Annual Report 2012 Annual Report 2012 Warsaw 2013 Compiled on basis of NBP materials Photo of the President of NBP Agnieszka Deluga-Góra Printing Printshop NBP Published by Narodowy Bank Polski Education and Publishing Department 00–919 Warszawa ul. Świętokrzyska 11/21 phone 48 22 185 23 35 www.nbp.pl ISSN 1427–0277 © Copyright Narodowy Bank Polski, 2013 2 Narodowy Bank Polski Contents Contents List of the most important abbreviations 7 Foreword by the President of Narodowy Bank Polski 8 Monetary Policy Council 12 Management Board of Narodowy Bank Polski 13 Organisation chart of Narodowy Bank Polski 14 Summary 15 Chapter 1. Governing bodies of NBP 23 1.1. President of Narodowy Bank Polski 24 1.2. Monetary Policy Council 25 1.3. Management Board of Narodowy Bank Polski 27 1.4. Narodowy Bank Polski Plan of Activity 28 Chapter 2. Monetary policy 31 2.1. Monetary policy strategy in 2012 32 2.2. Monetary policy and macroeconomic developments in 2012 36 2.3. Monetary policy instruments in 2012 47 Chapter 3. Financial system 55 3.1. Cooperation with financial safety net institutions 56 3.2. Activities of the Systemic Risk Committee 57 3.3. Analyses and research for the needs of the financial system 57 3.4. International cooperation for financial stability 58 3.5. Participation of Narodowy Bank Polski in bank resolution programmes 59 Chapter 4. The issue of currency 61 4.1. Currency in circulation 62 4.2. Issue of collector coins 62 4.3. Withdrawal of notes and coins from circulation due to wear and tear or damage 64 4.4. Counterfeit Polish currency 64 4.5. Supply of notes and coins to banks 64 Annual Report 2012 3 Contents Chapter 5. Foreign exchange reserves management 67 5.1. Level of the official reserve assets 68 5.2. Foreign currency reserves management strategy 69 5.3. Financial risk management in the foreign exchange reserves management process 70 5.4. Market environment in 2012 71 5.5. Return on foreign currency reserves 74 5.6. Investment income 76 Chapter 6. Foreign exchange activity 77 6.1. Register of bureaux de change 78 6.2. Foreign exchange related decisions 78 6.3. Foreign exchange control 78 Chapter 7. Payment system oriented activities 81 7.1. Performance of operational tasks 82 7.2. Policy measures and development of the payment system 86 7.3. Oversight of payment systems, authorisation and clearing systems and securities settlement systems 89 Chapter 8. Services to the State Treasury 91 8.1. Bank accounts operated by NBP 92 8.2. Handling international liabilities and claims of the State Budget 93 8.3. Organisation of trade in Treasury securities 93 8.4. Public debt management 94 Chapter 9. Research activity 97 9.1. Analytical and conceptual framework for the economic processes unfolding in the euro area 98 9.2. Studies of monetary policy, inflation processes and expectations 99 9.3. Enterprise and household surveys 100 9.4. Other macroeconomic research 101 9.5. Forecasting and research work 102 9.6. Activity of NBP’s Economic Research Committee 103 9.7. Conferences and seminars organised by NBP 103 4 Narodowy Bank Polski Contents Chapter 10. Statistics 105 10.1. Core tasks performed by NBP with respect to statistics 106 10.2. Statistical tasks deriving from NBP participation in the ESCB and in other international institutions 107 Chapter 11. Education and information 111 11.1. Education 112 11.2. Information and promotion 113 11.3. Publishing 115 11.4. Petitions, complaints, requests and letters 115 11.5. NBP Central Library 116 Chapter 12. Legislative activity 117 12.1. Legislation by NBP governing bodies 118 12.2. NBP contribution to legislative activity by state authorities with respect to normative and non-normative acts 118 12.3. Draft legislation related to the operation of the banking system 121 12.4. Consulting Community laws and draft national legislation of the EU Member States by NBP 121 12.5. Work related to the adoption of the euro by Poland 122 Chapter 13. International activity 125 13.1. Duties resulting from Poland’s membership in the European Union 126 13.2. Collaboration with international economic and financial institutions 127 13.3. Technical and training assistance 130 Chapter 14. Internal development of NBP 133 14.1. Human resources management 134 14.2. Operational and compliance risk management 135 14.3. Investment and renovation 135 14.4. IT support for the banking system and NBP 136 14.5. Internal audit 137 14.6. Safety and security 137 14.7. Services 138 Annual Report 2012 5 Contents Chapter 15. Condensed financial statements of Narodowy Bank Polski as at 31 December and registered auditor’s opinion 139 Balance sheet of Narodowy Bank Polski as at 31 December 2012 140 Profit and loss account of NBP for the year ended on 31 December 2012 142 Notes – general information 143 1. Introduction 143 2. Description of significant accounting principles 146 3. Changes in accounting principles 154 4. Values based on professional judgement and estimates 154 5. General overview of changes and structure of the NBP balance sheet and financial result 155 6. Explanatory notes to the balance sheet 160 7. Explanatory notes to off-balance sheet positions 172 8. Explanatory notes to profit and loss account 174 9. Other explanatory notes 182 10. Financial and operational risk 183 Registered auditor’s opinion 189 Appendix 1. GDP and aggregate demand 191 Appendix 2. Prices of consumer goods and services 195 Appendix 3. Balance of payments 201 Appendix 4. Money and credit 207 Appendix 5. List of open-to-public academic seminars and selected publications of NBP 211 Appendix 6. Voting records of MPC members on motions and resolutions in 2012 219 Statistical annex 225 Methodological notes 248 6 Narodowy Bank Polski List of the most important abbreviationsContents List of the most important abbreviations BFG Bank Guarantee Fund (Bankowy Fundusz Gwarancyjny) BIS Bank for International Settlements CPI Consumer Price Index EBA European Banking Authority EBRD European Bank for Reconstruction and Development ECB European Central Bank ERM II Exchange Rate Mechanism II ESCB European System of Central Banks ESRB European Systemic Risk Board EU European Union GDP Gross Domestic Product GUS Central Statistical Office (Główny Urząd Statystyczny) IMF International Monetary Fund KDPW SA National Depository for Securities (Krajowy Depozyt Papierów Wartościowych ) KIR SA National Clearing House (Krajowa Izba Rozliczeniowa) MF Ministry of Finance MPC Monetary Policy Council NBP Narodowy Bank Polski (National Bank of Poland) SDR Special Drawing Rights SEPA Single Euro Payments Area SIS reporting system SORBNET Real-Time Gross Settlement System [RTGS] at the NBP Head Office TARGET, TARGET2 Trans-European Automated Real-Time Gross Settlement Express Transfer System UKNF KNF Office WB World Bank Annual Report 2012 7 Contents Marek Belka President of Narodowy Bank Polski 8 Narodowy Bank Polski Foreword by the President of Narodowy BankContents Polski Dear Readers The Annual Report which I am pleased to present, describes the most important activities of Narodowy Bank Polski in 2012. I hope you will find it a valuable source of information about the Bank and its operations, offering an insight into the background to our activities and hence an opportunity to assess their impact more accurately. The main objectives of the central bank are set out in the Constitution of the Republic of Poland and in the Act on the National Bank of Poland (Narodowy Bank Polski). Under article 227 section 1 of the Constitution, Narodowy Bank Polski “shall be responsible for the value of the Polish currency”. The Act on the National Bank of Poland (Narodowy Bank Polski) gives the following precise definition of the objective of NBP “the basic objective of the activity of the NBP shall be to maintain price stability, while supporting the economic policy of the Government, insofar as this does not constrain the pursuit of the basic objective of the NBP”. Monetary policy is conducted by the Monetary Policy Council under the direct inflation targeting strategy. Since 2004 the inflation target has been set at 2.5% with a symmetric range of deviations of +/- 1 percentage point. In 2012, the average annual inflation rate went down to 3.7% (as compared to 4.3% in 2011). In 2012 inflation was largely determined by relatively high growth of food prices and administered prices, including those of energy. Both resulted from factors beyond the direct impact of NBP’s policy. In 2012 the Monetary Policy Council conducted monetary policy amidst volatility observed in the international financial markets and unstable conditions in the global economy, in particular, in the euro area. Persisting recession in the region, excessive debt in particular euro area countries and growing unemployment raised concerns as to whether the euro area will re-embark on a path of economic growth. As a result of the above factors combined with the tightening of domestic fiscal policy, economic growth in Poland slowed down from 4.5% in 2011 to 1.9% in 2012. In performance of their tasks in 2012, the Monetary Policy Council was faced with many challenges. On the one hand, monetary policy was supposed to curb inflation, which ran above the inflation target throughout most of the year, and, on the other hand, take into consideration the situation in the euro area and declining economic growth in Poland. In the first months of 2012, the Monetary Policy Council kept the NBP interest rates unchanged. Following a protracted period of inflation hovering above 3.5%, which posed a risk of heightened inflation expectations becoming persistent, in May 2012, the Council raised the NBP interest rates by 0.25 percentage point, including the reference rate from 4.50% to 4.75%.