By Kuba Jaworowski and Karolina Slowikowska
WARSAW (Reuters) - Poland's government is drawing up plans to guarantee interbank transactions as part of efforts to bolster trust in the banking sector, Deputy Finance Minister Katarzyna Zajdel-Kurowska said on Wednesday.
"This (bill) will be ready very soon but you have to be aware of the fact that many countries declared they will do it (guarantee transactions) but still the mechanism in the EU (countries) is not working," Zajdel-Kurowska told the Reuters Central European Investment summit.
Banks would have to pay for the guarantees and Zajdel-Kurowska said one of the most difficult issues was setting the price for the instrument, which the banking sector has repeatedly said it needs.
The measures would aim to remove "psychological" barriers in the markets caused by the ongoing global financial crisis, she said, adding that Poland's banking sector had plentiful liquidity and, unlike many of its Western counterparts, was not suffering from any cash shortages.
"It's quite a funny situation because Poland is structurally over-liquid. The over-liquidity of the sector is 15 billion zlotys," Zajdel-Kurowska said.
"(Bankers) know who is over-liquid but do not trust each other and they prefer to go to the central bank," she added.
Last week, the Polish central bank announced it was ready to provide liquidity to banks as and when they need it to help tide them through the global financial crisis. It has also begun making foreign exchange swap transactions with commercial banks.
The head of Poland's BRE Bank BREP.WA, speaking at the Reuters Central European Investment summit on Tuesday, said the measures so far taken by the central bank to revive the interbank market were insufficient.
Before Zajdel-Kurowska's comments, BRE chief Mariusz Grendowicz said the government should instead guarantee interbank loans or consider procedures that would allow lenders to reveal some measures of the state of their financial condition.
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