For ten years we have witnessed radical economic transformations from the centrally planned model of economy to the market system. Polish banking reform - best developed segment of the financial system in Poland - is an inseparable element of the process. The process is accompanied, however, by numerous barriers and obstacles, both in the organizational area and the way of thinking.

Economic independence gained by banks changed completely their role in the economy. From companies performing passively their role of a cashier they were to become units fully responsible for their decisions and oriented on a commercial success. They had to optimize their choices, aim at maximizing profit at an acceptable risk level. However, the initiation of the Polish banking transformation took place in unfavorable conditions determined by inflation, decrease in production, collapse of Eastern markets, mass inflow of foreign goods, change of relation between production costs and sale prices. As a consequence financial performance of the majority of enterprises went down, and they lost their credit capacity. The developments affected adversely banks' activity. At the same time, banks emerged at the beginning of 1989 from the structures of NBP took over not only its assets and liabilities but also its culture and staff - with knowledge and mentality shaped by the banking culture of the previous period. Also new banks had no adequately educated staff, and, therefore, irrational decisions resulting in "bad debts" reflected not only current condition of enterprises but also the level of professional qualifications of bankers.

Although it has been assumed that the nature of banking lies in risk taking, and "problematic credits" are a natural consequence of lending, the magnitude of non-performing claims in Poland, in particular in 1992-1994, reflects irregularities far from being admissible. Though there are ready patterns of minimizing risk worked by Western market, their adoption in the context of Polish conditions is not always successful. Legal framework and technical conditions of banks' functioning constitute a fundamental obstacle of adjusting such methods.

The article's objective was to present basic credit risk factors in Poland in the 90's. Although the ongoing transformation process still provokes discussions, disputes and polemics, the author's intention was to provide a relatively objective analysis of changes in the context of threats to creditors. Transformations in the macroeconomic policy and institutional framework as well as people's judgement were presented, and their implications for the quality of banks' credit portfolios were evaluated. Attention was also paid on problems encountered by the monetary and economic authorities during the period discussed, with particular focus on difficulties with the implementation of a effective reform program and mistakes resulting mainly from the lack of experience and skills. In the microeconomic area there was an attempt to analyze mechanisms affecting businesses' behavior and their decisions.