What is the Central Bank?

The Central Bank is a public institution, in Poland operating under the provisions of the Constitution, as well as the Banking Law. It is in charge of servicing public entities, primarily the state treasury. The Central Bank is responsible for the smooth operation of the country’s banking system. Depending on the political situation in the country, it may or may not be dependent on the state authorities. In favor of the national economy is the independence of this institution.

 

How is the Central Bank different from commercial banks?

The difference between the two entities is significant, as the Central Bank is exclusively engaged in banking activities in cooperation with state and international institutions. Commercial banks, on the other hand, mainly focus their attention on individual customers, including businesses and individuals. Despite the differences, there is close cooperation between these banks, which ensures peace in the financial market.

Can anyone be a customer of the Central Bank?

Unfortunately, this bank only serves public entities. No individual, is able to open an account with this bank.

Does the Central Bank extend credit?

In the case of this institution, it is usually referred to as a loan of “last resort” and only for other banks or public entities. These are short-term loans to rescue the entity’s financial situation and protect it from insolvency when it gets into difficulty.

Do we need a Central Bank?

The Central Bank is for citizens and other foreign entities, a guarantee of the country’s financial security. Thanks to it, there is stability in the commercial bank market. If a bank has bad practices, has a bad monetary policy, the Central Bank has an impact.

Is there only one Central Bank?

As the name suggests, this entity is the center of national banking, but there are even larger entities that bring together several countries. These entities could be the European Central Bank or the World Bank.

What are the functions of the Central Bank?

Four main functions are given:

• Bank of Banks,
• Money Issuance,
• State Bank,
• Lender of last resort.

These are nationwide functions. In addition to the above, the bank ensures the stabilization of the national currency, sets interest rates, or regulates the amount of money in circulation.

What bank holds the central bank function in Poland?

It is the National Bank of Poland, which is headed by the President, who is appointed for a 6-year term by the Sejm, on the proposal of the President of Poland. The President is responsible for the organization and operation of the Central Bank and can serve a maximum of 2 years in this position.