9 Poland

Omotunde Johnson, Jean-Marc Destresse, Nicholas Roberts, Mark Swinburne, Tonny Lybek, and Richard Abrams
Published Date:
March 1998
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Poland is a formerly centrally planned economy with a per capita GDP of over $2,300 (1993), a population of about 38.5 million, and an area of 121,000 square miles. Until 1989, it had a monobank system with one major bank, Narodowy Bank Polski (NBP), and four specialized banks. The Banking Law of 1989 ended the monobank system, and the NBP became the central bank, while its commercial banking functions were spun off into nine state-owned commercial banks. The new law also permitted the licensing of private commercial banks.

Overview of the Economic and Financial System

The banking sector has evolved rapidly since the passage of the banking law. Initially, licensing requirements were not restrictive, and, by end-1992, 90 private banks had opened. However, problems associated with many banks’ small capital bases and weak loan portfolios led to a consolidation in the sector, and the number of private banks declined to 85 in 1993.73 Efforts are being made to privatize the state-owned banks. Two banks, including the largest, were privatized in 1993, and a third in 1994. In 1992, the law was amended to permit the opening of branches of foreign banks, and three opened that year.

In addition to the commercial banks, there are over 1,600 cooperative banks. These banks used to operate under the umbrella of one of the specialized banks, the Bank for Food Economy (BGZ). However, when the NBP took over supervision of the cooperative banks in 1992, they lost their autonomy and were required to affiliate with the BGZ or with one of three other banks. A number of the cooperatives were subsequently found to be technically insolvent, and by end-1993 about 60 had been closed.

Despite its rapid evolution, the banking sector remains dominated by the current and former state-owned banks and by the four specialized banks. At end-1993, this group held over three-fourths of the assets of the banking sector, while private banks accounted for about 10 percent of the total and cooperative banks about 6 percent. One of the reasons for the dominance of the public banks is that only they have open-ended deposit insurance from the treasury.74

Domestic money and security markets have also evolved rapidly. The interbank market is doing particularly well. At end-1994, the volume of interbank placements totaled Zl 2.6 billion ($1.1 billion). Placements are mostly short-term, but some are for as long as 24 months. The average maturity is 4.0 months.

Treasury bills accounted for 83 percent of the Zl 26 billion ($11 billion) of outstanding government securities at end-1994, with the remainder being one- to five-year bonds, most with maturities in the one- to three-year range. Treasury bills with maturities of 8, 13, 26, 39, and 52 weeks are auctioned on a weekly basis, and often more frequently. They are sold on a discount basis, and generally the cutoff interest rate is sufficiently low that the fall amount offered is not sold.

The NBP also engages in open market operations for monetary policy purposes. This may involve repurchase and reverse repurchase agreements or outright purchases and sales. The NBP has issued its own bills to expedite its open market operations. At end-1994, there were almost Zl 1.9 billion ($771 million) in NBP bills outstanding, nearly three-fourths in domestic currency.

Institutional and Organizational Framework

The Main Organization

Two bodies are responsible for the management, operation, and reform of Poland’s payment system. Primary responsibility lies with the NBP, which oversees and regulates the payments system. The second body is the National Clearing House (KIR), which was created as a private company in late 1991, for the purpose of facilitating the exchange of interbank payments in Poland. It was originally owned by the NBP and 17 major commercial banks, which accounted for 80–90 percent of interbank payments, and by end-1993 its membership had expanded to close to 50 banks (see the next section).

The Legal Framework

The main legislation covering the payment system is the Banking Act of 1989, which entered into force in February 1989. This law ended the monobank system and gave the NBP oversight and regulatory power over the payments system. Beyond this, most payment activities are governed by regulations issued by the NBP and the KIR.

Payment Instruments

Payment instruments in Poland include cash and various debit and credit transfer instruments. Cash has been and remains the primary instrument for individuals, although they have started to make greater use of other instruments.

Traditionally, most retail credit transfers were paper-based payment orders (giro) authorizing the bank to make a payment out of the customer’s account to an account at another bank or branch. A number of retail credit and debit instruments are now in use.75 Banks also permit retail third parties to use their coded telex and fax system, which was introduced in 1990, to issue payment orders for moving funds from one bank’s current account at the NBP to another’s. However, recently a more efficient system of electronic payment orders has also been introduced.

Debit transfers, which take the form of paper checks written on customer accounts, have been used since the late 1980s. Guaranteed checks, which were introduced in 1989, are guaranteed by the issuing bank up to some fixed amount and are commonly used by individuals. Since 1992, they have had a maximum value of $300 a check. The other forms of checks are settlement checks, which are not used by individuals and are drawn on banks but not guaranteed, and certified checks, which are guaranteed item by item by the issuing bank.

Initially, there were serious problems with guaranteed and certified checks because there were no automatic limits on check size, and debit transfers sometimes suffered from settlement lags of up to two weeks. In 1991, a check-kiting scheme allowed Art-B, a private holding company, to steal $400 million.76 In August 1991 the NBP closed this loophole.

Until 1990, most large-value transfers were effected using paper-based payment orders, although telegraphic orders were used for some larger interbank transfers and enterprise payments. Starting in 1990, many large-value transactions were effected with payment orders initiated by a new telex system. In 1992, access to the large-value interbank settlement system, called SORB, was expanded to include secure fax input, which greatly streamlined and expedited large-value electronic credit transfers.

Clearing and Settlement Systems

Retail Payment Systems

Most clearings are effected through one of three systems. Paper-based retail clearings are done through the KIR’s SYBIR system, while retail electronic transfers are handled through a newer KIR system called ELIXIR. Large-value interbank transactions are processed through SORB.

Settlement is done by transfers between banks’ NBP current accounts. Until 1992, settlement was branch to branch, with each branch having its own current account at its local NBP branch. This created much unnecessary intrabank activity and forced banks to hold large excess clearing balances. It also resulted in large and variable float, which interfered with monetary control. In response, banks’ NBP current accounts were consolidated in April 1992.

Automatic daylight overdrafts of NBP current accounts were permitted until the fall of 1992, at which time all overdrafts were prohibited. Since then, a bank’s transactions have been held up until its current account has sufficient funds to cover them.


KIR membership includes all major commercial banks as well as the NBP as full clearing members, while smaller institutions with limited clearings work through a commercial correspondent or the NBP. The KIR system includes 17 regional clearinghouses (BRIRs), along with KIR headquarters in Warsaw. The KIR drafts its own rules, which must be approved by the NBP.

The KIR began to develop its first system, SYBIR, in 1992, and it began operations in 1993. SYBIR is a system for the overnight clearing and settlement of paper documents. The two primary payment instruments used are payment orders and settlement checks; payment orders account for about 85 percent of transaction volume. SYBIR is generally considered to be an effective and efficient system; its introduction led to a 60 percent decline in average daily float.

In SYBIR, payment documents are received at the local BRIRs between 3:00 p.m. and 6:00 p.m. on day 1 and are sorted and delivered to all receiving BRIRs by 9:00 a.m. on day 2. The receiving BRIR verifies the packages, makes adjustments for errors, and prepares the packages for presentation to each branch endpoint. Settlement for payment orders can be made after the packages have been verified, and adjusting entries made to the KIR. Final settlement figures are calculated around 10:30 a.m., at which time the KIR sends net settlement totals to the NBR The NBP’s Interbank Settlement Department (ISD) then determines if sufficient funds are in the banks’ current accounts to complete the settlement (see below). At 11:00 a.m. the NBP completes the settlement and notifies the KIR accordingly.

After the notification of settlement, each BRIR sends the packages of payment orders and checks to the bank branches. All documents are delivered between noon and 3:00 p.m. of day 2, and return checks and other adjustments are sent back to each BRIR between 3:00 p.m. and 6:00 p.m., after which the KIR prepares for the debit settlement, which takes place at about 7:00 p.m., marking the completion of the settlement cycle.

The ELIXIR system is an electronic payment clearing system, which the KIR introduced in 1994 to complement, and potentially replace, SYBIR. It is a batch processing system, for both credit and debit payments. Banks use their data transmission systems to send payment orders to the ELIXIR system, which delivers them electronically to receiving banks. ELIXIR then submits net settlement entries to the ISD on a set schedule (which currently matches SYBIR’s). Initially, the volume and value of payments through the ELIXIR system have been small fractions of the KIR’s total processing. However, this may rise with the planned addition of a third net settlement reserved for ELIXIR transactions. The settlement will be at 2:30 p.m. and will permit same-day settlement of electronic payments cleared through the ELIXIR system that morning.

Large-Value Transfer System

SORB was introduced in 1992 as the primary system for effecting electronic, large-value, interbank payments. It operates on the NBP’s IBM data processing platform at its headquarters in Warsaw, and it carries out many of the functions of a large-value interbank, gross settlement system. The NBP uses SORB to make interbank transfers between banks’ NBP current accounts, to make intrabank transfers between a bank’s NBP accounts,77 and to make transfers between the NBP and banks’ NBP accounts.

The NBP in Warsaw accepts SORB payment orders initiated by commercial banks and from NBP branches. Commercial bank payment orders are usually delivered to the NBP by fax or telex and are authenticated manually. Payment orders originating from NBP branches may be received by fax or electronic mail. KIR daily net settlements are sent to a personal computer at the NBP by electronic mail and transferred electronically into SORB for processing.

A payment order is executed by SORB only if it can be covered by the ordering bank’s NBP current account. If a payment order is required to fund a bank’s KIR settlement obligation, the bank must quickly obtain credit to cover its obligation, or the KIR settlement is rejected, unwound, and resubmitted on the same day without that bank’s participation. Other transactions that cannot be covered are placed into a queue to await the arrival of sufficient funds. Items in the queue are processed on a first-in, first-out basis. If, at the end of the processing day, transactions remain in this queue, they are removed and the ordering banks are notified that the orders have not been processed.

In mid-1995, SORB was processing an average of about 1,200 payment orders per day. The many manual processing aspects of this system may limit its capacity to handle anticipated transaction volume growth.


In July 1995, the NBP introduced SKARB-net, an automated delivery-versus-payment (DVP) system for processing and settling book-entry government securities transactions. It was designed and implemented by the NBP’s Information Technology Department (ITD), based on specifications provided by the Monetary and Credit Policy Department (MCPD), and the Ministry of Finance. SKARB-net is operated by the MCPD and generates and electronically transmits payment orders to SORB for: (1) debiting NBP current accounts on settlement date for book-entry securities purchased at the primary market auction; (2) crediting NBP current accounts on maturity date for maturing securities held in book-entry form; and (3) debiting the purchaser’s NBP current account and crediting the seller’s NBP current account on the settlement date for interbank transfers of book-entry securities.

Although there is an automated link between SKARB-net and SORB, payment orders are not processed automatically. Instead, they are sent forward electronically to the ISD, which manually compares each payment order against the hard copy documentation before releasing it to SORB. This is done because of uncertainties in the legal framework.

Secondary market transactions involving nonbank participants are settled separately through the KIR, not through SKARB-net. For these transactions DVP is not achieved, since delivery of securities and payment transfers are processed separately.

Role of the Central Bank

Organization of Payments Activity at the Central Bank

The NBP plays a central role in domestic payment systems. It owns, manages, and operates SORB and SKARB-net. It is also a founding member of the KIR, and it has the power to approve the KIR’s operating rules and regulations.

Several NBP departments are actively involved in its payment-related activities, including: (1) the ISD, which manages and operates SORB; (2) the MCPD, which manages and operates SKARB-net; (3) the ITD, which handles the design and operation of the electronic data processing aspects of the NBP’s payment systems; and (4) the Banking Technology Department (BTD), which is responsible for data security and disaster recovery systems.


The ITD has made significant progress in installing and operating a new Hewlett Packard Unix-based Local Area Network (LAN), which is to replace the old IBM platform. The new system will be able to serve over 1,000 end users when installation is completed. SKARB-net is already operating on the new system, and Telbank, a company that provides an interbank data communication system for Polish banks, has cooperated with the NBP in installing the technical infrastructure to interconnect the NBP, its branches, and the major commercial banks.

Efforts are under way to provide for all of the security needs of the NBP’s payment systems. To this end, security features of the Hewlett-Packard Unix operating environment were installed by the NBP with the initial LAN implementation. Additional security measures are being considered by the newly established BTD.

Account Structure, Reserve Requirements, and Credit Facilities

Each bank branch originally had a separate current account at its NBP branch, while the bank’s required reserves were frozen in a separate—consolidated—account. In October 1992, current accounts were consolidated at NBP headquarters. In August 1994, the NBP began permitting banks to use part of their required reserve balances to provide liquidity for settlement purposes, but reserves eligible to meet clearing obligations were kept in a separate account and had to be transferred by NBP staff from the reserve account to the NBP current account. In November 1994, these two accounts were combined into a single reserve and clearing account.

Required reserves are held in the bank’s zloty-denominated reserve and clearing account. Differential reserve requirements are imposed, on the basis of the type of deposit and the currency of denomination. In March 1995, reserve requirements were 20 percent on zloty-denominated demand deposits, 9 percent on zloty-denominated time deposits, and the zloty equivalent of 1 percent on demand and time deposits denominated in foreign currency.

Most NBP bank credit outstanding is associated with either pre-1989 activities or overdrafts carried over from the Art-B scandal. However, the NBP offers a rediscount and a Lombard facility. The NBP limits borrowing from these facilities by setting a combined access quota for each bank, based mainly on its capital (additional rediscount credit is also provided for agricultural finance). From time to time the NBP provides credit through repurchase agreements. The provision of all three forms of credit fell markedly in 1994, largely owing to a surge in capital inflows. In 1994, month-end figures for rediscount credit varied sharply from zero to about Zl 300 million, while Lombard lending was generally in the Zl 40–80 million range, and repurchase agreements ranged from zero most months to as high as Zl 250 million.

Until May 1992, banks were required to allocate their combined quota for rediscount and Lombard borrowing on a branch-by-branch basis. Then, if a branch’s NBP current account turned negative, the NBP would cover the shortfall with rediscount credit until a branch used up its quota, after which the branch was granted an automatic overdraft at a penalty rate, even if other branches had excess reserves and the bank as a whole had not used up its rediscount limit. The centralization of NBP current accounts ended the need to allocate their NBP borrowing quota. However, at the same time, the NBP ended the practice of providing automatic refinance credit to cover shortfalls in banks’ current accounts.

Major Ongoing and Planned Payment System Projects

Development has started on a new system called SORB-net. SORB-net, which is to replace SORB, is to be an RTGS system that will not permit overdrafts. It will have a number of automated functions, including accepting payment orders from commercial banks. It will also be able to identify bank clients as the originator or beneficiary of the payment order and support on-line transmission and receipt of payment order transactions by commercial banks for their own accounts and on behalf of third parties. However, the implementation schedule has not been set, in part because a number of technical, operational, and legal or regulatory issues must be resolved before the system can be introduced. One legal problem is that the courts currently rely on duly authorized hard-copy forms to resolve any disputes concerning payment orders.

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