Legal risk

On 6 October 2015, the Court of Appeals issued a decision regarding calculation of the interchange fee by banks acting in agreement. Thus, the decision of the 1st instance (Regional) Court of 2013 was changed by dismissing the banks’ appeals in whole, while upholding the appeal brought by the Office of Competition and Consumer Protection (UOKiK), which had questioned a considerable reduction in the fines by the 1st instance court. This denotes that the penalty imposed under the first decision of the President of UOKiK of 29 December 2006 was upheld. It involved a fine levied on 20 banks, including Bank BGŻ S.A. and Fortis Bank Polska S.A., for practices limiting competition by calculating interchange fees on Visa and MasterCard transactions in Poland in agreement.

The total fine levied on Bank BGŻ BNP Paribas (currently BNP Paribas Bank Polska S.A.) amounted to PLN 12,54 thousand and included: i) a fine for the practice of Bank Gospodarki Żywnościowej in the amount of PLN 9.65 million; and ii) a fine for the practice of Fortis Bank Polska S.A. (FBP) in the amount of PLN 2.89 million. The penalty was paid by the Bank on 19 October 2015. The Bank brought a last resort appeal against the aforesaid court decision on 25 April 2016. By a ruling issued on 25 October 2017, the Supreme Court overturned the verdict of the Warsaw Court of Appeal and referred the case for reconsideration. Acquisition of the core business of RBPL did not change the situation of the Bank as RBPL was not a party to this claim.

As at 31 December 2019. The Bank received:

31 requests for settlement from companies (marchands), associated with interchange fees paid due to the use of payment cards (of which three businesses applied twice and one applied twice for different payment schemes). The total amount of these claims was PLN 1,020.96 million, including PLN 1,010.99 million where the Bank had joint and several liability with other banks.

4 applications for mediation before the arbitration court of the Polish Financial Supervision Authority. The applications were addressed to the Bank by the same entrepreneurs who had previously requested to call for a settlement attempt. The total value of claims resulting from the above-mentioned motions amounts to PLN 40.29 million, PLN 37.79 million of which concerns joint and several liability of the Bank with other banks.

On 3 October 2019 the Court of Justice of the European Union (CJEU) ruled that: 1) unfair terms and conditions of contract concerning foreign exchange rate differences cannot be replaced by general provisions of Polish civil law; 2) if, after the removal of the unfair terms, the nature and main subject-matter of those contracts can be altered to the extent that they would no longer be index-linked to a foreign currency while at the same time being subject to an interest rate based on the rate applicable to that currency, European Union law does not preclude the annulment of those contracts. However, the Court has not examined the abusive nature of the indexation clauses at all and allows the national court to fill in the gaps in the contract caused by the removal of a provision of national law which has been found to be abusive. It should be noted that the CJEU judgment concerns indexed loans, while the Bank’s portfolio does not include such loans; the Bank and its legal predecessors concluded only denominated loan agreements and foreign currency loan agreements. Therefore, the CJEU judgment is not automatically applicable to disputes brought by the Bank’s clients, however, it cannot be ruled out that it will affect the line of the case-law also in the case of other loans, as a consequence of which a full assessment of the effects of the CJEU judgment will be possible only after the line of case-law of Polish courts has been formed. The change of the line of the case-law may potentially have a negative impact on the Bank, however the scale, due to many uncertainties, is currently impossible to estimate precisely.

As at 31 December 2019, the Bank was a defendant in 192 pending court proceedings (a total of 207 actions against the Bank was brought by the customers, including legitimately concluded cases), in which the Bank’s customers demand to declare the mortgage loan contract is invalid in terms of granting a foreign currency loan or denominated to CHF by determining that the Bank granted a loan in PLN without denomination to a foreign currency or compensation for abuse of the subjective law by the Bank, including the principles of social coexistence and misleading the customer or depriving the executory title of enforceability, as well as the spread reimbursement. The Bank is not a party to any collective action that would involve such loan agreements. As at 31 December 2019, the total value of claims pursued in currently pending cases was PLN 49.37 million, and PLN 30.66 million in legitimately concluded and binding cases.

The following judgements were made in 15 proceedings that have been legitimately concluded so far: claims against the Bank were dismissed in 9 proceedings, 3 proceedings were discontinued; in one proceeding the court dismissed the claim; in one, despite the dismissal of the claim, the court stated in its justification that the agreement shall be annulled, in one, only the claim for low own contribution insurance was awarded, in the remaining proceedings the court dismissed the claim.

The Bank recognises provisions on an ongoing basis for pending court proceedings concerning denominated or foreign currency loans, taking into account the current status of legitimate judgements in cases against the Bank and the line of the case-law. The Bank also decided to recognise a provision of PLN 29.49 million for portfolio risk related to CHF proceedings in the fourth quarter of 2019. As at 31 December 2019, the total value of created provisions for CHF proceedings amounted to PLN 32.1 million.

At the same time, the Bank points to a significant discrepancy between the facts (in particular different terms of the agreements and the scope of information for the customer) and the rulings in Poland in matters relating to indexed, denominated and foreign currency loans, which significantly hinders precise estimation of the risk scale. The Bank monitors the published judgements on an ongoing basis and is going to adjust the level of provisions to the observed direction of the case-law.