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1. Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy

Author:
Jakob Vestergaard and Daniela Gabor
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Despite much attention to unconventional monetary policies after the financial crisis, the collateral policies of central banks are rarely discussed. And when they are, the haircuts applied to assets pledged to access central bank liquidity tend not to be analyzed. An exception to these trends is the recent work by Nyborg (2017), who argues that the collateral policies adopted by the European Central Bank (ECB) aggravated the sovereign debt crisis and put the survival of the euro at risk. Taking our point of departure in the money view literature (Mehrling 2011), we argue however that Nyborg’s critique of the ECB’s crisis response is misguided and that his proposal to deepen and reinforce the ECB’s role in the fiscal disciplining of member states would be procyclical and destabilizing. Through our analysis of Nyborg’s work and the ECBs crisis response, we identify core principles for countercyclical collateral policies suitable for market-based financial systems.
Topic:
International Political Economy, Global Markets, Central Bank, Macroeconomics, Money, Fiscal Policy, European Central Bank, and Banking
Political Geography:
Europe

2. The Privatisation of the Polish Banking Sector

Author:
Hubert A. Janiszewski
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
Warsaw East European Review (WEER)
Institution:
Centre for East European Studies, University of Warsaw
Abstract:
The Polish banking sector, at the outset of the Balcerowicz reform plan, was com- posed of the central bank (NBP), 9 regional commercial banks (which had spun out from NBP back in 1988): the state savings bank – PKO BP; the state bank handling foreign com- merce – Bank Handlowy SA; the state bank handling retail foreign exchange transfers – PeKaO SA; the state bank for financing the agriculture sector – BGZ; and a number of small cooperative banks – BRE SA a bank financing export industries established in 1986; and a single private bank, albeit with equity provided by state enterprises – BIG SA. The Ministry of Finance faced a formidable task, firstly to restructure the banking sec- tor – primarily commercial banks and at a later stage privatize the whole sector in order to i.a make it market oriented, flexible and serve large chunks of the rapidly privatizing economy as well as to cater to the needs of the population. It should be stressed – to give the full description of the sector, that the percentage of bad loans in all the above-mentioned banks (except BIG, BRE and probably PKO BP) was between 30 to 50% of their portfolios! It was therefore decided by Finance Minister Leszek Balcerowicz and his key staff, that prior to their privatization, restructuring of the banks was the key for their success. The major problem with restructuring was a lack of funding, which was not available as the Polish state was bankrupt and private resources were by far too small, and politi- cally inaccessible; moreover the parliament would not allow creation of additional debt by way of equity injections to the ailing banking sector. Under those difficult conditions Balcerowicz managed to pass through parliament a set of legislation on restructuring the economy including banks, which allowed for the provision of banks with so-called restructuring bonds (a special law had been enacted called the “Law on financial restructuring of banks and enterprises”) to strengthen their balance sheets and force them to individually, over time, repay such new debts. In order to guide and help the banks with the restructuring, with the assistance of the British Government, the so-called British Know How Fund was created, whose purpose was to provide professional advice and assistance to all commercial banks. This advice was strengthened by a so-called “twinning arrangement”, under which each of the nine commercial banks was provided with a “twin partner” in the form of an established western bank. Among the banks that participated in this scheme were the Allied Irish Bank (twinned to WBK based in Poznan), ING (Bank Śląski in Katowice) and the Midland Bank (Bank Za- chodni in Wroclaw). The whole operation was launched in early 1990 and was completed by early 1993, thus most of the commercial banks were potentially ”ready” for privatization with substan- tially improved balance sheets. Parallel to the above, all the other banks embarked on the restructuring of their balance sheets, if only in order to stay competitive in the market.
Topic:
Privatization, Finance, State Capitalism, and Banking
Political Geography:
Europe, Eastern Europe, and Poland

3. Introduction to the Round Table on Building a Modern and Robust Banking System: Poland’s Experience after 1989

Author:
Stefan Kawalec
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
Warsaw East European Review (WEER)
Institution:
Centre for East European Studies, University of Warsaw
Abstract:
Poland was the first country of the Soviet bloc in which a non-communist government was created following the period of the cold war. This was the government of Tadeusz Mazowiecki called into being on September 12, 1989. The government announced imme- diately that the economic system would be changed. The government did not propose a third way. It said that a market economy would be introduced, based on private ownership with a freely exchangeable currency. After this transformation of the socialist economy into a capitalist economy was announced, the government acted very quickly to realize this goal. The change of the economic system entailed a great undertaking, consisting of the creation of a banking system adapted to the needs of a market economy. In the socialist economy, there was no money in the true sense of the word. Money served only a certain limited purpose related to the distribution of consumer goods, but not for all such goods. A significant portion of consumer goods were distributed through the use of ration cards, special coupons or through informal channels such as sales made under the counter. En- terprises had their inputs and outputs rationed. The simple fact that an enterprise had złotys on its account did not give the enterprise the right to buy the necessary goods, if the rights to obtain such goods were not included in the appropriate distribution list. Having złotys was also insufficient for purchasing goods from abroad. For that one needed foreign currency -- which also was rationed in accordance with the distribution lists.
Topic:
Communism, Democracy, Finance, and Banking
Political Geography:
Europe, Eastern Europe, and Poland