Last week EU Finance Ministers agreed to lift the minimum level of protection for individual bank deposits to Euro 50,000 as part of a multi-pronged effort to restore faith in the banking sector. Up until last week Poland had resisted the call to take any specific actions vis-à-vis the banking sector, believing that Poland’s banking sector was somehow immune to the crisis spreading from the West. Prior to last week individual deposits in Polish banks were only guaranteed against loss up to Euro 22,500, and even this amount was not fully protected as the rate of protection only extended to 90% of the actual amount. Previously deposits exceeding Euro 22,500 were not protected at all. Now at least deposits of up to Euro 50,000 are protected in full.

Other EU member countries have raised the level of protection even higher. Austria, the Netherlands and Belgium, among others, have decided to provide full protection to individual bank deposits up to Euro 100,000. Ireland has taken this one or two steps further, announcing plans to provide 100% protection to all bank deposits, to include not only retail deposits but commercial deposits as well…with no cap on the amount insured.

Granted, Polish banks seem to have avoided the most egregious lending practices that served as the catalyst for the current turmoil in financial markets, but Poland is by no means immune from the current crisis. Last week the Warsaw Stock Exchange saw 20% of its value disappear. The Polish government can no longer continue to stick its head in the sand and pretend that Poland is immune to the current turmoil. The EU can only do so much. Poland and the other member states must step up to the plate and be much more proactive in order to stave off the on-going crisis.

-- Paul B. Fogo