Domański: Poland is to become the engine of change in Europe. In the background there are billions for investments

The government announces intensification of activities towards a stronger capital market. Minister of Finance and Economy Andrzej Domański emphasizes that building a stable market architecture is his priority and that Poland wants to actively participate in shaping the European Investment Union.

Minister of Finance and Economy Andrzej Domański, in an interview with PAP Biznes on the occasion of the Capital Market Conference starting on Monday in Bukowina Tatrzańska, declared that the development of the capital market is one of the key elements of his program.

– Building a strong capital market architecture is my priority. From the very beginning, as Minister of Finance, I focused on cooperation with the market, listening to the voices that reached us from the market and incorporating its demands into the government's actions, he said.

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He added that opinions and demands from the market are incorporated into legislative and regulatory work.

– We implement projects such as Innovate Poland and Personal Investment Accounts, but there is also a very long list of deregulation projects that are the result of our consultations with the market – he said.

The minister pointed out that Poland plans to act more broadly than just at the national level.

– Our ambitions go further. We not only want to build a strong capital market in our country, but we also want Poland to have a very strong share in building the European capital market. Hence, among other things, my involvement in the E6 group, i.e. the six largest economies of the European Union, where the topic of the Savings and Investment Union or building common thinking about the capital market is a priority – he noted.

“We want to be the driving force behind change in Europe”

The Savings and Investment Union is an initiative of the European Commission aimed at increasing the financial opportunities of EU citizens and improving the ability of the financial system to combine savings with investment products.

– We want to be the driving force behind changes in Europe. Of course, our approach will not always be consistent with that of other Member States. We have our own specifics, but we are the leader in Central and Eastern Europe when it comes to the capital market. We agree with some points, less with others, he added.

He pointed to several areas that Poland wants to pursue in the European Union.

– We know which direction we want to go. This includes the area of ​​deregulation, reduction of ESG obligations, portfolio approach to MIFID and not only the product approach, simplification of prospectuses, primary and secondary issues – said Domański.

– I am not satisfied with the pace of work in the European Union and the finance ministers of many other EU member states are also not satisfied with this pace. We are aware that the area where Europe can relatively quickly improve its competitiveness is the capital market, he said.

He also pointed to the ineffectiveness of using available financial resources in Europe.

– There is capital in Europe, but its effective use is lacking. Our Innovate Poland or OKI project is about thinking about how to effectively manage capital on the Polish market – he said.

The head of the Ministry of Finance drew attention to the structure of turnover on the European market.

– About 70 percent turnover in Europe takes place outside regulatory markets. We have huge dark trading that is beyond the control of European supervision, he said.

He also expressed doubts about the creation of a European Consolidated Tape, i.e. an electronic system that collects and reports real-time data on shares listed on stock exchanges in Europe. Data is collected from a variety of sources, including exchanges, alternative systems and brokers, and investors can use it to make buying and selling decisions.

– Personally, I am skeptical about Consolidated Tape because we need to create an environment in which small and medium-sized Polish companies will be able to enter the capital markets – he said.

– For this we need brokers who will build a research base in a situation where the local database of brokerage houses would be subject to fierce competition from American entities. It will be difficult to count on, for example, adequate coverage of mWIG 40 or sWIG 80 with market reports, he added.

The economic situation favors the inflow of investors to the Warsaw Stock Exchange

– Over the last two years, the world has noticed the economic and political changes taking place in Poland and the fact that Poland is joining the G20 group, and our economy is the fastest growing large EU economy, and our companies – both the largest, medium-sized and small ones – are improving their results, often in an impressive way – he said.

He pointed out that the effects are visible on the market. – This meant that foreign capital began to flow into Poland – he noted.

The head of the Ministry of Finance also commented on the return rates of the Warsaw Stock Exchange. – If we look at the stock exchange results last year, we had 47 percent. growth on WIG, WIG20 Total Return increased by over 52%. This is a reason to be satisfied, but probably even more important is the turnover, which is also growing, he said.

He also highlighted the role of state-controlled companies. – I am satisfied with the fact that last year's growth leaders were companies controlled by the State Treasury, which had failed for years under our predecessors. Currently, they are providing better and better results, they are paying dividends, which is very important, and the quality of their corporate governance is improving – he said.

In the minister's opinion, the most important are access to capital and an increase in the share of domestic investors.

– For me, it is crucial that Polish companies have access to capital through the stock exchange and that Polish households can invest effectively. This is a priority for me, he noted.

Minister of Finance: MrThe OKI project is an absolute priority for me

He emphasized the importance of OIC. According to the assumptions, Personal Investment Accounts are to act as long-term investment accounts with tax preferences, enabling the construction of domestic capital and increasing the share of private savings in stock market investments. They are intended to strengthen the investment base for companies listed on the WSE.

– The OKI project is an absolute priority for me. I hope that in the coming weeks, in the first half of March, the project will be submitted to the Standing Committee of the Council of Ministers, he said.

He added that the new solution is intended to increase the supply of domestic capital.

– We estimate these projected revenues at between PLN 60 and 100 billion during the first years of the system's operation – he said.

Domański also informed about the progress of work in the area of ​​financing innovation.

– The Deeptech fund has already started. Agreements with the funds have already been signed. This amounts to a total of PLN 1 billion, he said.

DeepTech is a fund investing in projects based on advanced technology and research, often at a very early stage, with a high entry barrier.

The minister also talked about recruiting funds for Innovate Poland.

– As for Innovate Poland, recruitment for Venture Capital funds has already started, and for Private Equity and Private Debt funds the recruitment will start in April. We would like at least 2-3 investors to join this year. We estimate that it will amount to approximately PLN 10 billion for new investments, he said.

Domański wants to strengthen the private market

– Generally, I would like to see the private market strengthened. We know that in the early stages of development of companies, they are not candidates for IPO, hence the idea of ​​Innovate Poland and the Deep Tech fund – he said.

He emphasized that, in the ministry's assessment, the effects of the changes are already visible. – I think we are achieving this goal step by step. There were some doubts at the beginning, but I think we managed to convince the market to accept the proposed solutions, he said.

The minister also talked about the need to change the approach of institutional investors.

– I would like the investment model of institutional investors to be more open to private equity venture capital solutions, so that long-term capital from pension products could be invested in a tailored way – he said.

He pointed out the importance of a long horizon. – Since we have long liabilities, we can also afford to invest in long-term products where there is no need for immediate liquidity. We are not talking about a revolution, but we want to work together with the market on new solutions, he noted.

Domański also talked about ETFs, which are a popular passive investment tool, but in Poland their development was limited by regulations and competition from foreign funds.

– When it comes to ETFs, there are certain regulatory barriers and the competitiveness of domestic investment funds compared to foreign funds is low. Therefore, we will propose an ETF in the UCITS formula at the same time as creating a framework for ETFs in the AIF formula, he said.

According to the minister, the market should be attractive thanks to its structure, not tax breaks.

– The capital market should be attractive to companies due to the strength of its solutions, access to investors, access to liquidity, and not necessarily tax solutions, Domański noted.

Domański warns against excessive regulation

– I would warn against such apparent protection of customers. Hundreds of pages of disclaimers or annexes to contracts do not make the customer who signs them more secure. They often constitute a form of security for the institution rather than actual customer care. I believe MIFID should be a portfolio solution, not a product solution, he said.

– I am afraid of overregulation and forgetting about the more important risk of insufficient diversification of Poles' savings – he added.

The Capital Market Conference organized by the Chamber of Brokerage Houses will be held on March 9-11 in Bukowina Tatrzańska. It is a three-day forum for discussions by representatives of the management boards of leading banking, financial and capital institutions, listed companies and government administration, as well as financial market advisors, lawyers, auditors and investors.

The aim of the conference is to support the development of the capital market and promote solutions for financing innovative Polish companies and increasing society's savings. PAP Biznes is the media partner of the event.

Piotr Rożek (PAP Biznes)

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