Monday, April 26, 2010

National Bank in turmoil

From: NPE
The tragic death of the head of the National Bank of Poland Slawomir Skrzypek in Saturday’s plane crash leaves questions open about who will replace him, and how his loss will affect monetary policy and other issues.

The succession issue is a major one, since both the parliament and the president must make the choice jointly. Because President Lech Kaczynski was also killed in the crash, it is unclear whether a permanent replacement will or even can be made before the presidential election scheduled for June.

The Monetary Policy Council, which determines interest rates and is headed by the NBP president, announced on Monday that Vice-Chairman Piotr Wiesiolek will preside over the body until a new head can be named.

The announcement came during a previously scheduled meeting of the MPC and was made after its members consulted with constitutional experts. “We will hold normal meetings unless somebody, such as the Constitutional Tribune, decides that it is against the law, MPC member Andrzej Bratkowski told Reuters.

The law states that a member of the MPC must be replaced within three months, which is roughly when a new national president will be elected. Since acting president Bronislaw Komorowski does not possess all the powers of the office, it is uncertain whether he can select a replacement.

On Wednesday, Komorowski said that choosing a successor to Skrzypek should not be made in haste. “I don’t want to rush the procedure for selecting a new NBP president,” he said.

He downplayed his own potential role in the process, adding that the decision should be “as uncontroversial as possible and best handled by the Polish Parliament.”

Some experts expressed concern about the idea that Komorowski would wait until after the election to select a candidate to succeed Skrzypek. “This might be too long for the markets. There may arise some uncertainty, some fears about the stability of the NBP,” Maja Goettig, head economist for Bank BPH told Gazeta Wyborcza.

Although analysts doubt that monetary policy is likely to change much under Skrzypek’s successor, the fact that a president from the ruling Civic Platform is likely to choose the new head of the NBP may well lead to some change in policies. Among these issues are the amount of profits to be paid from the central bank to the budget and how quickly to move Poland into the eurozone.

It may also test the government’s commitment to a truly independent central bank, since it found itself at odds with Skrzypek on such issues in the past. Markets remained calm after Skrzypek’s death, which indicates that investors do not expect any major changes in monetary policy under the new head