Poland adopts draft of central bank law amendment
June 18, 2014
Poland's cabinet approved a framework of changes to the law governing the central bank, including rotating terms for Monetary Policy Council members and the inclusion of QE capacities at the center of a wire-tapping scandal that erupted over the weekend.
Amongst other provisions, the bill will open the door for the central bank to buy government Treasury bonds on the open market.
"The experience of the past six years - first in the financial crisis and then in the economic stagnation of the advanced economies - showed clearly that there are conditions in which normal monetary tools prove insufficient," Szczurek said in defense of the proposed rule allowing the central bank to purchase government bonds on the open market, outside open market operations.
While the condition of the Polish economy and financial system has been "incomparably better" than the western nations that have had to use QE, "it doesn't mean we should shut out the possibility of using such an instrument," Szczurek said.
The provision for QE-like actions is at the core of a scandal that errupted over the weekend centered on NBP president Marek Belka.
Transcripts of a July 2013 conversation between NBP chief Marek Belka and Internal Affairs Minister Bartlomiej Sienkiewicz published by the weekly Wprost, show Belka speaks to possibilities for the central bank to buy government debt after Sienkiewicz confronts him with the prospect of tight public finances and losing voter support figures for the governing party ahead of elections.
Szczurek said at a briefing that the element of the legal amendment enabling potential QE was introduced into the bill well ahead of the July 2013 meeting between Belka and Sienkiewicz and that changes enacted after the meeting actually added new restrictions to utilization of the new capacities.
The Treasury-buying capacity will belong both to the Monetary Policy Council as a tool for monetary policy and to the NBP board as a liquidity tool for ensuring financial system stability, Szczurek said.