Narodowy Bank Polski

NBP to introduce new instruments to support lending

At the conference on 12 August 2009, the President of the NBP declared that within 30 days he would propose solutions addressing the requests voiced by banks. The work carried out at the NBP under the „Pact for the Growth of Lending in Poland” was presented at the meeting on 9 September 2009.

The NBP offers banks three new solutions to provide them with new financing sources in support of their lending. The new instruments of the NBP include:

  • extension of repo transactions maturity to 12 months;
  • discount credit;
  • the NBP’s purchase of bank-issued bonds in open market operations.

1. Introduction of repo transactions with 12-month maturity

By introducing an additional 12-month maturity period for repo transactions, the NBP seeks to provide access to new sources of longer-term financing. This will make it easier for banks to manage their liquidity. The transactions will be collateralised by the same types of securities with matching maturities which have been accepted in repo transactions so far.

2. Discount credit

This is a brand new instrument in the NBP’s toolkit. In essence, it consists in that the NBP may accept for discount promissory notes from banks, issued by enterprises in connection with bank loans granted to them. This may prove a convenient instrument for banks, as it is based on a promissory note, which is a simple and safe instrument. The enterprise will issue a promissory note to the bank, which in turn may discount this note with the NBP. Discount credit will be used to refinance new loans. Given its construction, the discount credit will stimulate lending to enterprises, i.e. precisely the category of credit which saw the deepest weakening due to the crisis.

Banks interested in joining the programme will have to sign a framework agreement with the NBP where the general conditions for using the discount credit will be defined.

The introduction of this instrument will require the Monetary Policy Council to set a new interest rate of the central bank – the discount rate, and modify the Monetary Policy Guidelines.

3. The purchase of bank-issued bonds in open market operations by the NBP

In line with the Act on the National Bank of Poland, the NBP is only entitled to purchase bonds issued by banks under open market operations in the secondary market. This may be used as an instrument to refinance long-term lending, particularly investment projects. The Act of 1 July 2009 Amending the Act on the Operations of Cooperative Banks, their Affiliation and Affiliating Banks makes this instrument available also to cooperative banks.

The NBP may consider purchasing bonds issued by banks provided they comply with some specific conditions: bonds are registered with the National Securities Depository (KDPW SA), it is recommended that they should be covered by appropriate guarantees or have a proper rating. Treasury guarantees or a guarantee provided by another domestic bank may be considered: the guarantee for cooperative banks may be issued by their affiliating bank, for commercial banks – by their parent bank.

Should the currently planned Capital Resolution of the Polish Financial Supervision Authority (KNF) come into effect, bank-issued bonds could also be recognised against their capital – provided the conditions defined in the draft resolution are met.

The introduction of this instrument will need to be approved by the Monetary Policy Council.


In the existing legal framework, the NBP has a limited possibility of directly influencing the lending volume of banks. In view of the above, and in an attempt to address the requests voiced by banks, the NBP has prepared a draft of a new, special law authorising the NBP to establish the Banking System Development Fund (FRSB). The Fund would be responsible, in particular, for:

  • issuing and selling securities;
  • purchasing and selling securities in transactions with banks and other financial institutions,
  • purchasing and selling receivables in transactions with banks and other financial institutions,
  • granting loans and other liabilities to banks, in particular for the purpose of increasing own funds.
The second variant of the draft changes in legislation assumes that the instruments available to the NBP would be broadened accordingly, especially by instruments allowing capital increases in banks.

When introducing these changes, the legislator could, at the same time, increase the allowance to be deducted from the reserve requirement from EUR 500,000 to EUR 700,000, which would release additional liquidity in banks.

Krynica, 10 September 2009

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