The situation is serious in terms of liquidity of the banking sector. There are three elements which have to be taken into account all the time: liquidity, quality of credits granted and profitability. Profitability is at the end of this list. There are banks and institutions which may not be profitable and yet have been operating on the market for years. This is fine, but there is no such institution which would be able to operate without cash, without liquid assets regardless of the number of buildings or other properties held. Hence liquidity ranks first and this is the reason why we are so anxious about what is happening in the world, because this financial crisis of confidence boils down to liquidity. If banks do not give each other an opportunity to sell and buy money as was the case before, the financial system lacks liquidity and the economy is deprived of oxygen.

As a result, we have tightened the terms of some credits. In the case of housing loans, we have introduced the loan-to-value-ratio of 80 (LTV80) which means that we finance up to 80 percent of the property purchase price and that a minimum of 20% must be paid by the customer, in other words we no longer credit the full property purchase price. However, this does not apply to customers who submitted their applications before these changes were announced – the old terms and regulations apply. I think it is fair. Must the banks toughen lending terms? If money on the market becomes dearer it cannot be sold cheaper as credit - consider what is happening to WIBOR (the Warsaw Interbank Offered Rate). Of course, this can be done within the framework of a special, short term action, but not for long.

How long can the Polish banking sector stay immune to international turmoil? I am optimistic. We are dealing with very serious turbulences in world finances, but I believe that the most difficult time for Poland will last from three to six months. In real fact we are dealing with two kinds of crisis. The financial crisis is one thing. Another one is the resulting economic slowdown in the world, and also in Europe, which is bound to hinder economic growth in Poland. It is particularly dangerous for Poland that many foreign business partners and investors identify this country not as Poland but as part of Central Europe or the Central-East European region. This error may cost us dearly at the time when the world hears so much about the trouble Hungary is facing and when investors take it for granted that the whole CEE region is in bad shape, while in fact this has no relation to Poland.

I assess the condition of the Polish economy as very sound and the chances of

Poland emerging from the present crisis unscathed as considerable. The more so that the banking sector has for the first time ever received such a determined and unequivocal support from the Financial Stability Committee consisting of the Finance Minister, the Polish Financial Supervisory Authority, the National Bank of Poland (NBP) and the Bank Guarantee Fund. It is significant that to-day these key institutions speak with one voice. Opinions have been voiced that the National Bank of Poland did not do everything that was done by governments and central banks in Europe but I for one believe that there has been no such need. I am not in favour of putting a patient through surgery if other kinds of therapy can be applied. The crisis in Western Europe is much deeper than in Poland and NBP responded fast in agreement with the biggest banks. The confidence package that was introduced is to give banks access to cash through the central bank and without injecting additional money into the financial sector. The range of instruments that can be used in such a situation has been extended. NBP’s working hours have been extended. We have also received assurances that if the situation deteriorates, NBP and regulators are ready to expand the scope of intervention.

Much depends now on cooperation between parliament, the government, the Finance Ministry, the Financial Supervision Commission, the National Bank of Poland, banks and customers. I think that the role of banks’ relations with customers is of key importance as well. For much depends on mutual confidence. I believe there is such confidence as I keep track of customer perceptions of BPH bank. A year ago, this bank was divided up and more than 80% of its customers - including all corporate clients and corporate division employees - were transferred to another bank. We were only left with technology; we began reconstructing that division and we have already gained more than 1,000 corporate customers. This is evidence of confidence in our bank. It is really reassuring. Even under the current circumstances Polish customers are behaving admirably – almost all banks have registered a growth of deposits. I wish to thank customers for their prudent attitude. I am sure that we will be able to overcome the present difficulties within the next several months.