Poland achieves low overall compliance with international standards and codes, with a score of 36.67 out of 100 in our Standards Compliance Index. This represents a downgrade from its previous assessments, as Poland's financial supervisory system has been substantially revamped in 2006 with the establishment of a new integrated financial supervisor, the Polish Financial Supervisory Authority . No independent assessments have been conducted or published since then. Similarly, the Polish payment systems originally evaluated have been discontinued and its new systems have not been assessed. Available assessments convey that Poland's compliance in the areas of macroeconomic fundamentals, however, is high. Regarding Poland's compliance with standards in the market infrastructure category, the picture is mixed. Poland is moving towards convergence with international auditing standards, and the imminent transposition of the European Union's Third Money Laundering Directive should bring it in compliance with Financial Action Task Force Recommendations. The legal framework of its corporate governance structure is in line with the Principles set forth by the Organization for Economic Cooperation and Development. Poland's insolvency framework, however, is still in need of improvement, especially in its successful application.

Macroeconomic Policy and Data Transparency

Poland became a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) in April 1996 and started meeting the IMF's SDDS requirements on March 2, 2000. Based on information provided on the IMF's SDDS website, Poland meets SDDS requirements for periodicity, coverage, and timeliness of data, although it does employ the flexibility option for timeliness for general government (public sector) and central government operations. Further, Poland also fulfills SDDS requirements, where applicable, for the access dimension. Information on the IMF's SDDS website, however, shows that Poland does not meet all SDDS requirements for integrity of data, as several data categories lack provisions for information about revisions and advance notice of major changes in methodology. With regard to the quality of data, information provided on the IMF's SDDS website indicates that Poland largely observes the SDDS requirements. However, there is no information on dissemination of documentation on methodology for the data on unemployment and central government debt; and several data categories make no mention of statistical frameworks that support statistical cross-checks. More »

In its 2006 annual update on Monetary Policy Transparency in Poland, Oxford Analytica (OA) concluded that Poland's overall score of "Compliance in Progress" remains unchanged from 2005. The National Bank of Poland (NBP) is still widely respected as an independent institution with high professional standards. The OA report states the NBP operates as a fully independent entity, although there are valid concerns that the NBP may be prone to political pressures, specifically from the Polish Congress. Efforts to rewrite the NBP Act to make the Monetary Policy Council more responsive to government economic priorities have raised further alarm regarding NBP independence. The NBP's practice of publishing inflation projections has become a transparent and effective mechanism to communicate the NBP's stance. Also, the NBP's 2005 revisions to the macroeconomic modeling framework have boosted the link between the projections and MPC decisions. Regardless of recent political maneuverings by members of the government, it appears unlikely that the NBP's independence will be compromised, given the increasingly clear and formal framework in which monetary policy is conducted. More »

Oxford Analytica's 2006 Report on Fiscal Transparency rates Poland's overall compliance with this standard as "Compliance in Progress." In recent years, Poland has made remarkable strides in its efforts to converge with international best practices in fiscal transparency. EU accession in 2004 played an important role in consolidating this progress and ensuring basic compatibility with Eurostat criteria. Present government policies appear to be consistent with international fiscal responsibility principles. For example, Poland's deficit targets are met, and there do not seem to be any substantial efforts to hide the true positions of public finances. The fiscal reform program being pursued by the administration at the time of the OA assessment included measures expected to enhance fiscal transparency. Already, the Polish government has accomplished two key milestones: the consolidation of EU funding into the budget and the incorporation of extra-budgetary funds into the state budget. The government is working on introducing performance-based budgeting. Although government finances are still calculated on national accounting standards, a committee consisting of the National Bank of Poland and the Central Statistical Office is working to ensure that national accounts are prepared in compliance with ESA95 standards. According to OA, the Polish authorities are strongly committed to building on the progress of recent years. Budget preparation and execution is carefully regulated and reliable data is reported in a timely manner. Although the availability of accurate information on the government's activities has improved dramatically, some of it is still presented in a way that is not easily accessible and understandable. More »

Institutional and market infrastructure

In anticipation of entering the EU in 2004, Poland enacted a new Law on Insolvency and Restructuring in 2003 to replace the previous Bankruptcy Law of 1934. The new law was intended to bring Poland's regime into closer alignment with EU regulations. The 2003-2004 Insolvency Law Assessment Project commissioned by the European Bank for Reconstruction and Development's (EBRD) assigns Poland's insolvency legislation an overall "medium" score on compliance with international standards established by international organizations, including the World Bank. The EBRD's 2006 publication "Commercial Law of Poland" reaffirms the conclusions of the Insolvency Law Assessment Project regarding the level of compliance of Poland's insolvency regime with the international standards but expresses concern whether any of the positive attributes of the insolvency regime can be implemented. The report cites the conclusions of the 2004 EBRD Legal Indicator Survey which examined the "effectiveness" of the insolvency regimes. The results of the Survey revealed that with regard to the practical application of the Insolvency Law, both creditor and debtor initiated insolvencies can be problematic. The 2006 EBRD report acknowledges that Poland is not alone in the region as far as the need for improved professional training for insolvency professionals and recommends a reform of the legal sector to promote the rescue of fundamentally healthy companies. More »

In 2002, a EC Regulation No. 1606/2002 was passed by the European Parliament and the European Council of Ministers requiring the adoption of International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board. As a result of the Regulation, all EU listed companies are required to prepare their consolidated financial statements following IFRSs as adopted by the EU beginning January 1, 2005. Listed companies in Poland consequently follow IFRSs in preparation of their consolidated accounts. Per the 2008 EC report on the implementation of the Regulation No. 1606/2002, IFRSs are permitted in the annual accounts of listed companies and in the consolidated and annual accounts of all other companies that have either filed for admission to public trading or are a subsidiary of a parent which prepares its consolidated accounts in accordance with IFRSs. All banks are required to apply IFRSs in their consolidated financial statements. Companies that are not required or choose not to apply international standards prepare financial statements in accordance with the Polish requirements primarily contained in the Accounting Act, which incorporates provisions set out in the Fourth and Seventh EU Company Law Directives. The World Bank in its 2005 assessment of accounting and auditing practices in Poland commended the authorities for the progress achieved in reforming financial reporting requirements, however, pointed to a number of remaining differences between Polish and international accounting standards. Adoption of IFRSs for consolidated accounts of all public interest entities was recommended, as was a review of Polish legislation to eliminate conflicting reporting requirements. More »

In its 2003 Corporate Governance Sector Assessment Project, the EBRD observed that corporate governance legislation in Poland is in "high compliance" with the Organization for Economic Cooperation and Development (OECD) Principles of Corporate Governance. A World Bank assessment conducted in 2005 confirmed that the Polish corporate governance framework complied with many of the OECD Principles and observed that Poland had adopted new legislation, implemented a corporate governance code, and strengthened its regulatory and enforcement regime. Nonetheless, the World Bank assessment identified deficiencies in regulation of pension funds, weakness of the supervisory board, problems in delisting procedures, and inadequate approvals of related-party transactions. A 2006 EBRD assessment further stated that minority shareholder disclosure procedures were found to be "complex" and enforceability was problematic. Some of these issues have since been addressed. According to a 2007 EBRD report, under the Warsaw Stock Exchange (WSE) Council resolution of July 2007, the updated corporate governance code became a mandatory part of the WSE rules. Also, listed companies are required to disclose compliance with the Code on a "comply-or-explain" basis. Poland has also adopted the International Financial Reporting Standards for application in consolidated financial statements of listed companies. More »

In a 2005 assessment, which benchmarked Polish accounting and auditing practices against International Financial Reporting Standards and International Standards on Auditing (ISAs), the World Bank observed that ISAs are not mandatory and statutory auditors are obliged to comply with Polish auditing standards. A November 2006 National Chamber of Statutory Auditors (KIBR) self-assessment explained that Polish standards are based on ISAs. The World Bank, however, noted that Polish auditing standards are an "abbreviated" and "incomplete" version of international standards and recommended the wholesale adoption of ISAs in Poland. Polish auditing practices, however, are likely to change with the implementation of Directive 2006/43/EC of the European Parliament and Council, which came into force in May 2006. Per this Directive, all statutory audits of annual and consolidated accounts in the European Union countries must be conducted on the basis of ISAs as adopted by the European Commission. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. Both, the World Bank and the KIBR self-assessment confirmed that Poland has expressed its commitment to adopt endorsed ISAs in line with the EC directives. More »

The European Committee on Crime Problems and Select Committee of Experts on the Evaluation of Anti-money Laundering Measures (CDPC & MONEYVAL) conducted a mutual evaluation of Poland's anti-money laundering and combating the financing of terrorism (AML/CFT) regime in 2006 and released its findings in a 2007 report. In this report, the evaluators concluded that Poland is fully or largely compliant with only 18 of the 40+9 Financial Action Task Force (FATF) recommendations and special recommendations (SR) and is non-compliant with 11. The same report observed that although Poland has made significant improvements in its AML regime since its last mutual evaluation in 2002, its overall AML/CFT framework is lacking when assessed against FATF's requirements. Most importantly, the CDPC & MONEYVAL report notes that Poland is non complaint with SR II as it has yet to criminalize terrorist financing as mandated by the United Nations Security Council Resolution 1373. A 2008 report by the U.S. Department of State notes that Poland was expected to transpose the European Union's Third Money Laundering Directive into Polish legislation in December 2007 but parliamentary elections delayed this process. There is little further information publicly available regarding the adoption of this Directive. The EU's Third Directive requires that all EU member countries implement the FATF Recommendations. More »

Poland's payment systems were assessed against the Committee for Payment and Settlement System's Core Principles for Systemically Important Payment Systems (CPSIPS) by the IMF in 2001. The systems assessed by the IMF in 2001 were SORBNET, ELIXIR, and SYBIR. The IMF assessment concluded that these systems exhibited a high degree of compliance with the CPSIPS, and the main concern raised by the IMF assessors was the lack of clear oversight responsibility, especially in the case of multilateral netting systems. The authorities at the time of the IMF assessment noted that the issue was being addressed. In 2001, the Act on Settlement Finality was passed, stating the National Bank of Poland's responsibility for the oversight of payment systems in Poland. After the 2001 IMF assessment, the SYBIR system was discontinued and two new systems began operating: the SORBNET-EURO and the Euro-ELIXIR. The SORBNET-EURO was assessed by the European Central Bank in 2005. Their report concluded that the system achieved a high degree of compliance with all relevant Core Principles (CPs). There is no assessment publicly available of the Euro-ELIXIR system against the CPSIPS. Moreover, there is little information in public documents of the NBP as to which currently operating systems in Poland are of systemic importance. SORBNET-EURO is linked to the European Union's Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system through the Italian RTGS system, BI-REL. Presently, TARGET is being phased out and replaced by its successor TARGET2 and on May 19, 2008, Poland will also join TARGET2. However, there is little information available on the NBP's website regarding its transition to and adoption of TARGET2. More »

Financial Regulation and Supervision

Accession to the European Union has been the key driving force behind Poland's financial sector development because it contributed to improvements in the regulatory framework, according to the IMF's 2006 Article IV Consultation report. Moreover, the U.S. Department of Commerce, in its 2008 Country Commercial Guide, states that the Polish banking system is among the best in Central and Eastern Europe in terms of regulation and supervision. In 2001, the IMF conducted a Financial Sector Assessment Program (FSAP) of Poland's observance of the Basel Core Principles (BCPs) for Effective Banking Supervision, and reported its findings in its 2001 Financial System Stability Assessment. The IMF report concluded that the Commission for Banking Supervision had adopted and effectively implemented a clear set of goals and objectives through supervisory strategies and through on-site and off-site examinations. While most of the essential prudential regulations and requirements were in place, the assessment found that compliance with the regulatory framework was not complete. The Act on Financial Market Supervision was adopted in September 2006, establishing the new integrated financial supervision authority - the Polish Financial Supervisory Authority (PFSA) - for the insurance, securities market, and pension fund sectors. Starting from January 1, 2008, banking supervision is also carried out by the PFSA. Subsequent to this change in the supervisory and regulatory authority, there is little information publicly available regarding Poland's compliance with the BCPs. More »

The European Bank for Reconstruction and Development, according to its 2006 report on Commercial Laws, assessed in 2004 the securities market legislation in Poland against the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation and found Poland to be in "medium compliance." At the time of the IMF's 2001 Financial Sector Assessment Program, securities regulation in Poland already complied with most IOSCO Objectives and Principles. Furthermore, the areas where compliance could be strengthened were reasonably minor in importance. According to the EBRD's 2006 report, a 2005 update of Poland's securities markets legislation showed dramatic improvement in the already relatively sound Polish legal framework with the adoption of the Act on Public Offering, the Act on Trading in Financial Instruments, and the Act on Capital Market Supervision. More »

The 2001 IMF Financial System Stability Assessment concluded that Poland broadly observed the Insurance Core Principles (ICPs) developed by the International Association of Insurance Supervisors (IAIS) and that the regulation and supervision of the insurance sector had been significantly strengthened. Weaknesses were identified with regard to the powers and independence of the supervisory agency; frequency of on-site inspections; corporate governance practices; and exchange of information with the domestic and foreign counterparts. At the time of the assessment, supervision of the insurance sector was conducted by the State Office for Insurance Supervision, which was replaced by the Insurance and Pension Funds Supervisory Commission in 2002. Since September 2006, the Polish Financial Supervisory Authority regulates the insurance, securities market, and pension funds sector Given the October 2003 revision of the Insurance Core Principles and their methodology by the IAIS, and the change in Poland's supervisory and regulatory framework in 2006, there is insufficient information publicly available regarding Poland's compliance with the new, more stringent IAIS principles. More »

Legend:

Credit Ratings

Moody's A2/Stable

Fitch A-/Stable

Standard & Poor's A/Stable

Macroeconomic Data

2007 GDP (Current Prices): 420.3 billion USD (IMF)

2007 GDP (Per Capita): 11,041 USD (IMF)

2008 GDP (Growth Forecast): 4.9% (IMF)

2008 Inflation (CPI): 4.1% (IMF)

2007 Unemployment: 12.8% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 13.9 billion USD (UNCTAD)

FDI (Outward): 4.3 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)