BANKING

Central Banking

Central  Banking  

FINANCIAL  

INSTITUTION  

Na6onal  Bank  of  Poland  

FINANCIAL  

INSTITUTION  

Issuing  bank.  The  NBP  has  the  sole  right  to  issue  the  currency  that  is  legal  tender  

in  Poland.  The  Na6onal  Bank  of  Poland  determines  the  amount  of  currency  issued    

and  the  6me  at  which  the  currency  enters  in  circula6on,  for  the  liquidity  of  which  it  is    

responsible.  It  also  organises  money  circula6on  and  regulates  the  amount    

of  currency  in  circula6on.  

 

Banks'  bank.  The  NBP  performs  regulatory  func6ons  with  regard  to  other  banks,    

in  order  to  ensure  the  safety  of  deposits  held  by  the  banks  and  the  stability    

of  the  banking  sector.  The  NBP  organises  the  monetary  clearing  system,    

services  current  interbank  seAlements  and  ac6vely  par6cipates  in  the  interbank    

money  market.  The  Na6onal  Bank  of  Poland  is  responsible  for  the  stability    

and  safety  of  the  en6re  banking  system.  As  the  banks'  bank,  it  supervises  the  opera6ons    

of  other  banks  and,  in  par6cular,  their  compliance  with  the  provisions  of  the  Banking  Act.    

The  NBP  also  supervises  payment  systems  in  Poland.  

 

Central  bank  of  the  State.  The  NBP  provides  banking  services  to  the  central    

government,  holds  the  accounts  of  government  and  other  central  state  ins6tu6ons,    

state  special-­‐purpose  funds,  as  well  as  central  government  en66es,  and  executes    

their  payment  orders.  

Na6onal  Bank  of  Poland  

FINANCIAL  

INSTITUTION  

The  Act  on  the  Na6onal  Bank  of  Poland  of  August  29,  1997  as  published  

in  Dziennik  Ustaw  (the  Journal  of  Laws)  of  1997  no  140  (with  further  

amendments)  

hAp://nbp.pl/en/aktyprawne/the_act_on_the_nbp.pdf  

Ø 

   General  Provisions  

Ø 

   Organisa6onal  Structure  of  the  NBP  

 A.  The  President  of  the  NBP  

 B.  The  Monetary  Policy  Council  

 C.  The  NBP  Management  Board  

Ø 

   The  NBP  and  the  State  Authori6es  

Ø 

   Banking  Supervision  

Ø 

   The  Issue  of  Currency  

Ø 

   Monetary  Policy  Instruments  

Ø 

   The  Opera6on  of  Bank  Accounts  

Ø 

   Foreign  Exchange  Ac6vity  

Ø 

   Par6cular  Rights  and  Du6es  of  the  NBP  

Ø 

   NBP  Finances  

Ø 

   Interim  and  Final  Provisions  

Na6onal  Bank  of  Poland  

FINANCIAL  

INSTITUTION  

Na6onal  Bank  of  Poland  

FINANCIAL  

INSTITUTION  

Ar6cle  3  

 

1. The  basic  objec6ve  of  NBP  ac6vity  shall  be  to  

maintain  price  stability,  and  it  shall  at  the  same  

6me  act  in  support  of  Government  economic  

policies,  insofar  as  this  does  not  constrain  pursuit  

of  the  basic  objec6ve  of  the  NBP.  

 

2.        The  responsibili6es  of  the  NBP  shall  also  include:  

 1)  organising  monetary  seAlements,  

 2)  managing  the  official  foreign  exchange  reserves,  

 3)  conduc6ng  foreign  exchange  opera6ons  within  the  bounds  s6pulated  by  statute,  

 4)  providing  banking  services  to  central  government,  

 5)  regula6ng  the  liquidity  of  the  banks  and  providing  them  with  refinancing  facili6es,  

 6)  establishing  the  necessary  condi6ons  for  the  development  of  the  banking  system,  

 7)  drawing  up  an  account  of  the  na6onal  balance  of  payments  for  repor6ng  purposes,  

 together  

with  balances  of  the  foreign  assets  and  liabili6es  of  central  government,  

 8)  performing  other  responsibili6es  as  specified  by  statute.  

 

Na6onal  Bank  of  Poland  

FINANCIAL  

INSTITUTION  

The  most  important  areas  of  ac6vity  of  the  NBP  are:  

 

• 

monetary  policy

,  

• 

issue  of  currency

,  

• 

development  of  payment  system,  

• 

management  of  official  reserves

,  

• 

educa6on  and  informa6on,  

• 

services  to  the  State  Treasury.  

 

NBP  Monetary  Policy  

FINANCIAL  

INSTITUTION  

Narodowy  Bank  Polski  implements  the  monetary  policy  guidelines  

determined  by  the  Monetary  Policy  Council.  The  basic  goal  of  monetary  

policy  is  to  maintain  price  stability.  
Since  1998,  NBP  has  been  pursuing  direct  infla6on  targe6ng.  Since  the  

beginning  of  2004,  the  con6nuous  infla6on  target  has  been  standing  at  
2.5%  with  a  permissible  fluctua6on  band  of  +/-­‐  1  percentage  point.  This  

means  that  every  month,  annual  CPI  should  be  as  close  as  possible  to  2.5%.  

Narodowy  Bank  Polski  influences  the  level  of  infla6on  mainly  by  
determining  the  official  interest  rates,  which  define  yields  on  monetary  

policy  instruments.  In  order  to  influence  short-­‐term  interest  rates  on  the  

money  market,  NBP  uses  modern  monetary  policy  instruments,  including:  
• 

open  market  opera6ons,  

• 

credit-­‐deposit  opera6ons,  

• 

a  reserve  requirement.  

By  using  the  above  men6oned  instruments  NBP  strives  to  maintain  such  a  

level  of  interest  rates  in  the  economy,  which  would  maximise  the  
probability  of  achieving  the  infla6on  target.  

Monetary  Policy  Council    

FINANCIAL  

INSTITUTION  

Pursuant  to  Art.  227,  para.  2,  of  the  Cons6tu6on  of  the  Republic  of  Poland  and  Art.  6  of  the  

Act  on  the  Na6onal  Bank  of  Poland,  the  Monetary  Policy  Council  cons6tutes  one  of  the  
direc6ng  bodies  of  the  NBP.  

It  is  composed  of  a  Chairperson,  this  being  the  President  of  the  NBP  and  nine  members  
appointed  in  equal  numbers  by  the  President  of  the  Republic  of  Poland,  the  Sejm  and  the  

Senate.  
 
Monetary  Policy  Council:  

• 

draws  up  annual  monetary  policy  guidelines  and  submits  these  to  the  Sejm,  for  the  

informa6on  thereof,  together  with  the  submission  by  the  Council  of  Ministers  of  the  drah  
Budget,  

• 

presents  a  report  to  the  Sejm  on  the  performance  of  monetary  policy  guidelines  within  

five  months  of  the  end  of  the  fiscal  year,  

• 

sets  NBP  base  interest  rates,  

• 

determines  the  procedures  governing  the  reserve  requirement  and  sets  the  reserve  ra6o,  

• 

sets  ceilings  on  the  liabili6es  arising  from  loans  and  advances  drawn  by  the  NBP  from  

foreign  banking  and  financial  ins6tu6ons,  

• 

approves  the  NBP  financial  plan  and  report  on  opera6ons,  

• 

accepts  the  annual  accounts  of  the  NBP,  

• 

determines  the  principles  applicable  to  open  market  opera6ons.  

Monetary  Policy  Instruments      

FINANCIAL  

INSTITUTION  

• 

Interest  rates  

• 

Open  market  opera6ons  

• 

Reserve  requirement  

• 

Standing  facili6es  

Interest  Rates  

FINANCIAL  

INSTITUTION  

The  principal  instrument  of  monetary  policy  is  the  short-­‐term  interest  

rate  –  NBP’s  reference  rate.  Changes  in  this  rate  result  from  the  direc6on  

of  the  implemented  monetary  policy.  

 

NBP’s  reference  rate  determines  the  yield  obtainable  on  the  main  open  

market  opera6ons  while,  at  the  same  6me,  affec6ng  the  level  of  short-­‐

term  market  interest  rates.  

 

NBP’s  lombard  rate  determines  the  cost  of  obtaining  liquidity  at  NBP.  It  

sets  the  ceiling  for  the  overnight  market  rate.  

 

NBP’s  deposit  rate  determines  the  interest  on  deposits  made  with  NBP.  It  

provides  the  floor  for  fluctua6ons  of  the  overnight  market  rate.  

 

The  levels  of  NBP’s  deposit  and  lombard  rates  set  the  corridor  for  

overnight  interest  rate  fluctua6ons  in  the  interbank  market.  

Open  market  opera6ons  

Open  market  opera6ons  are  transac6ons  in  which  the  central  bank  
engages  with  commercial  banks  

on  its  own  ini6a6ve

.  Such  

transac6ons  include  the  condi6onal  and  outright  sale  or  purchase  of  

securi6es  or  foreign  currency,  as  well  as  the  issue  of  own-­‐debt  

securi6es  by  the  central  bank.  

Open  market  opera6ons  balance  the  demand  and  supply  of  funds  

held  by  commercial  banks  at  the  central  bank.  This  allows  the  central  

bank  to  influence  the  level  of  short-­‐term  interest  rates  on  the  

interbank  market.  

The  open  market  opera6ons  currently  conducted  by  the  Na6onal  

Bank  of  Poland  consist  in  the  issue  of  own-­‐debt  securi6es  (7-­‐day  NBP  

money  market  bills),  whose  minimum  yield  equals  the  reference  rate  

adopted  by  the  Monetary  Policy  Council.  

Required  reserves  

The  central  bank  imposes  on  the  banks  the  obliga6on  of  maintaining  

required  reserves.  The  purpose  of  these  reserves  is  to  smooth  out  the  

impact  of  movements  in  banking  sector  liquidity  on  interbank  interest  

rates.  They  also  serve  to  limit  excess  bank  liquidity.  

The  required  reserve  cons6tutes  a  por6on,  expressed  in  zloty,  of  funds  

accumulated  on  bank  accounts  and  obtained  from  the  sale  of  

securi6es  and  other  repayable  funds  accepted  by  the  banks,  except  

for  funds  taken  from  another  domes6c  bank,  or  obtained  from  abroad  

for  a  period  of  not  less  than  two  years.  The  required  reserve  is  held  on  

accounts  with  the  NBP.  

Reserve  requirements  are  set  by  the  Monetary  Policy  Council.  From  

December  31,  2010  the  required  reserve  rate  is  3.5%  for  all  the  types  

of  deposits,  except  for  funds  obtained  from  repurchase  agreements,  

whose  required  reserve  rate  is  0%.    

Credit-­‐deposit  opera6ons  (standing  facili6es)  

When  the  NBP  engages  in  basic  open  market  transac6ons  with  a  7-­‐day  

maturity  period,  the  shortest  (especially  overnight)  interbank  market  

rates  may  be  subject  to  considerable  fluctua6ons.  Credit-­‐deposit  
opera6ons,  which  are  conducted  with  commercial  banks  

on  their  

ini6a6ve

,  serve  to  limit  such  fluctua6ons;  these  include  the  lombard  

loan  and  the  banks'  6me  deposits  at  the  NBP  (overnight  deposits).  NBP  

credit-­‐deposit  opera6ons  affect  the  level  of  interest  rates  on  the  

money  market;  the  lombard  rate  is  the  ceiling  here  and  the  NBP  

deposit  rate  is  the  floor.  

The  NBP  offers  lombard  loans  against  Treasury  securi6es  to  the  banks.  

Such  loans  enable  banks  to  cover  short-­‐term  liquidity  shornalls.    

Interest  rate  history  in  Poland  

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Interest  rates  in  the  world  

 

Na6onal  Bank  of  Poland,  Monetary  Policy  Council.  Report  on  monetary  policy  implementa6on  in  2012.  

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Sources  of  informa6on  

1.  The  Act  on  the  Na6onal  Bank  of  Poland  of  August  29,  1997  as  

published  in  Dziennik  Ustaw  (the  Journal  of  Laws)  of  1997  no  140  

(with  further  amendments)  

hAp://nbp.pl/en/aktyprawne/the_act_on_the_nbp.pdf

 

 

2.  Heffernan  S.,  Modern  Banking,  Chapter  1.6.  

 

3.  Narodowy  Bank  Polski,  Monetary  Policy  Council,  Monetary  Policy  

Guidelines  for  2014  (hAp://www.nbp.pl/en/publikacje/

o_polityce_pienieznej/zal2014a.pdf)  

 

Addi6onal  source:  

Leszczyńska  C.,  An  Outline  History  of  Polish  Central  Banking,  NBP  

2011  (hAp://www.nbp.pl/en/publikacje/inne/

history_of_polish_central_banking.pdf)  

Class  problems  for  the  18th  of  March  

Class  begins  at  13.30  (instead  of  a  lecture)  and  ends  at  15.30.  

No  lecture  on  the  18th.      

 

1.  Bank  and  types  of  banks.  

2.  Polish  banking  system  aher  1989.    

3.  Current  condi6on  of  Polish  banking  sector.  

4.  The  Banking  Act,  Chapter  1.  

5.  Central  banking  –  general  ideas  and  func6ons.  

6.  The  Act  on  the  Na6onal  Bank  of  Poland.  

7.  Na6onal  Bank  of  Poland  (bodies,  func6ons,  objec6ves).  

8.  Monetary  policy  instruments.