ABSTRACT
In the financial sector, pre-war banks were eliminated and their functions were transferred to the Central Bank of Poland (NBP). The NBP supervises the lending policy of banks and collects and relays information on the banking system and its overall financial situation and liquidity. The new banks spun off from the NBP inherited their assets and liabilities without prior assessment of their quality. More importantly, since 1993, the Polish economy has shown positive growth. In the banking system these positive macroeconomic developments have resulted in an improvement in the rate of saving and the institutional development of banks and banking infrastructure. Independent deposit insurance was finally introduced at the end of 1994 and is obligatory for all banking institutions in Poland with the exception of three state banks that retain state-guaranteed coverage of household deposits until 1999. The negative effects of macroeconomic and institutional changes were worsened by a moral hazard problem that affected enterprises and banks equally.
