Poland Pledges Liquidity for Troubled Banks as Stocks Steady

(Bloomberg) -- Poland’s finance minister and central bank chief pledged to provide liquidity and support for two lenders at the center of a corruption scandal, helping shore up battered bank stocks.

“We are ready to guarantee that these banks have and will maintain liquidity,” Governor Adam Glapinski said on Monday. “Their clients are safe.”

He spoke after the country’s Financial Stability Committee (KSF) held an emergency meeting on Sunday and vowed to step in with “necessary actions to support banking-system stability.” The WIGBank index of lenders advanced 1.1 percent by 2:37 p.m. in Warsaw after a 4 percent slide on Friday, the biggest daily decline in more than two years.

Poland’s nationalist government and its allies in the central bank are struggling to contain the scandal, which broke last week when Gazeta Wyborcza newspaper published transcripts of recordings suggesting that the financial regulator solicited a bribe from Leszek Czarnecki, the owner of Getin Noble Bank SA and Idea Bank SA.

The concern is that the public debate over Getin Noble and Idea Bank, both of which lost money in the second quarter, would prompt some customers to pull their deposits and force other lenders to help bail out its clients under the country’s bank guarantee fund. Both Glapinski and Finance Minister Teresa Czerwinska said on Monday that Getin Noble and Idea Bank were operating normally. A spokesman for Czarnecki declined to comment.

Political Fallout

While the watchdog quit the same day the story was published, it’s unclear who else may be involved. In an editorial on Monday, the country’s financial broadsheet Rzeczpospolita called for Glapinski to resign over the scandal and said propping up Czarnecki’s banks would be a test of intentions for Poland’s authorities, who the daily said support a “creeping nationalization” of the economy and “don’t like big private companies.”

The governor himself went on the offensive on Sunday, accusing Czarnecki of trying to “destabilize” the country’s banking industry. Czarnecki told reporters on Monday that he has no political motives other than resolving the corruption scandal, adding that he hopes that state prosecutors will “thoroughly investigate the matter and find all people linked to it.”

Glapinski didn’t specify what liquidity measures the central bank could provide, while blaming a “media frenzy” over Czarnecki’s banks for stoking public concerns.

Shares in Getin Noble dropped 15 percent to a record low of 0.28 zloty, while Idea Bank fell 1.4 percent. Both lenders, which are among the least capitalized among listed Polish banks, rely on short-term retail deposits for funding. The benchmark WIG20 index rose 0.5 percent and the zloty dropped 0.4 percent against the euro.

The KSF is chaired by the country’s finance minister, central bank governor, chief financial regulator as well as the head of the Bank Guarantee Fund. Getin Noble had 46.8 billion zloty ($12.4 billion) of deposits as of end-June, while the smaller Idea -- 20.7 billion zloty.

Both lenders increased interest on some of their savings products, already one of the highest in the industry, in the wake of the scandal. Poland guarantees retail deposits up to an equivalent of 100,000 euro ($114,350).

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