The Monetary Policy Council decided to cut interest rates by 50 base points. However, the decrease in interest rates for loans and bank deposits resulting from the cut in the WIBOR rate will not be the only consequence of this.
One should also be aware of practical complications resulting from cutting the lombard rate to 2.5 percent. According to an amendment to the Civil Code from 2006 – sometimes referred to as the anti-moneylending act – the maximum value of interest rates caused by a legal act cannot be more than four times the value of the Lombard rate set by the National Bank of Poland, that is 10 percent year-to-year. This means that no bank or entity of any kind can give a credit or loan with an interest rate higher than that.
Consequently, financial institutions may be unwilling to grant credit or even credit cards – particularly to people with low credit reliability. The cost of money is not the only factor shaping interest rates established by the central bank – the credit risk assumed by the financial institution is also important. If the lombard rate continues to be decreased, many people will be deprived of the opportunity to assume financial obligations, unless banks compensate for lower interest rates with higher additional costs.
Lombard rate cuts usually translate to lower rates for outstanding taxes. However, this time it will not be the case, as the minimum rate specified in the act – 8 percent – though according to the calculation algorithm this rate should actually be 7 percent. What is more, if in the coming months the Council cuts the base rate by more than 50 base points, the tax interest rate will qualify as moneylending – as the limit for acceptable rates would then fall below 8 percent.
The rates specified by the act would also be higher than the maximum – as was the case last year, before they were cut by a regulation issued by the Prime Minister. In the United States and Western Europe zero or even negative interest rates are slowly becoming the norm. Polish law should also provide such mechanisms, so that there is no need for hastily amending acts and issuing new regulations as a result of decisions made by the Monetary Policy Council.
Łukasz Kozłowski, expert of Employers of Poland