Compliance in Progress Summary

In 2006, Oxford Analytica published its last annual update on monetary policy transparency in Poland, in which it awarded the country an overall rating of "Compliance in Progress." OA credited Poland's efforts to achieve European Union (EU) membership, as well as with the obligations arising from that membership (achieved in 2004) with providing much of the impetus for the country's progress toward monetary policy transparency. The International Monetary Fund (IMF) carried out a Financial Systems Stability Assessment on Poland in 2001, in which it also looked at the country's monetary policy transparency practices. The report recognized that the National Bank of Poland (NBP) expended great efforts to serve the cause of transparency, even to the extent of revealing its decision-making process. The NBP Act clearly lays out the roles and responsibilities of the individuals and agencies involved in setting and implementing monetary policy. However, a few areas remain where improvements could be effected. More detail could be provided in certain areas of reporting, such as the mechanisms by which the NBP handles profit retention and capital maintenance. The IMF also recommended that the NBP make public its internal governance policies, and should regularly include a statement of accounting policies with its published financial statements. At present, Poland remains committed to joining the euro area in 2012, at which time it will give up its independence in monetary policy formulation, taking its lead instead from the European Central Bank.

General Overview

OA's last annual update on Poland's monetary policy transparency was published in 2006. At that time, OA rated Poland's compliance as "in progress." OA noted that much of the improvement in Poland's transparency practices arise from the country's ultimately successful (in 2004) efforts to join the EU, which necessitated that Poland bring its practices into alignment with broader EU requirements. In 2001, the International Monetary Fund (IMF) published a Financial Systems Stability Assessment (FSSA) on Poland that touched upon the country's monetary policy transparency. The report found Poland's central bank, the National Bank of Poland (NBP), to have "good" transparency practices, but offered the caveat that no assessment methodology had yet been worked out. The legal framework for Poland's monetary policy, OA notes, is embodied in the provisions of the 1997 Act on the National Bank of Poland. This act sets the NBP's primary policy objective (price stability), as well as the NBP's responsibilities and the tools it had available to achieve its goals. The IMF found that the policy tools available to the NBP were flexible. According to the FSSA, monetary policy is conducted by the Monetary Policy Committee, which is chaired by the president of the NBP and whose nine additional members are appointed, in equal parts, by the president of Poland, the Sejm (parliament) and the Senate. The FSSA concluded that most of Poland's transparency practices complied with the Code of Good Practices, noting that the NBP expends considerable effort to achieve transparency in the conduct of its monetary policy activities, with special emphasis on the swift dissemination of information and on the disclosure of its decision-making processes. It also praised the NBP for its accountability practices and for its transparency with regard to assurances of integrity. The FSSA did note that greater disclosure of detail would be welcome with regard to the NBP's holdings in commercial enterprises, and suggested that the bank could provide more information regarding its methods of profit allocation and capital maintenance. The FSSA also suggested that the NBP publish the terms and amounts of government funds carried on the NBP's books. Finally, the FSSA encouraged the public disclosure of the NBP's internal governance standards.

The IMF's 2009 Article IV Consultation report on Poland notes that Polish officials are committed to joining the euro area, with a target date of 2012. Should this occur, Poland would give up the independence of maintaining its own monetary policy and comply instead with the requirements set by the European Central Bank (ECB). The IMF cautions that this goal may not be feasible, however, given global economic uncertainties. It argues that a delay in euro adoption might give Poland greater flexibility in adapting itself to the effects of global deleveraging. From the Polish perspective, staying with its 2012 target date offers certain advantages, such as marshalling support for its ongoing structural reforms and its fiscal consolidation plans. The Statistical Issues annex to the 2009 Article IV report noted that the NBP "regularly reports analytically useful data to the fund with minimal delay" (Appendix II, p. 8). It has already adopted ECB compilation standards (beginning in 2002), and has issued ECB-consistent data revisions for earlier statistics, dating back to December of 1996. The NBP broadly follows the Monetary and Financial Statistics Manual in its use of concepts and definitions, but departs from the Manual in a few specific areas: it records financial derivatives and accrued interest on loans and deposits as "assets/other liabilities"; it treats loan-loss provisions as "special reserves"; and it records the valuation of equities at other than market prices. As the IMF report notes, where these practices deviate from the Manual's recommendations, they do not conflict with the practices of the ECB. Noting the existence of discrepancies between government finance statistics and corresponding monetary data, it was suggested that the NBP work with the Ministry of Finance to carry out regular reconciliation exercises.

The Principles

FCClarity of roles, responsibilities and objectives of central banks.

The 2006 OA Report on Monetary Policy Transparency in Poland rates Poland's compliance with this principle as "Full Compliance." OA cited the Polish Constitution of 1997 and the Act of the National Bank of Poland (NBP), as amended, as determining the roles, responsibilities, and objectives of the central bank. The NBP Act was updated in December 2003 to ensure full compliance with EU standards, even though some issues remain unresolved. According to the Polish Constitution, the NBP, specifically the NBP's MPC, has the "exclusive right to formulate and implement monetary policy" (p. 306). The MPC is headed by the NBP president, two vice presidents and seven others, all of whom are appointed in equal parts by the President of Poland, the Senate, and the Sejm (Polish lower house of parliament) for a term of six-years (only the NBP president may serve up to two consecutive six-year terms). MPC members cannot be removed from office, except under strict legal criteria. According to the IMF's 2001 FSSA, the NBP's transparency practices are "good." The roles and responsibilities of actors in the sphere of monetary policy are laid out in the provisions of the NBP Act, which sets forth the primary objective of monetary policy and defines the tools it may use to achieve that objective. The Act allocates to the NBP the unique power of issuing currency and determining monetary policy. The Act stipulates the selection process for members of the Monetary Policy Committee, including the professional qualifications required of such members. For instance, the NBP Act stipulates that all Council members be specialists in the field of finance and that they are not permitted membership in any political party or union during their tenure. Provisions in the NBP Act require that the central bank submit a critique on the budget and other issues to parliament. According to provisions in the Act, the NBP is also legally permitted to service Poland's foreign debt and conclude loan agreements. By law, however, the NBP does not assume any Treasury liabilities when acting in this capacity. The 2001 FSSA recommended greater disclosure of detail would be welcome with regard to the NBP's holdings in commercial enterprises, and suggested that the bank could provide more information regarding its methods of profit allocation and capital maintenance. The FSSA also suggested that the NBP publish the terms and amounts of government funds carried on the NBP's books. Finally, the FSSA suggested the public disclosure of the NBP's internal governance standards.

CPOpen process for formulating and reporting monetary policy decisions.

The 2006 OA Report on Monetary Policy Transparency in Poland rates Poland's compliance with this principle as "Compliance in Progress." The NBP has embarked on an inflation-targeting regime since September 1998 in the run-up to adopting the euro. In terms of framework and monetary targets, the OA report states that even against the backdrop of strong zloty appreciation, the NBP has consistently maintained its commitment to exchange rate flexibility but retains the right to operate a dirty float, if need be. Changes to the floating exchange rate regime are currently viewed as unlikely before ERM2 membership. Poland's fiscal consolidation plan foresees a public sector deficit of less than 3 percent of GDP by 2009. The government has a policy of not setting a target date for euro accession to avoid losing credibility if it has to be changed later. According to the IMF's 2001 FSSA, Poland has always had a highly transparent process for the formulation and reporting of its monetary policy. For this principle, in fact, the FSSA states that no action is required.

FCPublic availability of information on monetary policy.

The 2006 OA Report on Monetary Policy Transparency in Poland rates Poland's compliance with this principle as "Full Compliance." According to the report, "Poland subscribes to the International Monetary Fund's Special Data Dissemination Standard (SDDS), and fulfills its specifications for the coverage, periodicity, and timeliness of monetary data" (p. 313). The NBP publishes and releases online its analytical accounts monthly, including the NBP's balance sheet and details of reserve money and net foreign assets going back to 1999. The IMF's 2001 FSSA found that no action was required with regard to Poland's performance on this principle. The NBP website discloses a wide array of monetary-policy related information, including information on the decision-making process, associated legislation, statistical data, the minutes of the Monetary Policy Committee's meetings, reports on policy implementation, and other valuable information. The website is available in both Polish and English, and is user friendly.

CPAccountability and assurances of integrity by the central bank.

The 2006 OA Report on Monetary Policy Transparency in Poland rates Poland's compliance with this principle as "Compliance in Progress." The NBP Act mandates the central bank to report its financial results and its Annual Report of Monetary Policy to the Sejm (Polish lower house of parliament). The NBP president is also required to submit quarterly data on balance of payments and annual data on Poland's assets and liabilities to the Sejm. The OA report notes, however, that few legal avenues exist to criticize or demand changes in the NBP reports. Since 2004, the NBP's dealings have been subject to independent audits by an external auditor to be selected by the MPC. That external auditor was Ernst & Young in 2006. The NBP's Internal Audit Department prepares an internal audit plan that focuses on areas of the greatest perceived risk. The auditor's recommendations are then publicly announced with an implementation timetable and deadline. The Supreme Chamber of Control is mandated to audit the NBP, specifically regarding the management of the state budget accounts and the performance of such key NBP tasks like setting monetary policy and the management of reserves. In its 2001 FSSA, the IMF suggested that the NBP make it a regular practice to include a statement of accounting policies and any pertinent qualifications in its published financial statements. It should also disclose its internal governance practices and clarify the legal protections available to its staff for actions occurring during the performance of their duties.