Baby steps: Poland’s securitization market edges forward despite hurdles

Abstract

Polish currency still holding back investors  

The securitization market in Poland is beginning to build up. But progress is slow, with one banker told GlobalMarkets that the market is taking “baby steps”.

The most advanced part of the Polish securitization market is in leasing, in particular equipment leasing, as the country’s economy and industry becomes more fully developed, a banker involved in a Polish securitization said.

“Those companies are growing quite significantly so they need easier funding,” she said. “They need local funding too, in Polish zloty, so securitization is quite a good source of funding through the EIB [European Investment Bank].”

The EIB is crucial for the development of the Polish securitization market. Investing in securitization transactions falls under the EIB’s mandate to invest in Polish small and medium sized companies to aid Europe’s post-pandemic recovery. The EIB and European Investment Fund were involved as lead investors and underwriters in Europejski Fundusz Leasingowy’s two deals, most recently a Z2.2bn (£400m) lease receivables securitization in November.

Outside of EIB involvement, there is also more activity in the significant risk transfer space, with mBank completing a Z9bn (£1.65bn) credit risk sharing transaction in March.

Another banker said that the local investor base was also starting to mature. Polish banks and local subsidiaries of foreign banks had zloty funding needs as they started lending more products suitable for securitization, such as auto leases. As a result, securitization was becoming more necessary, he added.

Significant hurdles

Despite the growing sense of optimism, the bankers admitted that developing the market further would take a long time.

The zloty is a major stumbling block, the first banker said. She explained that the investor base for assets in zloty was small and this made growing the Polish market difficult. At the same time, however, doing a euro transaction of Polish assets would likely be too expensive to be worthwhile.

“It’s not a big currency,” the second banker added. “And so, it’s difficult for a non-local investor to have access to competitive zloty funding.”

The zloty, relative to the euro and sterling, made it hard to reach the “critical mass” crucial for the economics of securitization to work, he said.