Bank of Poland

Bank Polski SA, formally Bank Polski Spółka Akcyjna, was the central bank of the Second Polish Republic. It was established during the monetary and fiscal stabilization program directed by Prime Minister Władysław Grabski after Poland experienced severe postwar monetary instability and the collapse of the mark-based currency system. The institution replaced the Polish National Loan Bank and was closely associated with the introduction of the Polish złoty in 1924. The bank was announced in late 1923 and completed as a joint-stock company on 15 April 1924. Its shares were offered to the Polish public, giving the institution a formally commercial and nationally subscribed structure rather than making it simply a direct department of the state. Its initial capital of 100 million złotych was subsequently increased to 150 million złotych, divided into 1.5 million shares. The Polish Treasury held only a small direct shareholding, although the state retained important constitutional and supervisory powers: the President of Poland appointed the chairman and deputy chairman of the board of trustees, while the Minister of Finance could veto appointments to the bank's governing council. Bank Polski's principal responsibilities included issuing currency, supporting the złoty, maintaining monetary reserves, and conducting central-bank functions for the Polish state. The 1924 reform set the złoty at one złoty for 1.8 million marks previously issued by the Polish National Loan Bank. The stabilization was achieved without a formal League of Nations stabilization loan, although foreign expertise influenced the institution's design and later governance. A reserve framework required a substantial portion of issued currency to be backed by gold, silver, and foreign currencies. After further monetary reforms, the required backing ratio was raised to 40 percent. The stabilization program encountered difficulties. The government's continued expansion of the money supply through coin production contributed to so-called coinage inflation in 1925 and 1926. Bank Polski suspended the free convertibility of the złoty into United States dollars in July 1925. Gold convertibility was restored in October 1927, after the political changes associated with the May Coup. The bank also operated under restrictions on shareholder dividends and mechanisms that directed part of higher profits to the State Treasury. The German invasion of Poland in 1939 transformed the institution into a bank in exile. Before the invasion, Polish officials, notably Ignacy Matuszewski and Henryk Floyar-Rajchman, organized the evacuation of approximately 105,000 kilograms of gold reserves. The reserves were moved through Romania, Turkey, and Syria to France and subsequently to Canada and the United Kingdom. Bank Polski first relocated to Paris and then, following the fall of France in 1940, to London with the Polish Government in Exile. From London it helped finance the government's wartime and military activities. In occupied Poland, the German authorities established the Bank of Issue in Poland for the General Government, while other occupied territories came under German or Soviet central-bank administration. After the war, the communist authorities created the National Bank of Poland in January 1945, removing Bank Polski's currency-issuance role. Governor Bohdan Winiarski led efforts to return the institution to Warsaw in 1946, and banknotes and reserve assets held abroad were brought back or otherwise administered. The notes were not put into circulation, however, and much of the gold backing was used by the postwar authorities for budgetary purposes and settlements connected with nationalization compensation. Bank Polski entered liquidation in the early 1950s and was ultimately dissolved on 7 January 1952. It is sometimes called the Second Bank of Poland to distinguish it from the nineteenth-century institution that used the same name.

Bank Polski SA emerged from the monetary crisis that followed the restoration of Polish independence. The country inherited a fragmented and unstable monetary environment, and the Polish National Loan Bank's mark-based currency was undermined by inflation. The State Treasury Repair Act of 11 January 1924 provided the legal framework for Władysław Grabski's stabilization program. The new central bank was announced on 3 December 1923 and began operating on 15 April 1924. Unlike a purely state-owned institution, Bank Polski was organized as a joint-stock company whose shares were subscribed by the Polish public. Its capital was first set at 100 million złotych and later increased to 150 million. The government retained influence through appointment and veto rights, but the structure was intended to give the bank a degree of institutional independence. The same reform introduced the złoty, valued at one złoty for 1.8 million marks previously issued by the Polish National Loan Bank. The bank's early years were shaped by the effort to make the złoty credible. Currency issuance was subject to reserve requirements involving gold, silver, and foreign currencies. The government nevertheless continued expanding the money supply, and Poland experienced coinage inflation in 1925 and 1926. In July 1925, Bank Polski suspended free conversion of the złoty into US dollars. After the political changes of 1926 and further stabilization measures, gold convertibility was restored in October 1927. The institution drew on international technical advice, including advice associated with E. Hilton Young and the appointment of Charles S. Dewey as a foreign adviser to its council in 1927, but Poland did not adopt a formal League of Nations stabilization loan. The bank's ordinary central-bank role ended with the German invasion in September 1939. Polish officials evacuated the bank's gold reserves, totaling about 105,000 kilograms, through southeastern Europe and the Middle East. The reserves were transferred first to France and later largely to Canada and the Bank of England. Bank Polski moved to Paris on 19 September 1939 and then to London on 1 July 1940, where it operated alongside the Polish Government in Exile and supported its wartime financial effort. German authorities created the Bank of Issue in Poland in the occupied General Government, while the Reichsbank and Soviet Gosbank assumed central-banking functions in other occupied areas. The postwar communist government founded the National Bank of Poland on 15 January 1945 and deprived Bank Polski of its right to issue banknotes. In 1946, Governor Bohdan Winiarski directed the institution's return toward Warsaw. Banknotes printed in Britain and assets held in foreign banks were recovered or transferred, but the notes were never placed into circulation. The postwar authorities used much of the gold reserve for government expenditure and for compensation arrangements related to nationalized property. Liquidation began in 1951 and was completed on 7 January 1952. The former Warsaw headquarters had been built between 1908 and 1911 for the State Bank of the Russian Empire on the site of an earlier Polish mint. Bank Polski later used the building, which was damaged and not reconstructed after the Second World War. A later office complex incorporated some surviving architectural elements, but the historic bank itself no longer operates.

1. 1952Liquidation completed

   The liquidation of Bank Polski SA concluded on 7 January.

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2. 1945National Bank of Poland founded

   The postwar authorities founded the National Bank of Poland, superseding Bank Polski's central-bank and banknote-issuance functions.

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3. 1940Operations relocated to London

   After leaving Paris, Bank Polski established its wartime base in London alongside the Polish Government in Exile.

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4. 1939Gold reserves evacuated

   Before and during the German invasion, approximately 105,000 kilograms of gold reserves were moved out of Poland through several transit countries.

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5. 1927Gold convertibility restored

   Gold convertibility of the złoty was restored on 15 October after further stabilization measures.

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6. 1925Dollar convertibility suspended

   Bank Polski suspended free convertibility of the złoty into US dollars amid monetary pressure and inflation.

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7. 1924Bank Polski begins operations and the złoty is introduced

   The joint-stock central bank was completed on 15 April, replacing the Polish National Loan Bank as the principal monetary institution and supporting the introduction of the złoty.

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8. 1923Bank establishment announced

   The Polish government announced the creation of a new Bank Polski during the monetary reform program associated with Władysław Grabski.

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A nationally subscribed central bank created to stabilize the currency and financial system of the newly independent Second Polish Republic.

• Polish złotyCurrency1924

  The złoty was introduced as part of the 1924 monetary reform and became the principal currency supported by Bank Polski. It replaced the mark-based monetary system associated with the Polish National Loan Bank. Bank Polski managed issuance and sought to maintain the currency's value through reserve requirements and convertibility rules. Dollar convertibility was suspended in 1925, while gold convertibility returned in 1927.

• Central-bank reserve and issuance servicesCentral banking1924

  Bank Polski held monetary reserves, issued banknotes, supported currency convertibility, and performed central-bank functions for the Second Polish Republic. Its framework required a significant proportion of currency issuance to be backed by gold, silver, and foreign currencies. During the Second World War, the bank's reserve-management role included the evacuation and preservation of Poland's gold holdings.

• 1939Evacuation of national gold reservesStrategy

  The German invasion threatened Poland's monetary reserves and the continued operation of its central bank.

  What changed. Bank officials arranged the movement of approximately 105,000 kilograms of gold through Romania, Turkey, and Syria to France and subsequently to Canada and the United Kingdom.

  Aftermath. The reserves remained associated with the Polish authorities in exile and supported the continuity of the Polish monetary institution during the war.

  Evacuated gold reserves. Approximately 105,000 kilograms moved out of Poland (1939)

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• 1925Suspension of dollar convertibilityStrategy

  Monetary pressure and inflation made it difficult to maintain unrestricted conversion of the złoty into US dollars.

  What changed. Bank Polski suspended free convertibility of the złoty into US dollars on 30 July.

  Aftermath. The suspension formed part of the difficult stabilization period before gold convertibility was restored in 1927.

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1. Bank Polski SA