Economists with the idea of ​​creating a state bank: who needs a toy that is expensive to maintain Business

On Thursday, the governors registered a draft resolution in the Seimas proposing that the Government immediately initiate consultations with the European Commission on technical assistance to establish the State Development Bank and consider the possibility of the state participating in the capital of the institutions. of credit.

Economist Indrė Genytė-Pikčienė sees risks in the idea of ​​establishing a state bank. Mainly because politicians have previously expressed a desire for the state bank to operate in those niches from which commercial banks are withdrawing.

For example, it would operate in remote rural areas where it does not seem profitable for commercial banks to provide services, distributing loans to companies not accredited by commercial banks. I.Genytė-Pikčienė is convinced that in such a case the state bank would simply become a burden on the budget.

“It is worrying that Lithuania can follow a populist path and create a bank that operates in areas that are not profitable and from which commercial banks are withdrawing.” If this bank acted contrary to commercials, it would simply be operating at a loss, taking additional risks, serving economic operators that are not accredited by market participants.

Such a bank would be a burden for taxpayers, since they would have to maintain a structure for social purposes, the reliability of which would be questioned in the long term, “emphasized the economist.

According to her, state banks generally not only make a profit, but also provide social, infrastructure and development functions, making it more difficult to measure whether the bank is operating efficiently.

“There is a problem with the duality of these objectives: it is very difficult to measure whether the lack of profit is justified, whether the resources are effectively managed or not used for malicious purposes,” emphasizes I. Genytė-Pikčienė.

The bank will have to be subsidized.

Economists are convinced that if a state bank provides loans to riskier clients than risk management practices would allow, it would simply generate more bad loans.

“Eventually they are piling up and they can drown that bank,” emphasized I. Genytė-Pikčienė.

Algirdas Bartkus, Head of the Department of Quantitative Methods and Models, Faculty of Economics and Business Administration, Vilnius University, is also convinced that the state bank can become a burden on the budget. According to him, Lithuania has a relatively high concentration in the banking sector due to a small market, which has declined due to emigration.

Therefore, to operate efficiently, a state bank will have to behave like commercial banks, because otherwise, for example, more intensive business loans will simply increase the portfolio of bad loans.

“What will that bad loan portfolio rest on? On the shoulders of all residents and businesses. Even if a state bank were created, it would be subsidized. Who needs a toy that is expensive to maintain? “A. Bartkus asked himself.

The economist also criticized the decision that the state bank, unlike the commercial bank, would focus on regional development.

“But the question is, do we need to promote those regions? By investing money in the regions, we will throw away that money. Investment in some regions is not viable “, 15 minutes said the economist.

M. Dubnikov: is a stutter of voters before the elections

Economist Marius Dubnikov believes that the state is on the wrong track. “Now it may be necessary to establish state pharmacies, perhaps even supermarkets. It is a dangerous proposition,” he said.

The State Development Bank could target “custody” and distribution of EU money, even though state institutions have been established for this, the analyst says. Invega has been around for a long time, so who else needs a new bank? For me, it’s like tickling the feelings of the “peasant” electorate before the elections, not real steps, “said M. Dubnikov.

In his opinion, the rulers send an advertising message to the voters. “We are on the wrong path of state capitalism,” Dubnikov is convinced.

Bank of Lithuania: we would consider the retail bank to be reserved

The idea of ​​establishing a state-owned retail bank is also not backed by the Central Bank of Lithuania.

The Bank of Lithuania states that it would be possible to discuss the establishment of state-controlled development banks, the purpose of which is related to the financing of infrastructure projects, as well as the provision of guarantees to market participants seeking to obtain loans from institutions of credit. Such beginnings already exist in Lithuania: Invega, the Agricultural Guarantee Fund and the Public Investment Development Agency (VIPA) are involved in this.

“However, the ambition to create a retail bank would be reserved. In any case, a cost-benefit analysis must be done before making decisions. It is also important to note that supervisory standards would not really change how owned by the banks: there would be no concessions to the state bank ”, emphasizes the comment sent by the Bank of Lithuania. 15 minutes.

The Bank of Lithuania also recalls that bank concentration problems are also solved in other ways, for example through a state Fintech strategy to issue licenses to the new generation of market participants (electronic banks), taking an active position in the discussion of the realization of a single European market for financial services not only on paper but also in practice.

In Central Europe, the trend is the opposite.

I. Genytė-Pikčienė emphasized that the trends in Central and Eastern Europe are opposite: countries are trying to move not towards the establishment of state banks, but towards privatization. As an example, he cited Slovenia, which had a serious crisis in 2013 due to an oversupply by state banks.

“These banks have faced serious problems due to inefficient operations, the weight of bad loans in their portfolios and a local crisis, which has made it even more costly for the state to borrow.” The country has resorted to privatization and has sought to restructure itself. Therefore, without deep traditions, experience and knowledge, the creation of such a bank raises questions ”, emphasized the economist.

Meanwhile, A. Bartkus proposed making more efforts to attract a commercial bank from other countries, for example Poland, to increase competition in the banking sector instead of establishing a state bank.