buying. It’s not the way, the way is educating people, educating the sales forces, changing the mobile advisory, but this is a long way away. The way that we see right now is regulating the stuff that needs regulations, but not as the way it’s done right now. When I look at the bank assurance regulations, I always use the example of buying things other than investments. You can buy an insurance product. Of course it’s complicated; it’s a death contract you’re signing. On the other hand, imagine you’re buying a car. And you need to buy a book of disclaimers saying ‘You know that you can kill somebody with that car because it has a fuel tank, which can explode,’ and many other things that could happen because you’re buying a car. Why aren’t we regulating those things? We should, if we were screening a customer, that person does not understand the words he’s reading.
