Incoming governor at Polish central bank unlikely to rock the boat

Incoming governor at Polish central bank unlikely to rock the boat
By bne IntelliNews June 10, 2016

The Polish parliament will approve Adam Glapinski as the governor of the National Bank of Poland on June 9. The appointment is unlikely to lead to any significant change in the central bank's hawkish stance on monetary policy, although the incoming chief's deep ties to the ruling party worry some.

Glapinski – a former member of the Monetary Policy Council (MPC) and current member of the NBP’s board – is thought highly likely to continue the policies of the outgoing Marek Belka. While the appointment will see the entire MPC consisting of candidates put forward by the ruling Law and Justice (PiS) party, the council seems highly unlikely to face pressure to bend to the will of the government. 

That would be an exception in Poland today. PiS has sought to overhaul a number of institutions, even at a price of harsh international criticism. The ongoing crisis surrounding the Constitutional Tribunal is the most vivid example.

On hold

Glapinski, 66, is a professor of economics with a varied experience, including stints as member of the supervisory boards of BRE bank, airline Centralwings, and copper and silver miner KGHM. He also was the CEO at mobile operator Polkomtel. But his recent career has been closely linked with the central bank, where he was a member of the MPC between 2010 and 2016 and remains a board member.

“[Glapinski] is one of the creators of Poland’s monetary policy of today, his policy will not be much different from [Belka’s],” Mateusz Sutowicz from Bank Millennium tells bne Intellinews. That suggests the MPC is likely to continue to resist pressure to cut the benchmark interest rate.

After trimming the base rate to a record low of 1.5% in March, the MPC has defied waves of speculation that further easing will be used in a bid to finally end deflation, which has been in place for around 18 months. The MPC’s statements have become repetitive, stressing that deflation remains externally driven by commodity prices, and that anyway, it is having little ill effect on growth.

While the MPC did note the weakening of growth in the first quarter after its most recent meeting on June 8, it also said it remained convinced growth will pick up in the coming quarters.

“The council maintains its assessment that ... the current level of interest rates is conducive to keeping the Polish economy on the sustainable growth path," has become a copypaste used by the MPC to justify its lack of action on rates. It should be expected that this will continue under Glapinski.

“[Glapinski’s] recent comments that interest rates might have reached bottom suggest that the stability of rates is most likely scenario,” says Katarzyna Rzentarzewska of Erste. She notes that the incoming governor has a reputation as a hawk.


That said, analysts do see some space for Glapinski to leave his own mark on the Polish financial market, especially as it remains so vulnerable to the controversial ideas of PiS. 

“[Glapinski’s] call for the [financial market regulator] KNF to be moved back to the central bank shows that he [wants to be] pro-active and perceives the responsibilities of the central bank broadly,” Marta Petka-Zagajewska, chief economist at Raiffeisen Polbank, tells bne IntelliNews.

Others might suggest that when Glapinski said in parliament in May that he wants to make the central bank the supervisor of the banking system, it was a call similar not out of line with the ethos of PiS to gather as much power over institutions as it can. The current banking watchdog has run a tight ship, and, whilst stern, is credited with helping deflect the issues that have plagued some other bank markets in CEE.

On the other hand, seeking more power for the NBP might suggest Glapinski is serious in his stated ambition to make the central bank a strong and independent institution, with the potential stand up to the ruling party if necessary.

Yet that could be driven more by hope than experience given the incoming governor's deep ties to PiS. Glapinski is, in effect, a founder of the party, after he launched in 2001 - alongside current chairman Jaroslaw Kaczyinski - the Centre Alliance, which was turned into PiS in 2001.

“I do not perceive his political experiences as any source of risk for independence, but rather as a chance for smooth partnership between the central bank and the government. That means the opinions of the central bank could have greater potential to impact government decisions,” Petka-Zagajewska hopes.