Over the coming months, we will be able to form a clearer view on the market impact of premium rate adjustments. This will allow us to consider further flexibilities in the pricing bands. We hope that this in turn will drive further product innovations in addition to expanding capacity going forward. Internationally, developments in global regulatory and accounting standards will also see corresponding changes in the domestic regulatory environment. A key development has been the ongoing work by the IAIS to establish a risk-based global Insurance Capital Standard. It is the Bank’s intention to align domestic regulations with international standards to promote the resilience of the industry. However, we will always do so with a careful consideration of domestic specificities. The Bank trusts that the industry will continue to ramp up its preparation towards full implementation of the IFRS 17 in 2021. In the next two years, the Bank will be reviewing the valuation and capital standards for solvency reporting. This will take into account the potential areas of alignment with international solvency and accounting standards. The results from the quantitative tests and feedback from industry engagement will be valuable inputs for these upcoming reviews. As you are no doubt aware, these standards are inherently very complex. As the industry prepares for them, there is a need to strengthen capacity and arrangements – both at the institution and industry levels – to support implementation. This includes ensuring effective organisation and coordination of technical work at the industry level through the actuarial and industry associations.
As a consequence, products manufactured in these countries become more expensive and such countries loose competitiveness (e.g. Estrada, Lopez-Salido 2001). It is relatively difficult to foresee how the Polish economy will react to demand pressures once in the euro area. However, as in the case of asymmetric shocks, labor market flexibility is probably the best answer to the described phenomena. It allows a smooth and relatively painless adjustment if the economy looses competitiveness. Summing up, I have discussed selected aspects of the cost-benefit analysis of Poland’s adoption of the euro, with a special focus on issues which are less familiar to the general public. As I argued, some costs will materialize if asymmetric shocks hit the enlarged eurozone. We do not know the likelihood of such shocks though, so it is impossible to calculate the expected value of costs related to these events. We know, however, that the probability of asymmetric shocks declines with rising similarity or progressing real convergence of the EU economies. Let me also stress that the magnitude of costs depends crucially on domestic policy – prudent banking sector supervision, labor market reforms and sound fiscal policies to name a few. Adoption of proper policies reduces future potential costs related to euro-zone membership and, at the same time, enhances future benefits. In my view, given the evidence that reforms have been halted in many countries after entering the eurozone, these measures should be taken before the euro area accession. Thank you for your attention. References: 1. Borowski J. 2003.