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Last updated: Thursday, 25-Jun-2009 16:24:04 EDT

Activity Reports

Financial Sector

USAID assistance to Poland included major work to develop additional banking services and to ensure that the country's new financial infrastructure is safe and transparent. A brief historical description of the assistance prepared by the USAID / Poland staff is provided below. For more detail, look up descriptions of activities, which in some cases include links to key reports or other internet sites. You may also wish to refer to a major assessments of the Polish banking sector carried out in 1998 and 2000.

USAID assistance to develop Poland's financial sector

The changes to the financial sector in Poland since 1989 have been profound. A number of institutions emerged over the course of the decade that are key to the functioning of a market economy. Some institutions, such as banks, changed their character and methods of operation from those associated with a command economy, to those required by a globalized financial sector. From being widely regarded as an economic basket-case, Poland is currently respected by governments and private financial institutions for having a viable, growing financial sector that is comparatively safe and transparent. There is also recognition for that these institutions are staffed by individuals that have mastered the operation of financial institutions in a market economy.

The principal changes that have occurred over the past ten years can be grouped in two general areas: 1) building the infrastructure for Poland’s financial sector; and 2) increasing the number of standard financial products and services available to private and corporate customers.

Building the infrastructure for Poland’s financial sector

Poland’s transformation in banking and finance required that certain concepts be instilled, and certain institutions created or reformed to serve these principles. USAID played a significant role in the following changes:

putting banks on a business track – prior to market reforms, banks were principally a channel for funding state enterprises, without regard either to the efficiency and profitability of the banks themselves, nor the interests of (individual) depositors. The U.S. led a group of countries and provided $200 million to the Bank Stabilization Fund, where funds were provided to the government to restructure the bad debts of state banks with the condition that they be privatized. This privatization, mainly by foreign banks, has led to continuous rapid improvements in the quality of management and services in the banking sector;

replacing the missing blocks – a multitude of financial sector institutions were created over the past decade, and they have rapidly become established elements of the sector: a stock exchange, a securities commission, a national depository of securities, a national clearing house, an over-the-counter market, a local commodity exchange, and a rating agency. USAID’s capital market projects contributed in a significantly to the majority of these institutions through assistance in their design, drafting and implementation of regulations, and training of their management and staff;

building trust through regulation – transition inevitably gives rise to turbulent changes in regulations, practices, and attempts to make use of the resulting confusion by dishonest individuals. Poland has managed to provide for a stable and transparent banking sector through a respected banking supervision inspectorate, as well as a transparent capital market as a result of a strong Securities and Exchange Commission. USAID, for seven years, provided technical assistance to strengthen the capacity of Poland’s banking supervision inspectorate, drawing on the experience of U.S. regulators (FDIC, Federal Reserve, OCC) in on-site and off-site supervision, troubled bank rehabilitation, and strategic decisions such as organizational and professional independence of banking supervision. Poland’s banking supervision is considered a leader in Central and Eastern Europe, with delegations from both neighboring and other countries (e.g. South Korea) coming to Poland for advice;

training and advising decision makers – the rapid and deep-reaching changes to the sector required training, as well as access to expertise from practitioners in countries with more developed banking and financial sectors. USAID funded the establishment of the Warsaw Institute of Banking (WIB), pioneering work that tapped U.S. best practices to establish a local training capacity. USAID further funded and organized the travel of volunteers that provided invaluable help: the beneficiaries of the FSVC volunteers included the Securities and Exchange Commission, the National Depository, the superintendent authorities for the pension system, banking, and insurance, the OTC market, and numerous professional associations in the financial and social sectors;

assisting a mature market – the advancement and maturity of Poland’s financial market allowed it to absorb the introduction of deep-reaching, long-term reform to the country’s pension system. Pension funds have recently become a feature of the Polish financial sector, and it is expected that within two years they will become financial institutions and the largest investors in the Polish capital market. The savings mobilized by the new institutions will effect quicker development of the entire sector, with significant impact on the economy as a whole. USAID’s role was critical to the design and development of the new system, the drafting and passage of required legislation, and training provided to the new pension system superintendent.

Increasing the number of financial products and services

The successful merging of the financial sector into the global economy, and ensuring the system’s transparency would have little meaning if the number of financial products and services, as well as their availability to business and individuals, were not also improved. The expansion of these products and services has been particularly strong over the past five years, following very conservative behavior by banks after a bad debt crunch in the early 1990’s. The rapid increase in the number of services and customers led to a process of self-regulation, whereby financial institutions, in order to ensure the soundness of the system and safeguard their own interests, began to create institutions such as credit information bureaus.

The Polish-American Enterprise Fund was instrumental in the introduction of new financial institutions – the First Polish-American Bank with its windows loan program for small business that provided over 7,000 businesses with $272 million; the First Polish-American Mortgage Bank lending $45 million to support about 4,500 housing units; and the very successful Fundusz Mikro microlending program, providing over 31,000 loans for over $50 million.

USAID implemented a series of disparate activities whose principal objectives were, however, consistent in improving access of small business to financing, as follows:

following the credit crunch of 1990-1994, USAID provided loan guarantees to cover small business loans of an aggregate value of about $10 million to two commercial and two community banks. The guarantee facility is the best performer in all the countries in the region where it is offered;

USAID training provided to assist the expansion of the credit union movement that started in Poland in the early 1990s. The Unions now have over 305,000 members in 171 credit unions with combined assets valued at approximately $50 million. This helped to bridge the gap between the availability of financial services to affluent white-collar workers and entrepreneurs, and lower income individuals. Credit unions are expected to be able to expand their services into financing businesses, which will add another incentive for the development of micro- and small firms;

USAID also provided training to local community or cooperative banks. The banks, previously serving farmers, now successfully compete with commercial banks in the provision of banking services to individuals and business. USAID also helped initiate a process by which the numerous community banks began to merge into two strong groups;

technical assistance was provided to the National Association of Loan Guarantee Funds, as well as a number of regional development agencies, in support of local initiatives;

business intermediary organizations (e.g. consulting firms) were brought together with bankers to promote a standard understanding of the requirements of banks, and demands of small business customers for finance;

legal and technical assistance was provided on the drafting of the Collateral Law, as well as training for bankers and judges on its implementation; and

studies and position papers were developed to promote the need to improve access to credit for small business for use by business organizations, parliamentary committees, and government departments.

Last Updated on: June 25, 2009