, 23 March 2006

Mr Kazimierz Marcinkiewicz Prime Minister

With regard to the ongoing work on the integration of authorities supervising particular segments of the financial market and setting up one regulator supervising the whole financial sector in I would like to once again express my objections regarding the presented draft law.

The principal comments of the National Bank of Poland to the contemplated changes have been presented in the letters of the NBP President and First Deputy President of 13 January 2005, 20 January 2006, 15 March 2006 and 17 March 2006.

I wish to emphasise that an explicitly negative opinion about the draft was already presented by the Legislative Council of the Council of Ministers (letter RL-0303-2/06 of 26 January 2006). Its opinion questioned the advisability of the contemplated solutions in the light of the present conditions on the Polish financial market. A negative stance was also presented by the European Central Bank in the opinion issued on 9 March 2006.

The objections raised by the NBP relating to the contemplated changes are of prime significance for the Polish economy, including the financial system. They come down to three key issues:

1. The legislator presented a substantially defective justification of the need for introducing changes in an area which functions effectively and well, and the system of financial market regulators in Poland should be recognised as such.

2. The contemplated changes are not in accordance with the trends of supervisory authorities transformations observed in Europe in recent years. Except for Switzerland, which is not an EU member, if integration of regulators took place at all, it was carried out only while maintaining the leading role of the central bank. It relates to the integration of regulators within the central bank in such countries as Slovakia, the Czech Republic, Spain, the Netherlands and Ireland.

3. The legislators intend to reorganise the system of supervising banks in a period when intensive work on legislative aspects and aspects concerning the substance is in progress on the New Capital Accord. The coinciding dates of carrying through the two processes may have a destabilising impact on the Polish banking system. In addition, work on the draft law is progressing at an unusual speed, which is unjustified, in particular, in case of a legal act relating to a crucial segment of the economy. Comments of a principal character, together with detailed comments were also motioned by the NBP during the meeting of the Council of Ministers on 13 and 20 March 2006 and at a consensus conference held on 16 March this year.

Furthermore, I wish to emphasise that the present draft was submitted to members of the Council of Ministers Committee on the day of the meeting (i.e. 20 March 2006) and differed from the previous version in several solutions of a fundamental character. Taking into account the scope of the modification, including modifications of fundamental nature, the draft should, according to the NBP, be considered again on the interministerial level. The motion submitted by the NBP in this matter has been rejected by the Committee of the Council of Ministers.

I recognise the following changes presented on 20 March 2006 in the draft law on the financial market supervision to be of fundamental significance:

1. Speeding up the integration of banking supervision into the new Financial Supervision Authority by one year in comparison with the draft of January this year – lacks justification and is against the risks indicated in the opinions presented by the NBP and the opinion of the European Central Bank. Therefore, the proposed change increases all the threats mentioned by the NBP before.

2. Depriving the NBP President of the position of Chairperson of the Commission for Banking Supervision on the date of the proposed law becoming effective which additionally weakens the role of the central bank in the process of reaching the targeted form of the financial market supervision and, without need and without any justification, increases the operating risks of the implemented changes. It may lead to a disruption of the banking supervision functioning.

3. Setting up a Commission for Financial Supervision only apparently goes out to meet ECB comment relating to introducing a supervising authority acting collectively and the participation of the central bank in such an authority. Including the NBP President or Deputy President in the composition of a Commission for Financial Supervision as one of its eight members does not in any way take into account ECB postulation relating to a strong involvement of the NBP in banking supervision. ECB postulated “including an appropriate number of NBP representatives in such a collegiate body, with the full right to participate in its meetings and deliberations”. The solution that has been accepted stands in contradiction with the NBP stance.

Please note that it is necessary to address ECB again for an opinion as the European Central Bank presented an opinion on the draft of the end of January 2006 and the solutions introduced in the present version significantly change the proposed law and stand in contradiction with ECB comments. Finally, I wish to emphasise that carrying through the draft creates a number of threats in the key area where Poland has succeeded and worked out good solutions. In parallel, it has not been proved that taking the risk may be favourable for the country.

CC: Ms Deputy Prime Minister Finance Minister