CFI.co Has Awarded Best Central Bank Governance Europe 2021

Narodowy Bank Polski (National Bank of Poland, NBP) started its operation in 1945. Narodowy Bank Polski is the central bank of the Republic of Poland. Its tasks are stipulated in the Constitution of the Republic of Poland, the Act on Narodowy Bank Polski and the Banking Act. The fundamental objective of NBP’s activity is to maintain price stability. Under the Monetary Policy Strategy beyond 2003 drawn up by the Monetary Policy Council, the objective of NBP is to stabilise the inflation rate at the level of 2.5 percent with a permissible fluctuation band of +/- one percentage point.

The most important areas of activity of NBP are monetary policy, issue of currency, development of payment system, management of official reserves, education and information, and services to the State Treasury.

Narodowy Bank Polski – a European leader

Narodowy Bank Polski under the leadership of Professor Adam Glapiński has been presented with  “The Best Central Bank Governance Europe 2021” award by CFI.co.

The outbreak of the global pandemic in 2020 caused unprecedented challenges for economic policy. The economic authorities of many countries suddenly had to face an unknown and unprecedented shock. Under conditions of total uncertainty, urgent decisions had to be taken and responses to the crisis caused by the pandemic had to be made. At the same time, rapid and appropriate action was key to limiting the economic costs to households and firms in the aftermath of the pandemic shock.

World Bank – January 2021

The policy response of Narodowy Bank Polski has been swift and large and effective in limiting the economic scarring effects of the pandemic. Adequate liquidity provision remains critical in the short-term (…). 

Asli Demirgüç-Kunt, Chief Economist of the Europe and Central Asia Region of the World Bank

Narodowy Bank Polski met these challenges by correctly diagnosing the situation and the risks involved. Despite the lack of data, which are always delayed, and amid great uncertainty regarding the course of the pandemic and its economic consequences, NBP took swift, firm and wide-ranging measures aimed at easing the financial conditions in the economy. The actions taken by NBP have significantly contributed to improving the prospects for the Polish economy: we can expect a robust recovery as early as this year, and the business and economic performance in 2021 should be significantly better than that achieved in 2020.

Under the model leadership of Professor Adam Glapiński – President of Narodowy Bank Polski –  NBP reacted swiftly, strongly and with conviction to the upcoming shock – reads the justification of the award by CFI.co (Capital Finance International).

It was the President of NBP that first signalled the need to lower interest rates, promptly slashing the main policy rate to 0.1 percent. NBP also launched the largest asset purchase programme among the emerging market economies, which was a huge step for combating the economic consequences of the pandemic. NBP purchases government securities and government-guaranteed debt securities on the secondary market and offers bill discount credit to support lending to private sector – reads the CFI.co jury report.

The Adopted Strategy Worked

NBP was the first bank in Central-Eastern Europe which signalled a cut in interest rates. It also immediately took additional steps to ensure the uninterrupted operation of the banking sector and reduce the cost of servicing and obtaining financing for all sectors of the economy. The broad set of measures taken by NBP included a three-time reduction in interest rates, including the reference rate by 140 basis points, to 0.1 percent, the launch of the purchase of Treasury bonds and bonds guaranteed by the Treasury on the secondary market, reduction of the required reserve ratio from 3.5 percent to 0.5 percent and offering a bill discount credit ensuring the possibility of refinancing loans for enterprises. NBP’s reaction was firm, but also consistent with the conditions of increased uncertainty: the launched asset purchase programme was designed in such a way as to provide the central bank with considerable flexibility and the ability to react to changing conditions. For this purpose, NBP did not announce ex ante the scale and duration of the purchases and made its course dependent on the market conditions. When it proved necessary, NBP did not hesitate to intervene in the foreign exchange market in order to strengthen the impact of a looser monetary policy on the economy.

International Monetary Fund – February 2021

Narodowy Bank Polski took the right decisions. In the opinion of the IMF, Narodowy Bank Polski’s quick and appropriate monetary easing helped to mitigate the negative impact of the pandemic on the economy and the banking sector.

Executive Board of the International Monetary Fund report on the annual review of the Polish economy

NBP has also taken appropriate initiatives in the field of macroprudential and regulatory activities, thanks to which, for example, the systemic risk buffer was lifted. This facilitated the release of significant capital buffers and allowed banks to absorb losses resulting from the crisis.

The proactive decisions taken by the NBP Management Board have helped Poland to achieve the lowest unemployment rate in the European Union, one of the lowest economic contraction rates in the European Union, and a record high in capital accounts – emphasised the CFI.co jury.

The Spectacular Effects Were Not an Accident

The beginning of 2020 saw an increase in the price index of goods and services, which significantly exceeded the upper bound for deviations from the NBP inflation target; however, already in the following months the inflation index decreased and was in line with the NBP inflation target. Ultimately, average annual inflation amounted to 3.4 percent, which is in line with the target set by the Polish central bank (2.5 percent, +/- one percentage point).

At the end of 2020, the unemployment rate in Poland was one of the lowest in Europe. In December Poland was one of nine countries in Europe in which unemployment had declined instead of increasing. In January 2021, the unemployment rate was the lowest in the whole of the EU.

Industrial output growth in 2020 was a positive surprise. With a production increase of 6.1 percent year on year, Poland achieved the second-best result among EU countries.

International Monetary Fund – March 2021

NBP’s response to the challenges posed by Covid-19 was agile, forceful, and added innovative elements to existing policy frameworks. Poland is well positioned for a strong recovery. 2021 should be much better than 2020.

Alfredo Cuevas, an economist at the IMF responsible for the latest IMF review of Poland’s economic situation.

In the pandemic year of 2020, exports did well. According to the data of the Polish statistical office (Statistics Poland, GUS), the surplus on goods trade after 2020 amounted to EUR 12 bn.

The coronavirus pandemic and the related restrictions led to a decline in GDP in Poland. However, it was only about half of what the estimates formulated in spring 2020 had expected. This is a relatively good result if we compare the GDP indicator with, for example, the euro area. The economy, supported by “anti-crisis shields”, adjusted to the restrictions and remained partially resilient to the economic shock.

NBP Always on Standby

The experience gathered during the pandemic has shown how important it is to take care of rudimentary matters. Maintaining buffers in the decision-making space and ensuring the health of the entire financial system are essential elements of a strategy to prepare for the unexpected. The comprehensive response of the economic policy of the government in Poland, comprising the “anti-crisis shields” and supported by the active approach of Narodowy Bank Polski, was also possible thanks to the strong credit rating of the state.

It is worth noting that the Polish central bank was able to provide support through an accommodative monetary policy and macroprudential easing thanks to the credibility it has built up over the years and its long-term efforts to support a sound financial system and strong regulatory and supervisory structures.

The Achieved Results are a Consequence of Teamwork and Wise Management

NBP’s response to the pandemic crisis was not only quick and decisive, but most importantly, effective. It contributed to a significant reduction in interest rates on loans, generating significant savings for indebted households and enterprises, thus supporting their financial situation in this difficult period. The actions of the central bank also ensured a stable situation in the Treasury bond market, thus enabling the implementation of anti-crisis measures by the government without an excessive increase in the costs of these measures for the taxpayer.

NBP made a very significant contribution to mitigating the economic effects of the pandemic. Despite the stricter sanitary regime and periodically introduced restrictions on the activity of selected sectors of the economy, it was possible to avoid a significant deterioration in the financial situation of the enterprise sector. Most Poles managed to avoid the unemployment which affected many citizens in Europe – the unemployment rate in Poland is currently the lowest in the whole of the European Union. Overall, the Polish economy experienced a much milder pandemic crisis than many other economies: real GDP fell by 2.7 percent in 2020 against an average decline of 6.2 percent in the European Union.

European Bank for Reconstruction and Development – March 2021

The quick and strong monetary easing policy implemented by Narodowy Bank Polski and the asset purchase programme helped mitigate the negative effects of the pandemic on the Polish economy. This proves that the Polish central bank has made good use of the experience of other central banks from the period of the global financial crisis. The actions taken by NBP were very positively assessed by the IMF during the last consultation held in February this year.

Prof. Beata Javorcik, Chief Economist of the European Bank for Reconstruction and Development

Under the leadership of Professor Adam Glapiński, the Polish central bank met the expectations arising from the economic challenges associated with the outbreak of the pandemic. This allowed the Polish economy to be protected against a deep recession and high unemployment.

As the jury of the competition noted: NBP is supported by a team of experts who safeguard the value of the zloty, the Polish currency. A modern arsenal of tools is in place to monitor data and identify risks. […] NBP acts with full independence. With market confidence, it strives to advance the economic wellbeing of the country and Poles and supports government policy.

The bank’s activities were appreciated by the world’s largest financial institutions, such as the World Bank, the International Monetary Fund and the European Bank for Reconstruction and Development, and Professor Adam Glapiński was awarded the special prize of Personality of the Financial Market, awarded by the editors of the Polish business daily paper, Gazeta Giełdy i Inwestorów “Parkiet”.

In April 2021, appreciating the merits of Professor Glapiński, the President of the Republic of Poland Andrzej Duda stated that the head of the central bank should continue his mission for the next term of office.

The award granted by CFI.co (Capital Finance International) confirms the correctness of the decisions taken by NBP in the difficult times of the COVID-19 pandemic.

According to the jury, a great achievement of NBP was the profit generated by the Polish central bank of $2.5bn — 95 percent of which goes to fund the state budget. The bank also deserves credit for storing significant reserves of gold, which is purchased with a great feel for the market.

President of the Republic of Poland Andrzej Duda – April 2021

Narodowy Bank Polski is the entity that has regularly generated profits in recent years, and […] I wish to emphasize very strongly that […] Professor Adam Glapiński is an excellent president of Narodowy Bank Polski. The situation has been very stable during his term of office. The task in terms of the state’s financial security is being fulfilled very well indeed and, if there is a commander-in-chief who manages the matters and leads the army so well, then I think that the task entrusted to him can be prolonged. […] I do respect Professor Adam Glapiński and I must admit that I really appreciate what he has been doing over recent years as well as the way he has managed the financial affairs of Poland, its monetary matters, [and] currency matters […].

President of the Republic of Poland Andrzej Duda for the Polish nationwide TV channel Polsat News in the broadcast Gość Wydarzeń

The jury also stated that: NBP has the strength and readiness to withstand market pressures, and the flexibility to respond to dynamically changing market conditions. The Polish central bank is able to respond swiftly since it is prepared for different scenarios, having at its disposal a broad and modern arsenal of tools to support Poles.

Thanking on behalf of all employees of Narodowy Bank Polski for the award granted by CFI.co, Professor Adam Glapiński said: Narodowy Bank Polski reacted swiftly and decisively to the pandemic-related risks, mitigating the negative economic effects on both society and the economy. This happened, amongst others, because we constantly prepare for different scenarios, not only those arising directly from economic events. We analyse the experiences of other central banks and draw conclusions from them. We are able to react flexibly and very quickly, i.e. in advance, also when our assessments are not yet confirmed by data that are always delayed.