THE MARKET OF HIGH RISK FINANCIAL SERVICES
THE MARKET OF HIGH RISK FINANCIAL SERVICES

Author(s): Jacek Binda, Paweł Mrowiec
Subject(s): Economy, Business Economy / Management, Financial Markets
Published by: ASERS Publishing
Keywords: shadow banking; financial pyramid; T recommendation; high risk financial service
Summary/Abstract: It is really difficult to arrive at a precise definition of the term „near bank‟, it is equally difficult to regulate the scope of financial services that „near banks‟ render. Shadow banking, as the sector of „near banks‟ is often referred to, came into play after the year 2000. In 2011, in the United States alone this sector was worth 24 trillion dollars61, and globally it reached the value of about 60 trillion 62 dollars. Despite high level of risk related to shadow banking services offered by unsupervised and unauthorized entities, those services enjoy a considerable popularity also in Poland. Amber Gold Ltd. may be a good example of a Polish shadow financial institution which left thousands of its customers facing financial ruin. On 20th September 2012 the District Court of Gdansk declared Amber Gold‟s liquidation bankruptcy. By the end of September the total sum of Amber Gold investors amounted to 16,000 people, and the value of the company‟s due liabilities exceeded 700 million zlotys. The value of unprotected company assets, on the other hand, was on the level as low as about 50 million zlotys. Currently, the black list of entities which do not hold a permission to render bank services, especially such as receiving money deposits in order to charge them with risk, is getting longer and longer. In the end of November the list, prepared by Polish Financial Supervision Authority (KNF) had 33 entries, which constitutes a 43% increase compared to the end of September. The reason for this may be the introduction by KNF of tightened criteria for loan availability in the form of T recommendation. Implementation of T recommendation shifted the demand for bank services towards non-bank entities.The subject of this chapter is an analysis of the market of high risk financial services, the reasons of its fast growth as well as supervisory activities undertaken by Polish Financial Supervision Authority (KNF) related to this phenomenon.

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