Exchange Currency

National Bank of Poland

The National Bank of Poland is the central bank of the Republic of Poland. Its tasks are stipulated in the Constitution of the Republic of Poland, the Act on the National Bank of Poland and the Banking Act. The fundamental objective of the NBP's activity is to maintain price stability. Under the Monetary Policy Strategy beyond 2003 drawn up by the Monetary Policy Council, the objective of the NBP is to stabilise the inflation rate at the level of 2.5% with a permissible fluctuation band of +/- 1 percentage point.

The most important areas of activity of the NBP are:

  • Monetary policy;
  • Issue of currency;
  • Development of payment system;
  • Management of official reserves;
  • Education and information;
  • Services to the State Treasury.

In the coming years, the European integration processes, including efforts aimed at Poland's entry into the euro zone, will have the largest impact on the execution of the NBP's tasks.

The National Bank of Poland is responsible for the stability of the national currency. Fulfilling this constitutional obligation, the NBP develops and implements the monetary policy strategy and the annual monetary policy guidelines. Through the management of the official reserves the NBP ensures the requisite level of the State's financial security. As an issuer of currency, the NBP maintains the liquidity of cash payments. An important objective of the NBP is guarding the stability of the financial system. As part of its supervisory and regulatory functions, the NBP oversees the liquidity, efficiency and security of the payment system. It also contributes to the development of a secure infrastructure of the financial market. Moreover, the NBP undertakes activities aimed at disseminating knowledge about economics, e.g. through publishing information on its website and operating the NBPortal - Economics Education Portal.

In order to ensure proper preparation for the adoption of the euro, the NBP will aim to meet the requirements pertaining to central banks of those countries that have already introduced the common currency. The NBP will also strive to achieve the position of a significant economic research center, both domestically and operating within the European System of Central Banks.


n January 1924 the Sejm (the lower chamber of the Polish Parliament) passed the famous currency reform, which enabled Poland to overcome the disastrous hyperinflation and the resulting economic chaos. In April 1924 the zloty, which was the forerunner of our present currency, was introduced into circulation, replacing the Polish mark whose value had been destroyed by inflation. The new currency was introduced by the then established Bank of Poland - the predecessor of the National Bank of Poland. A great man should be remembered in connection with these three jubilees - the brilliant politician, economist, the father of the zloty and one of the founders of the Bank of Poland, Władysław Grabski.

The origins of the above mentioned events of 1924 should be briefly recalled here.

The Polish State was restored at the end of 1918. It took over the issuing institution - the Polish National Loan Office - from the German occupation authorities. The Polish marks issued by this institution became temporary legal tender.

However, already in December 1918 it was announced that the Bank of Poland would be established in the future. The new issuing bank was to be named after the institution that managed monetary and economic matters after 1828, during the short-lived autonomy of the Kingdom of Poland.

In February 1919 the future introduction of the zloty, which was to replace the Polish mark, was announced. This was meant to be a reference to a long monetary tradition. The Polish zloty was a currency that had been in use in Poland since the end of the 15th century. Even during the period of partitions, when foreign currency was in circulation, people were still strongly attached to the zloty. The Polish zloty was e.g. used as the equivalent of 15 kopecks in daily calculations.

The Polish mark was the currency of independent Poland after 1918. Fighting to secure its borders and lacking in Treasury revenue, Poland continued to amass debt. The Treasury debt was covered by printing money. The amount of currency in circulation was rising rapidly and accordingly the exchange rate of the Polish mark was falling fast. In the middle of 1923, inflation turned into hyperinflation. Monthly rises in prices exceeded 50%.

In the middle of December 1923 Władysław Grabski was appointed Prime Minister and remained the Minister of the Treasury at the same time. He intended to balance the budget and obtain revenue from property tax, avoiding foreign loans for fear of political concessions. At the turn of 1924, monetary disaster loomed. Prices rose by over 150% every month.

On January 11, 1924 the Sejm passed the Act on State Treasury Repair and Currency Reform.

On January 20 the statute of the Bank of Poland was passed and the bank was granted the sole right to issue notes. The activities of the Bank were organised by a five-person committee chaired by the future President Stanisław Karpiński. According to contemporary models, the central bank was established as a private joint stock company, which was supposed to ensure its independence. The shares of the Bank were held by 176,000 shareholders. The State Treasury held only 1% of stock. The Bank started its operation on April 28, 1924. It exchanged the Polish mark at an exchange rate of 1,800,000 marks to the zloty. The zloty was on par with the gold franc (i.e. Swiss franc). The initially sound condition of the budget and the balance of payments as well as the accumulated foreign currency and gold reserves provided stabilization and ensured the success of the reform.

The success proved short-lived, however. The very poor harvest and a deep industrial crisis in 1924, and later the disastrous balance of payments in 1925 weakened the zloty dramatically. Foreign exchange interventions of the Bank of Poland proved ineffective. Fearing a decrease in modest gold and foreign exchange reserves, the Bank decided not to defend the zloty exchange rate any more. Prime Minister Grabski resigned in November 1925. The economic situation led to a renewed budget deficit. The government funded its expenditure by issuing notes and coin. Inflation (dubbed 'coin inflation') returned. Prices were rising by more than 15% per year. It was only an upswing in business climate that improved the budget and the balance of payments as well as helped stabilize the exchange rate.

The zloty exchange rate finally stabilized in 1927 thanks to an international loan. The zloty remained a stable and strong currency until the Second World War. Although the monetary policy of the Bank of Poland was often disputed, it was undoubtedly a very important institution of the Second Republic.

The National Bank of Poland started its operation in 1945. It was established as a state-owned bank supervised by the Minister of Treasury. The NBP soon attracted brilliant professionals, including former employees of the Bank of Poland. Their professional skills and experience continued to be a great asset for the NBP for many years.

Initially, the NBP adopted principles taken from the statute of the Bank of Poland. The assumption was that it would be an issuing bank, not involved in the direct funding of enterprises. The command-and-control economy soon sharply changed the role of the NBP and the currency, however. Already at the beginning of 1946 the NBP was entrusted with the financial supervision and direct funding of coal mining, metallurgy and the textile industry. The National Bank of Poland was gradually becoming a mono-bank - a monopoly not only with regard to the issue of currency but also with respect to extending loans and collecting savings. In other words, it was turning into a colossus, dependent on external political and administrative decisions. The zloty became a shadow of those plans, becoming an exclusively internal currency that could not be converted to other currencies. It was even difficult to convert it into goods because queues and market shortages were a constant feature of the centrally planned economy. No wonder that it was losing ground to dollar and other foreign currencies.

Even when the political system limited the role of the central bank, the NBP engaged in activities that contributed to the rationalization of the economy. Organizing non-cash settlements, servicing the budget, managing the scant foreign exchange reserves and calculating the balance of payments as well as other synthetic balances of the national economy should be mentioned here.

It was only at the end of the 1980s that the zloty started to return to the world of real money. Reforms were successful in enabling the zloty to perform the function of national currency again and the National Bank of Poland became a central bank that was responsible for the value of the Polish currency. At the beginning of the 1990s the considerable degree of dollarisation of the economy was a problem. Currency resources were composed in 75% of foreign currencies and only in 25% of zloty funds (in cash and in bank accounts). These proportions were successfully reversed very quickly. After many years of centrally restricted price movements and distorted pricing structures, and also due to a huge inherited deficit, inflation exploded in 1989 reaching a four-figure level but soon came down to two figures. The introduction of limited convertibility brought the zloty closer to a real currency.

In 1995 a re denomination of the zloty was performed, which was remembered as "the crossing out of four zeroes." The balance of payments, which was back to normal, enabled the exchange rate of the zloty to be shaped on the foreign exchange market and allowed to make the zloty convertible according to international standards.

Important changes occurred after 1997. The new Constitution gave the National Bank of Poland a strong position among public institutions and made monetary policy the responsibility of a new NBP body - the Monetary Policy Council. Supervising the banks was entrusted to the Commission for Banking Supervision, and the General Inspectorate of Banking Supervision, an organizationally autonomous body within the structure of the NBP, was made the executive body in this regard. Thus looking after the zloty and guarding the stability of the financial system became the primary objectives of the Polish central bank.

Central bank functions

The central bank plays a key role in a developed market economy. It fulfills the following three basic functions:

  • Issuing bank

    The NBP has the sole right to issue the currency that is legal tender in Poland. The National Bank of Poland determines the amount of currency issued and the time at which the currency enters in circulation, for the liquidity of which it is responsible. It also organizes money circulation and regulates the amount of currency in circulation;
  • Banks' bank

    The NBP performs regulatory functions with regard to other banks, in order to ensure the safety of deposits held by the banks and the stability of the banking sector. The NBP organizes the monetary clearing system, services current inter bank settlements and actively participates in the inter bank money market. The National Bank of Poland is responsible for the stability and safety of the entire banking system. The NBP also supervises payment systems in Poland;
  • Central bank of the State

    The NBP provides banking services to the central government, holds the accounts of government and other central state institutions, state special-purpose funds, as well as central government entities, and executes their payment orders.

Governing Bodies

The governing bodies of the National Bank of Poland are the President of the NBP, the Monetary Policy Council and the Management Board of the NBP.

The President of the NBP is appointed for a six-year term by the Sejm (the lower chamber of the Polish Parliament) at the request of the President of the Republic of Poland. He/she is the chairperson of the Monetary Policy Council and the Management Board of the NBP.

The Monetary Policy Council is chaired by the President of the NBP and includes nine other members, appointed in equal numbers by the President of the Republic of Poland, the Sejm and the Senate. Every year, the Monetary Policy Council determines monetary policy guidelines and the basic principles of their implementation. The Council sets the level of basic interest rates and determines the principles of open market operations as well as the principles and procedure of calculating and maintaining required reserves. The Council also approves the financial plan of the central bank and the report on NBP activities.

The Management Board directs NBP activities. Its basic task is the implementation of resolutions of the Monetary Policy Council, adoption and implementation of the NBP plan of activities, the execution of the financial plan approved by the Council and the performance of tasks related to the exchange rate policy and the payment system.

Monetary policy

The basic objective of monetary policy is maintaining price stability. Stable prices are an indispensable element of constructing solid foundations for long-term economic growth.

Since 1999 the direct inflation target strategy has been utilized in the implementation of monetary policy. Within the framework of this strategy, the Monetary Policy Council defines the inflation target and then adjusts the NBP basic interest rates in order to maximize the probability of achieving the target. Since the beginning of 2004, the National Bank of Poland has pursued a continuous inflation target at the level of 2.5% with a permissible fluctuation band of +/- 1 percentage point. The NBP maintains interest rates at a level consistent with the adopted inflation target by influencing the level of nominal short-term interest rates on the money market. Money market rates affect loan and deposit rates at commercial banks and thus the size of loans, the demand within the economy and the inflation rate. The set of monetary policy instruments used by the NBP enables it to determine interest rates on the market.

These instruments include open market operations, reserve requirements and credit-deposit operations.

Open market operations

Open market operations are transactions in which the central bank engages with commercial banks on its own initiative. Such transactions include the conditional and outright sale or purchase of securities or foreign currency, as well as the issue of own-debt securities by the central bank.

Open market operations balance the demand and supply of funds held by commercial banks at the central bank. This allows the central bank to influence the level of short-term interest rates on the inter bank market.

The open market operations currently conducted by the National Bank of Poland consist in the issue of own-debt securities (7-day NBP money market bills), whose minimum yield equals the reference rate adopted by the Monetary Policy Council.

Required reserves

The central bank imposes on the banks the obligation of maintaining required reserves. The purpose of these reserves is to smooth out the impact of movements in banking sector liquidity on interbank interest rates. They also serve to limit excess bank liquidity.

The required reserve constitutes a portion, expressed in zloty, of funds accumulated on bank accounts and obtained from the sale of securities and other repayable funds accepted by the banks, except for funds taken from another domestic bank, or obtained from abroad for a period of not less than two years. The required reserve is held on accounts with the NBP.

Reserve requirements are set by the Monetary Policy Council. From December 31, 2010 the required reserve rate is 3.5% for all the types of deposits, except for funds obtained from repurchase agreements, whose required reserve rate is 0%. Since September 30, 2003 all banks have been reducing their calculated required reserves by an equivalent of 500,000 euro. From May 1, 2004, required reserve funds carry interest.

Credit-deposit operations

When the NBP engages in basic open market transactions with a 7-day maturity period, the shortest (especially overnight) inter bank market rates may be subject to considerable fluctuations. Credit-deposit operations, which are conducted with commercial banks on their initiative, serve to limit such fluctuations; these include the lombard loan and the banks' time deposits at the NBP (overnight deposits). NBP credit-deposit operations affect the level of interest rates on the money market; the lombard rate is the ceiling here and the NBP deposit rate is the floor.

The NBP offers lombard loans against Treasury securities to the banks. Such loans enable banks to cover short-term liquidity shortfalls. It is granted according to the following rules:

  • collateral consists of Treasury securities and the amount of loan may not exceed 80% of their nominal value;
  • loan matures on the next business day after the date of it being granted;
  • loan is granted upon repayment of a loan granted previously.

The National Bank of Poland also offers banks the possibility of making short-term (overnight) deposits with the central bank. The deposits are accepted until the end of the business day and the deposit amount together with interest due is returned on the following business day. The deposits carry a variable interest rate (deposit rate) set by the Monetary Policy Council.

Time deposits at the NBP allow commercial banks to manage their liquid funds surpluses, preventing short-term interbank market interest rates from falling below the deposit rate.

Exchange rate policy principles

Since April 12, 2000 the zloty exchange rate has been a floating exchange rate that is not subject to any restrictions. The central bank does not aim to set predetermined zloty exchange rates against other currencies. It reserves, however, the right to intervene if it deems this necessary in order to achieve the inflation target.

On its accession to the European Union, Poland undertook to join the euro zone. Thus in the future the zloty will be replaced with the common European currency, and monetary policy will be shaped by the European Central Bank.

Meeting the exchange rate stability criterion is one of the conditions of joining the euro zone. Therefore before the adoption of the euro, the zloty exchange rate against the euro remains fixed for at least two years within the ERM II (Exchange Rate Mechanism II). This means that during this period the National Bank of Poland will maintain the market zloty exchange rate against the euro within the permissible range, with regard to the set central parity.

Management of official reserves

Official reserves guarantee full convertibility of the zloty, enable the performance of payments resulting from the international liabilities of the State and strengthen Poland's financial credibility. The reserves are held in foreign currencies and in gold.

The NBP takes the following issues into consideration when investing reserves on international financial markets:

  • Safety of invested funds;
  • Liquidity of reserves;
  • Maximization of returns on reserves without exceeding acceptable risk.

The NBP primarily invests in securities issued by governments and international financial institutions and as well deposits its reserves with banks.

The choice of investments ensures the availability of foreign currency funds according to the predicted demand and taking possible contingencies into account.

The quality of risk management related to changes in foreign currency exchange rates, interest rates and liquidity has a significant bearing on the maximization of returns on foreign exchange reserves.

The participation of the NBP in the European System of Central Banks puts the NBP under an obligation to make a suitable contribution to the capital of the European Central Bank. After Poland's accession to the Economic and Monetary Union and joining the euro zone, the NBP will contribute to ECB foreign exchange reserves. The National Bank of Poland will continue to manage its own reserves, whereas with regard to ECB reserves it will play the role of an agent and execute transactions for and on behalf of the ECB.

International Cooperation

Cooperation with the International Monetary Fund (IMF)

The cooperation focuses on working out the Polish position as regards the most important issues related to Fund membership. In this respect, the central bank cooperates with the Ministry of Finance. The NBP covers expenses related to Poland's IMF membership using its own funds.

The NBP participates in annual reviews of the economy conducted by IMF expert missions. These reviews result in reports and forecasts concerning the development of the Polish economy.

The NBP also cooperates with the IMF within the framework of programmes dealing with financial sector assessment and the extension of international statistical standards.

Cooperation with the World Bank and the European Bank for Reconstruction and Development (EBRD)

The President of the NBP is Poland's representative among the authorities of the World Bank and the European Bank for Reconstruction and Development.

The National Bank of Poland formulates Poland's position with regard to the most important issues discussed by the World Bank and the EBRD. Representatives of the NBP take part in annual meetings of the World Bank Group and in EBRD meetings.

The NBP services foreign liabilities and receivables of the State Treasury vis-a-vis international financial institutions.

Cooperation with the Bank for International Settlements (BIS)

The NBP is a shareholder of the Bank for International Settlements in Basle, which plays an important role in organizing the cooperation between central banks.

The National Bank of Poland maintains working contacts with the BIS with regard to new financial instruments and the deposit portfolio of the bank.

Cooperation with the European Central Bank (ECB)

From the date of Poland's accession to the European Union, the NBP has become part of the European System of Central Banks (ESCB). This entails close collaboration with the European Central Bank and other central banks from European Union member states.

The President of the NBP participates in the activities of the General Council of the ECB, which is one of the three decision-making organs of the Bank, alongside with the Governing Council and the Executive Board. NBP experts are members of ESCB committees and working groups, which prepare positions with regard to matters related to ESCB operations, e.g. the issue of the euro currency, banking statistics and legal regulations.

The collaboration with the ECB also consists in working contacts between NBP and ECB experts, consultations concerning drafts of legal acts, translating analyses and legal regulations as well as organizing various training courses. The NBP submits to the ECB statistical data regarding finance and banking, enabling the assessment of economic situation in the entire European Union.

Useful links

Currency of Poland:
Polish zloty
List of Central Banks:
Central Banks
Official website of National Bank of Poland:
Ministry of Finance of Poland:
Polish Financial Supervision Authority: