Bank of Poland – pibyk's hidey hole

Bank Polski SA has been established on 15 April 1924 as a public limited company with share capital of 100 000 000 złoty. On 28 April 1924 it became operational as the bank of issue replacing in this role the PKKP (Polish National Credit Cassa).

Bank Polski SA is sometimes referred to as “the second” Bank of Poland. The “first” Bank of Poland had been established in 1828 as the bank of issue for the Kingdom of Poland, operated until 1884 and was liquidated by Russian authorities in 1894. Bank Polski SA acted as the bank of issue from 1924 until 1939 (de facto). Banknotes denominated in złoty were circulated replacing depreciated Polish Mark at the rate of 1 800 000 Polish Marks being equal to 1 złoty, initially set at the parity with the gold franc i.e. equivalent of 9/31 grams of pure gold.

Laws regulating establishment and operations of Bank of Poland (sources are available in Polish only):

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100 złoty Bank Polski share Ist issue of 1924

For Bank Polski activities as the bank of issue see article about currency on Polish territories before 1939.

In the beginning of September 1939 the Bank of Poland has been evacuated with almost all of its gold reserves (and money printing plates) to Romania, then France and eventually to the United Kingdom. But its banknotes remained in circulation on Polish territories. By 1940 they have been withdrawn and replaced by various currencies issued by countries participating in war spoils: Germany, Soviet Union, Lithuania and Slovakia.

During the war Bank of Poland did not issue any banknotes, although new notes were prepared in order to circulate them after the war. But political situation changed and Poland became Soviet satellite. In the newly created “people’s republic” there was no place for such capitalist-minded institution, so new bank of issue under the name of National Bank of Poland has been established in violation of the laws in force, as the Bank of Poland held a legal monopoly for issuing banknotes valid until 1954. That did not seem to bother anybody at that time, but the fun fact is that our current bank of issue has been set up in legally flawed way and operated illegally at least until 7 January 1952, when liquidation of Bank Polski SA had been completed.

At the same time the Bank of Poland was repatriated to Warsaw, stripped of all its assets and finally liquidated. Liquidation was executed without proper legal proceedings (so nobody could lodge any claims against the company) because at that time the Bank was just empty shell with no assets. Those were siphoned by communist regime in a very clever (and technically legal) way:

Decree of 11 April 1947 on issuance of treasury bills in US dollars (Dz.U. 1947 no. 32 item 146) and Minister of Treasury Ordinance of 21 June 1947 on issuance of treasury bills in US dollars (Dz.U. 1947 no. 49 item 255) provided for issuance of special treasury bills denominated in US dollars to the maximum amount of 70 million dollars. Bills were registered, paid interest of 1% and were not transferable unless special authorization has been granted by the Minister of Treasury.
Bank of Poland in line with its statutes was not allowed to provide direct loans to the government but was allowed to purchase treasury bills. So dollar treasury bills were “purchased” by Bank Polski on authorization from its (token at that time) Management Board. This purchase was paid in gold, and in this way all gold holdings were converted into worthless paper issued by penniless regime.
On the basis of Decree of 27 July 1949 on contracting new and calculating the value of old financial obligations which have not been extinguished (Dz.U. RP 1949.45.332) those treasury bills denominated so far in “hard” dollars were automatically converted into “soft” polish currency at an extremely poor rate. It is very likely that the rate used for this conversion was 5,30 Złoty per 1 US Dollar – decree provided for the rate of the National Bank of Poland used in settlement of commercial transactions, and because at that time almost all transactions of this kind were settled as barter, the rate used for accounting purposes did not matter and was kept artificially low. So $70 million miraculously morphed into 371 million highly inflated złoty’s. This amount was worth $927.500 at the official rate used to purchase dollar banknotes (400 zloty per dollar) but at the free (black) market rate it was worth only ~$350 thousand.
Monetary reform of 1950 provided for denomination of old zloty, so 371 million was converted into 3,71 million of reformed zloty’s (~40.000 dollars at the black market rate at that time as the zloty kept loosing value to hard currencies). And this amount was available to liquidators. In its own right it was sizeable sum of money but just small change when compared with the number and value of potential claims on the Bank Polski assets (thousands of small shareholders and holders of banknotes which were withdrawn by technically illegal acts of occupying powers).
Liquidation of Bank Polski SA has been opened on 16 October 1951 on the basis of Minister of Finance Decision.
On the basis of Minister of Finance Decision of 7 January 1952 Bank Polski was deemed to be liquidated without following standard process (published calls for claims reporting etc.) due to the fact that assets available to the liquidators were not sufficient to cover costs of such procedures.

So token compliance with the law has been ensured although it is obvious that in the process State Treasury acted to the detriment of the company and its shareholders. Strange thing is that even modern literature avoids this subject and the mechanism of stripping Bank Polski SA of all its assets has never been described in detail. Various publications mention the fact that special treasury bills were issued, that they were bought by Bank Polski, that Bank Polski was liquidated without proper liquidation proceedings, but those facts are mentioned sort of separately as if they are unrelated to each other and not really important.

We also do not know how the money obtained from gold sales was spent. Was it really diverted to reconstruction of our country destroyed during the war (as Zygmunt Karpiński wrote in his diary) or was it used to support communist regime imported from Soviet Union?

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