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Annual Report 2009 Annual Report 2009 Warsaw, 2010 Marek Belka President of the National Bank of Poland 2009 Ladies and Gentlemen, We are presenting you with the Annual Report of the National Bank of Poland for 2009, providing data on the execution of NBP objectives and tasks in the last year. I hope the Report will prove a valuable source of information about the National Bank of Poland itself and its activities over the past year, while the figures and comments contained in it will serve the performance of in-depth analyses of the effectiveness of NBP operations in 2009. The activities of NBP in 2009 were determined by the macroeconomic conditions. In the aftermath of the global financial crisis, the world economy suffered the deepest recession since the Great Depression of the late 1920s and early 1930s. This has led to a strong decline in the global demand, collapse of international trading and significant price fluctuations on financial markets worldwide. Even with the implementation of anti-crisis measures by a number of countries, the signs of revival in the world economy were very weak. As set forth in the Act on the National Bank of Poland, the key objective of NBP operations is to maintain price stability while supporting the economic policy envisaged by the Polish government. In 2009, the annual consumer price index declined by 0.7 pp as compared with 2008 and stood at 3.5%. Inflation was to a large extent affected by factors outside the direct influence of domestic monetary policy, i.e. mainly by rises in administered prices and excise tax rates. A contributing factor was also the significant zloty depreciation observed in the period of July 2008 – February 2009, stemming from an increase in risk aversion on financial markets worldwide and an outflow of foreign capital from emerging markets. In the face of persisting uncertainty over the outlooks of global economy, the NBP activities in 2009 focused on limiting the impact of the worldwide financial crisis on the Polish economic environment. To this end, the Monetary Policy Council continued easing the monetary policy, which it initiated at the end of 2008. In 2009, the National Bank of Poland reduced its interest rates on four occasions – in January, February, March and June – by a total of 150 basis points, to their lowest recorded level since the economic transformation. The NBP reference rate decreased from 6% in November 2008 to 3.5% in June 2009. Notably, the above cuts were not without impact on the decrease in the majority of market interest rates. With the goal of enhancing the stability of the domestic financial system, the NBP continued the activities aimed towards providing banks with liquidity, first implemented at the end of 2008 under the Confidence Package. Steps were taken to ease the restrictions on credit accessibility for business entities, refinancing operations for banks were extended, and additional funds originating from an early redemption of NBP bonds and a reduction in the minimum reserve requirement rate were put at banks’ disposal. With respect to Poland’s prospects of joining the monetary union, the NBP conducted analyses on the real and nominal convergence of the Polish economy with those of the euro area, monitored the developments in the euro area countries and the implications for Poland stemming from them, as well as continued research on the level of equilibrium exchange rate. In 2009, in collaboration with the Polish government, the NBP worked towards developing organisational structures related to the preparations to adopt the euro in Poland. The NBP Management Board plenipotentiary for the introduction of euro as the official currency was appointed a Co-Chairman of the National Coordination Committee for Euro Changeover and of the Coordinating Council. The representatives of the National Bank of Poland became members of seven out of eight work teams. The profit posted by the NBP in 2009 amounted to PLN 4,165,600 thousand, as compared with 2008 when the earnings as of the end of the year stood at zero. The increase in the financial result of the National Bank of Poland recorded in 2009 is owed primarily to the effective foreign exchange reserves management executed in the face of zloty depreciation. Last year saw the completion of reorganisation of NBP regional branches and initiation of work on reorganising the Head Office of the National Bank of Poland. The key purpose of these changes is to improve the effectiveness of NBP operations, enhance the management efficiency and reduce the operating costs. The person heading the National Bank of Poland over the past year in the capacity of the President of the Management Board was Mr S∏awomir Stanis∏aw Skrzypek, tragically killed in the Smolensk air crash in April 2010. The year 2009 was particularly difficult, as the world struggled with a significant downturn in economies. In those challenging conditions, the National Bank of Poland actively counteracted the mounting decline. It initiated activities aimed at limiting the negative effects of global economic crisis, which protected our financial system from destabilisation, while the executed responsible monetary policy contributed to maintaining a positive economic growth, which none of the EU states managed to achieve. Marek Belka President of the National Bank of Poland 2009 Contents CONTENTS MONETARY POLICY COUNCIL . 10 MANAGEMENT BOARD OF THE NATIONAL BANK OF POLAND . 11 ORGANISATION CHART OF THE NATIONAL BANK OF POLAND . 12 SUMMARY . 13 1. GOVERNING BODIES OF THE NBP . 21 1.1. President of the National Bank of Poland . 22 1.2. Monetary Policy Council . 22 1.3. Management Board of the National Bank of Poland . 24 1.4. Implementation of the National Bank of Poland Plan of Activity 2007–2009. 27 2. MONETARY POLICY. 29 2.1. Monetary policy strategy . 30 2.2. Macroeconomic conditions of NBP monetary policy in 2009. 32 2.3. Monetary policy in 2009 . 36 2.4. Monetary policy instruments . 39 2.4.1. Liquidity in the banking sector in 2009 . 40 2.4.2. Monetary policy tools in 2009 . 40 2.4.2.1. Interest rate . 40 2.4.2.2. Open market operations . 43 2.4.2.3. Reserve requirement . 45 2.4.2.4. Standing facilities . 46 2.4.2.5. Foreign exchange swaps . 47 2.4.2.6. Other operations. 47 2.4.2.7. Foreign exchange interventions . 48 3. FINANCIAL SYSTEM . 49 3.1. NBP and the Financial Stability Committee . 50 3.2. Analyses and research for the needs of the financial system . 51 3.3. Preventing disturbances in the interbank market . 52 3.3.1. Pact for the Growth of Lending in Poland . 52 3.3.2. NBP response to the postulates from the banks . 52 3.3.3. Discount credit facility . 53 3.4. International co-operation for financial stability . 53 3.4.1. Poland's membership in the European Union. 53 4. THE ISSUE OF CURRENCY . 55 4.1. Currency in circulation . 56 4.2. Issue of collector coins . 56 4.2.1. Prizes and awards . 57 4.2.2. New principles of sale of coins . 58 4.3. Withdrawal of unfit notes and coins. 58 4 National Bank of Poland Contents 2009 4.4. Counterfeit Polish currency. 58 4.5. Supply of notes and coins to banks . 59 4.6. Exchange of notes and coins which ceased to be legal tender . 59 4.7. Commission for the Euro Introduction . 59 5. FOREIGN EXCHANGE RESERVES MANAGEMENT. 61 5.1. General principles for managing the foreign exchange reserves . 62 5.2. Financial risk management in the foreign exchange reserves management process. 63 5.3. Level of the official reserve assets . 64 5.4. Foreign exchange currency reserves management strategy . 65 5.5. Market environment in 2009 . 66 5.5.1. The US, euro area, UK and Australian government securities market. 67 5.5.2. Norwegian interbank deposits market . 69 5.6. Return on foreign exchange currency reserves . 70 5.7. Investment income. 72 5.8. Return enhancement on foreign exchange currency reserves. 72 6. FOREIGN EXCHANGE ACTIVITY . 75 6.1. Register of bureaux de change . 76 6.2. Foreign exchange related decisions. 76 6.3. Foreign exchange control . 76 7. THE PAYMENT SYSTEM . 79 7.1. Oversight of payment systems, authorisation and clearing systems and securities settlement systems . 80 7.1.1. Oversight of payment systems, authorisation and clearing systems . 80 7.1.2. Oversight of securities settlement systems . 80 7.2. Policy and development of the payment system. 81 7.2.1. Legal framework of the payment system . ..
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