Banking Sector Reform in Poland

Banking Sector Reform in Poland was started in 1990 although the reform started at the time of communist regiment in Poland before the nineties. In 1989 the Polish government introduced two new acts, one was the Act on Banking and the other one was the Act on the National Bank of Poland, which brought a new two tier architecture. These were:

1.The National Bank of the country espoused the central bank’s functions.2.All commercial activities had been separated from the National Bank and handed over to the nine newly formed banks.

• Reform Process:

  • Macroeconomic Development and Banking Sector Reform:The first economic transition period in Poland lasted from 1990 to 1997. In the first stage, the banking sector’s situation had been determined through the analysis of the macroeconomic conditions and by using the systemic instruments. A high financial liquidity had been achieved by the enterprises under the current economic condition and the investments were financed partly by taking money directly from the public funds. The transition process went on with a re-discount rate of the central bank which was risen over 400% in January of 1990.
  • Loosening of the Entry to the Banking Sector:According to the new act, that had been introduced in 1989, a new regulation was formed which led the foundation of the non state banks. In Poland, the National Bank followed a liberal licensing policy. That policy hardly focused on the equity requirements. In the year of 1990 – 91, many domestic banks had been established in Poland and by the end of the year 1992, the total number of those banks is 52.
  • Improvement of the Regulatory and Operating Environment:Through the banking sector reform, the government had been rehabilitating many banks, during the mid nineties, to achieve growth in the banking sector. To build the people’s confidence on the Polish banks a sustained development through a proficient banking supervision had been guaranteed and some new accounting principles, that was abiding by the EU guidelines, were implemented in 1995. Moreover, solvency, liquidity and general prudential requirements had been introduced.
  • Privatization:Privatization of the state owned banks was one of the few steps of banking sector reform that had been implemented by the Polish government. The privatization was started through commercialization of the state owned commercial banks. They were now transformed into a joint stock company in order to prepare them legally for privatization. For all the other banks, privatization had been done through that same method to close the whole process quickly.

• Effects of Banking sector Reform in Poland:

  Through the banking sector reform in Poland the government ensured the macroeconomic stability. This, in turn with market reform, drove the growth in the banking sector.

  After the implementation of the reform, the banks in Poland dominated the institutional growth of the investment funds and debt market.

  The state banks were loosing their shares in the Polish market.

  Through banking sector reform the economic growth of Poland got sufficient pace which encouaged government to open its economy to the global market and to use new complex financial instruments for determining the economic measures.