Poland’s Central Bank Chief Is Fighting the Battle of His Career as Parliament Starts Probe

"Poland's Central Bank Chief faces a career-defining battle as Parliament initiates a probe. This development underscores the high stakes and scrutiny surrounding monetary policy decisions in the country. Follow the unfolding investigation as Poland's financial leadership navigates through challenging times."

• Governor Glapinski has been accused of political interference
• His unorthodox policy making is a target of a lawmakers’ probe
  

It’s past noon on the most important day of the month, and Poland’s monetary policy council is waiting for Governor Adam Glapinski to show up to work.

The central bank chief’s erratic approach to timekeeping is one of many unusual habits observed by bank insiders who spoke to Bloomberg. Glapinski’s unorthodox approach to interest-rate setting is a matter of public record. When last year inflation was running four times above target, he blindsided investors with a beefy rate cut. So too is his maverick approach to communication. Asked about the trajectory of the zloty at a recent press conference, he touched on the subject before veering off to discuss the merits of the country’s toilets.

What is less well known is how the governor arrives at these decisions, and what goes on behind the scenes at the nerve center of Eastern Europe’s most traded currency. Bank insiders paint a picture of someone who both micromanages officials yet who shows up late to meetings — even to the monthly interest-rate decisions that decide the fate of the zloty. And who, while fighting an existential battle against his political enemies, might be starting to lose the support of some colleagues.

The account is based on conversations with half a dozen officials familiar with the inner workings of the central bank. They asked not to be named because they were not authorized to speak publicly on the subject. The central bank didn’t respond to an emailed request seeking comment for this article.

Several of the allegations against the governor made it into a charge sheet published Tuesday. The accusations compiled by the new government’s lawmakers accuse Glapinski, over the eight years he’s been in power, of politicizing his office and running roughshod over bank processes. They are allegations the central bank has strenuously denied in a detailed response on its website, decrying the move to probe the governor as an attempt to violate the institution’s independence.

What’s clear is that the 73-year-old has run the National Bank of Poland with a firm hand, bashing his critics as either Kremlin or German stooges, and enjoying the support of the ruling party which has sometimes publicly steered him over policy decisions.

But now, that grip may be loosening — and not only because his political allies were booted out in October’s election and the new government wants him gone. In the time that his colleagues sit waiting for their boss, arrayed along one side of the room named for the central bank’s founder, they talk among themselves. And, according to insiders who spoke anonymously to Bloomberg, even his supporters sometimes question his judgment — although they are careful to cleave closer to his line once Glapinski enters the room.

The legal challenge will test the resolve of the governor, who’s one of the most senior Law & Justice allies left in office. The parliamentary probe may take as long as a year to complete and Glapinski has said he’s not going to resign before his six-year term is up in 2028, already after the parliament ends its current term.

One thing the policymaker has in his defense is that — aspersions about process to one side — his two successive pre-election interest-rate cuts do not seem to have thwarted inflation’s moderation, with price rises now well within their target range. Likewise, if those cuts were designed to help the former ruling party stay in power, the scale of the fight Glapinski has on his hands is evidence that they failed.

All the same, at a time when the governor’s under attack from outside the bank, it doesn’t help him that there is discontent within. People familiar with the institution’s workings said Glapinski runs it as his own personal fiefdom. Several items on the opposition lawmakers’ charge sheet allege an associated disregard of process; that he’s intervened to weaken the zloty in 2020 without colleagues’ approval, that he blocks their access to information so they can’t do their jobs.

The governor has been preparing for the proceedings for a while. Before the new government had even decided on the mechanism by which they’d fulfill their campaign pledge of holding him to account, Glapinski had protested to the International Monetary Fund, the World Bank and the European Central Bank against the incipient attempts.

Officially, the majority on the Monetary Policy Council continues to stand by him. Six members appointed by the previous administration put their name to a denunciation of the probe against its leader. Of the three dissenters, one declined to sign, while two others left the room, according to people familiar with the process, who described the decision — like the country — as starkly polarized along political lines.

It’s that polarization that makes the fight going on inside the central bank one that’s so emblematic for Poland’s future. The spat may also become a test case for countries like Hungary and Turkey that may one day try to reverse the years of democratic back-sliding.

The former ruling party has scored some early points. The country’s top court, which is stacked with its appointees, has already barred lawmakers from trying to suspend Glapinski from office during the investigation phase. Prime Minister Donald Tusk called the verdict non-binding. The opposition has just asked the same court to prevent the governor from being summoned to testify.

Such polarization had become a trademark of Law & Justice’s rule, during which it pitted voters against each other while veering ever-rightwards. A vituperative election campaign widened the divide further, splitting the country into those who believe the original sin is the alleged politicization of the central bank under Glapinski, and those who perceive the attempts to depoliticize it as political in themselves.

Both camps may be at least partly right. Glapinski’s pre-election cuts were “widely interpreted by investors as being motivated by politics,” said Piotr Matys, a foreign exchange analyst at InTouch Capital. And yet, “by trying to restore the independence of the central bank by dismissing Glapinski, the governing coalition may undermine it over the long-term horizon by setting a dangerous precedent.”

Sourced from Bloomberg