Capital markets can provide new boost for growth needed in Europe, says WSE CEO (interview)

The European Capital Markets Forum will be held on January 29 at the WSE Headquarters in Warsaw. It is organised by the Warsaw Stock Exchange, the Central Securities Depository of Poland (KDPW) and the Federation of European Stock Exchanges (FESE).

"The Polish presidency of the Council of the European Union has started, and it is from Warsaw that we want to send a signal that Europe needs a new impulse for development. This impulse can be provided by the capital markets - they are the best at allocating capital, supporting innovation and higher risk investments," WSE CEO Tomasz Bardzilowski said in an interview with PAP Biznes.

"More and more voices can be heard that without bold solutions our continent will find it difficult to compete on the global stage. That is why it is so important to build conditions in Europe for investing in domestic products and solutions," he added.

The debate about the need for change to strengthen Europe's competitiveness gained momentum after the publication of Mario Draghi's report last year.

"Today, with the inauguration of Donald Trump's presidency, the topic of competitiveness is - next to energy prices - the main issue of debates about the European economy. Everyone agrees with the diagnosis that Europe suffers from low growth, low levels of investment and innovation. But proposals for solutions on how to finance investment and innovation are different," he said.

"We observe how difficult it is to finance innovation based on banks or subsidies and centrally managed investments. Our neighbours are becoming convinced by reading Wolfgang Munchau's book ‘Kaput: The End of the German Miracle’, and others are analysing the reasons for the failure of Swedish battery manufacturer Northvolt," he added.

According to the CEO, what matters today is the speed with which new solutions are brought to market, and this requires capital willing to bear higher risks in exchange for a potentially higher rate of return.

"Relying mainly on banks or EU subsidies is not enough. Stock exchanges must play a greater role, as they are best able to price risk and allocate capital efficiently," he said.

"You can see that the issue of capital markets and financing the European economy is very high on the agenda of the new European Commission. Concrete ideas are emerging to increase the flow of savings into capital markets, notably by simplifying overly complex regulations and systemic incentives for long-term savings. The Savings and Investment Union is intended to serve this purpose," he added.

Poland, being a growing market in the region, wants to actively participate in this work.

"Our voice will be important at EU meetings and arrangements, as we have experience in rapidly building a modern capital market over just the last three decades. Our task is to take care of the interests of smaller markets such as the WSE, but also to co-create a strategy that will help strengthen the competitiveness of all European exchanges," said Tomasz Bardzilowski.

The WSE, together with Polish capital market, insurance and banking institutions, has published a position paper "Advancing Capital Markets Union and Building Savings and Investment Union: Pan-European Integration and the EU Regional Capital Markets Growth."

"We put forward eight proposals - from the development of pension plans and funds, to support for private equity, venture capital and private debt, to simplifying regulation and reducing reporting obligations for SMEs," Bardzilowski said.

"We wanted to strongly emphasise that there needs to be a better balance between working towards a pan-European market and preserving the ability of local markets to finance companies, especially in the SME segment," he added.

Tomasz Bardzilowski would like the Warsaw Stock Exchange not only to be a leader in the region, but also a major player at the European level.

"We are already the largest stock exchange in Central and Eastern Europe. In January 2025, 410 companies were listed on the WSE, including 43 foreign companies.

Market capitalisation is around PLN 800 billion (around EUR 190 billion) and this is more than 1.5 times the size of the Vienna Stock Exchange, which is second in the region.

"We are betting on further regional integration, but not in the spirit of +poaching+ companies from each other, but rather strengthening the entire region together to attract global investors," he said.

He recalled that in November 2024, the WSE signed a cooperation memorandum with the stock exchanges of Bratislava, Budapest, Bucharest, Sofia, Ljubljana and Zagreb - with the support of the European Bank for Reconstruction and Development (EBRD).

The memorandum aims, among other things, to develop primary markets and improve access to finance for small and medium-sized enterprises across the region.

"It is crucial to operationally integrate the market infrastructure so that an investor from Poland can easily invest in companies listed in Bucharest or Zagreb and an investor from the region can buy shares listed in Warsaw without obstacles. This is just the beginning of this project, but we are convinced that such a regional bottom-up initiative can be an alternative to complement top-down solutions on a pan-European level," he said.

Tomasz Bardzilowski cites the Swedish and Danish capital markets as examples of how a strong and modern investment culture can be built. Among other things, he points to investment and savings accounts subject to simplified tax rules in Sweden, which replace capital gains tax with a relatively simple and low tax on the value of assets.

The Danish market, on the other hand, is based on pension funds, the size of which, in relation to GDP, is more than thirty times larger than Polish private pension funds (OFEs).

The Scandinavian success is also the result of the large role of venture capital and private equity funds in financing innovative companies, as well as very consistent financial education and building the so-called 'equity culture'.

"All of this supports the capital market and is having an effect. For example, the Danish company Novo Nordisk today has a capitalisation larger than the entire Danish economy and the largest companies on the German DAX index. It is worth taking inspiration from this and developing similarly local European markets, even if Sweden's largest start-up, Klarna, goes the way of Spotify and does an IPO in the US," he said.

The WSE CEO said that the two main priorities for this year were market development work and the implementation of the new Warsaw Automated Trading System (WATS).

"We also want to attract more individual investors - primarily by expanding our ETF offering. There is also a lot to do in the bond market. We have huge potential for growth, although this is a task not for the coming months but years," he said.

He pointed out that the ratio of stock market capitalisation to GDP is around 25 percent in Poland, compared to almost 50 percent in Germany, around 100 percent in the UK, and up to 200 percent in the US and Scandinavian countries.

"We want to grow dynamically by attracting innovative companies - especially from the new technology, biotechnology and RES sectors. At the same time, we are keen to strengthen the liquidity of the listing, among other things through a diversified investor structure, including individual investors," he said.

According to the WSE CEO, the most difficult challenge is always to raise sufficient capital on the market, as this is highly dependent on regulatory changes and the global economic situation.

"However, we want to use all tools - including the new WATS system - to attract investors, improve liquidity and introduce more instruments. It is urgent to expand our ETF offering, we are well behind schedule here, and we would like to be ready for the expected increase in interest in the stock market when interest rates fall," he said.

"At the same time, we have to bear in mind that we are competing with other forms of investment - such as the property market or cryptocurrencies, which are fashionable among young investors," he added.

Tomasz Bardzilowski asserts that more ETFs are a priority for the Warsaw Stock Exchange.

"We are preparing an offering in line with European Undertakings for Collective Investments in Transferable Securities (UCITS) standards so that they are recognisable and accessible to investors across Europe," he said.

"We have more than a dozen ETFs on the WSE, but we want to significantly expand this range, such as a dividend fund that pays out benefits every quarter, or thematic ETFs that allow us to invest in various assets, including crypto. We are waiting for legislative changes to allow the introduction of Real Estate Investment Trust (REIT) on the WSE," he added.

According to the WSE CEO, intense education is key to attracting individual investors, and greater tax incentives for long-term investment would also help.

"We are mainly committed to increasing total turnover. Currently, two-thirds of trading on the WSE is generated by foreign investors, including algorithmic funds like High Frequency Trading. Their activity increases liquidity and facilitates the valuation of companies, so we see no need to reduce this share," Bardzilowski said.

"However, we would very much like to see more Polish individual and institutional investors getting involved in the market. In the WSE's strategy, we strongly emphasise the role of financial education, development of pension systems and other solutions inducing Poles to invest in shares of domestic companies in the long term," he added.

The aim of the Polish capital market is to attract more large companies, but according to Tomasz Bardzilowski, the stock exchange must first take care of liquidity and valuations.

"The higher the capitalisation of the overall market, the lower the cost of capital and the better the valuation of issuers. Today, the price-earnings (P/E) ratio of the WIG index is around 10, while it is 15 for the DAX and 25 for the S&P 500 in the US," Tomasz Bardzilowski said.

"In the guidelines of the GPW Group's new strategy, presented in November 2024, we strongly emphasise the so-called 'capital market development circle': the greater the domestic capital, the greater the demand for shares, which increases valuations and encourages companies to list, which in turn attracts foreign capital. We need to strengthen this mechanism," he added.

CEO Bardzilowski announces that the Warsaw Stock Exchange wants to be a dividend company, but this does not mean giving up on investments.

"We have ambitions to grow both organically, through new projects, and through acquisitions. This year we will have major investments in the IT area. Our strategy is to accelerate growth, including through acquisitions in areas that complement our core listed business. We are interested in the fintech sector, data & analytics, as well as the development of data management services," he said.

"We want diversification, but not for diversification's sake, but to create synergies with our core business and to reduce our dependence on market volatility," Tomasz Bardzilowski added.

According to the CEO, the capital market can play an important role in the energy transition. He reminded that Poland may spend around PLN 800 billion (around EUR 190 bln) on the energy transition over the next ten years.

"This cannot be financed by public funds alone; we need private capital. The whole of Europe faces a similar challenge - in his report, Mario Draghi recommended increasing the level of investment in the EU to 25 percent of GDP in order to remain competitive in the global market," Bardzilowski pointed out.

"In Poland, this figure is around 17 percent, which is the lowest level in 30 years. We therefore need to stimulate investment, and it is the capital market that is best suited for this, as it offers diversified equity and debt instruments and an efficient allocation of funds," he concluded.

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